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91_SB0665
LRB9103055PTpk
1 AN ACT to amend the Illinois Income Tax Act by changing
2 Sections 201 and 1501.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Income Tax Act is amended by
6 changing Sections 201 and 1501 as follows:
7 (35 ILCS 5/201) (from Ch. 120, par. 2-201)
8 Sec. 201. Tax Imposed.
9 (a) In general. A tax measured by net income is hereby
10 imposed on every individual, corporation, trust and estate
11 for each taxable year ending after July 31, 1969 on the
12 privilege of earning or receiving income in or as a resident
13 of this State. Such tax shall be in addition to all other
14 occupation or privilege taxes imposed by this State or by any
15 municipal corporation or political subdivision thereof. An
16 attorney-in-fact for a reciprocal insurer or interinsurance
17 exchange that has made an election under Internal Revenue
18 Code Section 835, 26 U.S.C. 835, shall be deemed not be be
19 doing business in the State with respect to its activities as
20 an attorney-in-fact. Any income earned by the
21 attorney-in-fact on non-attorney-in-fact business that would
22 otherwise be subject to taxation in this State shall be
23 included in the income of the reciprocal insurer or
24 interinsurance exchange.
25 (b) Rates. The tax imposed by subsection (a) of this
26 Section shall be determined as follows:
27 (1) In the case of an individual, trust or estate,
28 for taxable years ending prior to July 1, 1989, an amount
29 equal to 2 1/2% of the taxpayer's net income for the
30 taxable year.
31 (2) In the case of an individual, trust or estate,
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1 for taxable years beginning prior to July 1, 1989 and
2 ending after June 30, 1989, an amount equal to the sum of
3 (i) 2 1/2% of the taxpayer's net income for the period
4 prior to July 1, 1989, as calculated under Section 202.3,
5 and (ii) 3% of the taxpayer's net income for the period
6 after June 30, 1989, as calculated under Section 202.3.
7 (3) In the case of an individual, trust or estate,
8 for taxable years beginning after June 30, 1989, an
9 amount equal to 3% of the taxpayer's net income for the
10 taxable year.
11 (4) (Blank).
12 (5) (Blank).
13 (6) In the case of a corporation, for taxable years
14 ending prior to July 1, 1989, an amount equal to 4% of
15 the taxpayer's net income for the taxable year.
16 (7) In the case of a corporation, for taxable years
17 beginning prior to July 1, 1989 and ending after June 30,
18 1989, an amount equal to the sum of (i) 4% of the
19 taxpayer's net income for the period prior to July 1,
20 1989, as calculated under Section 202.3, and (ii) 4.8% of
21 the taxpayer's net income for the period after June 30,
22 1989, as calculated under Section 202.3.
23 (8) In the case of a corporation, for taxable years
24 beginning after June 30, 1989, an amount equal to 4.8% of
25 the taxpayer's net income for the taxable year.
26 (c) Beginning on July 1, 1979 and thereafter, in
27 addition to such income tax, there is also hereby imposed the
28 Personal Property Tax Replacement Income Tax measured by net
29 income on every corporation (including Subchapter S
30 corporations), partnership and trust, for each taxable year
31 ending after June 30, 1979. Such taxes are imposed on the
32 privilege of earning or receiving income in or as a resident
33 of this State. The Personal Property Tax Replacement Income
34 Tax shall be in addition to the income tax imposed by
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1 subsections (a) and (b) of this Section and in addition to
2 all other occupation or privilege taxes imposed by this State
3 or by any municipal corporation or political subdivision
4 thereof.
5 (d) Additional Personal Property Tax Replacement Income
6 Tax Rates. The personal property tax replacement income tax
7 imposed by this subsection and subsection (c) of this Section
8 in the case of a corporation, other than a Subchapter S
9 corporation, shall be an additional amount equal to 2.85% of
10 such taxpayer's net income for the taxable year, except that
11 beginning on January 1, 1981, and thereafter, the rate of
12 2.85% specified in this subsection shall be reduced to 2.5%,
13 and in the case of a partnership, trust or a Subchapter S
14 corporation shall be an additional amount equal to 1.5% of
15 such taxpayer's net income for the taxable year.
16 (e) Investment credit. A taxpayer shall be allowed a
17 credit against the Personal Property Tax Replacement Income
18 Tax for investment in qualified property.
19 (1) A taxpayer shall be allowed a credit equal to
20 .5% of the basis of qualified property placed in service
21 during the taxable year, provided such property is placed
22 in service on or after July 1, 1984. There shall be
23 allowed an additional credit equal to .5% of the basis of
24 qualified property placed in service during the taxable
25 year, provided such property is placed in service on or
26 after July 1, 1986, and the taxpayer's base employment
27 within Illinois has increased by 1% or more over the
28 preceding year as determined by the taxpayer's employment
29 records filed with the Illinois Department of Employment
30 Security. Taxpayers who are new to Illinois shall be
31 deemed to have met the 1% growth in base employment for
32 the first year in which they file employment records with
33 the Illinois Department of Employment Security. The
34 provisions added to this Section by Public Act 85-1200
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1 (and restored by Public Act 87-895) shall be construed as
2 declaratory of existing law and not as a new enactment.
3 If, in any year, the increase in base employment within
4 Illinois over the preceding year is less than 1%, the
5 additional credit shall be limited to that percentage
6 times a fraction, the numerator of which is .5% and the
7 denominator of which is 1%, but shall not exceed .5%.
8 The investment credit shall not be allowed to the extent
9 that it would reduce a taxpayer's liability in any tax
10 year below zero, nor may any credit for qualified
11 property be allowed for any year other than the year in
12 which the property was placed in service in Illinois. For
13 tax years ending on or after December 31, 1987, and on or
14 before December 31, 1988, the credit shall be allowed for
15 the tax year in which the property is placed in service,
16 or, if the amount of the credit exceeds the tax liability
17 for that year, whether it exceeds the original liability
18 or the liability as later amended, such excess may be
19 carried forward and applied to the tax liability of the 5
20 taxable years following the excess credit years if the
21 taxpayer (i) makes investments which cause the creation
22 of a minimum of 2,000 full-time equivalent jobs in
23 Illinois, (ii) is located in an enterprise zone
24 established pursuant to the Illinois Enterprise Zone Act
25 and (iii) is certified by the Department of Commerce and
26 Community Affairs as complying with the requirements
27 specified in clause (i) and (ii) by July 1, 1986. The
28 Department of Commerce and Community Affairs shall notify
29 the Department of Revenue of all such certifications
30 immediately. For tax years ending after December 31,
31 1988, the credit shall be allowed for the tax year in
32 which the property is placed in service, or, if the
33 amount of the credit exceeds the tax liability for that
34 year, whether it exceeds the original liability or the
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1 liability as later amended, such excess may be carried
2 forward and applied to the tax liability of the 5 taxable
3 years following the excess credit years. The credit shall
4 be applied to the earliest year for which there is a
5 liability. If there is credit from more than one tax year
6 that is available to offset a liability, earlier credit
7 shall be applied first.
8 (2) The term "qualified property" means property
9 which:
10 (A) is tangible, whether new or used,
11 including buildings and structural components of
12 buildings and signs that are real property, but not
13 including land or improvements to real property that
14 are not a structural component of a building such as
15 landscaping, sewer lines, local access roads,
16 fencing, parking lots, and other appurtenances;
17 (B) is depreciable pursuant to Section 167 of
18 the Internal Revenue Code, except that "3-year
19 property" as defined in Section 168(c)(2)(A) of that
20 Code is not eligible for the credit provided by this
21 subsection (e);
22 (C) is acquired by purchase as defined in
23 Section 179(d) of the Internal Revenue Code;
24 (D) is used in Illinois by a taxpayer who is
25 primarily engaged in manufacturing, or in mining
26 coal or fluorite, or in retailing; and
27 (E) has not previously been used in Illinois
28 in such a manner and by such a person as would
29 qualify for the credit provided by this subsection
30 (e) or subsection (f).
31 (3) For purposes of this subsection (e),
32 "manufacturing" means the material staging and production
33 of tangible personal property by procedures commonly
34 regarded as manufacturing, processing, fabrication, or
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1 assembling which changes some existing material into new
2 shapes, new qualities, or new combinations. For purposes
3 of this subsection (e) the term "mining" shall have the
4 same meaning as the term "mining" in Section 613(c) of
5 the Internal Revenue Code. For purposes of this
6 subsection (e), the term "retailing" means the sale of
7 tangible personal property or services rendered in
8 conjunction with the sale of tangible consumer goods or
9 commodities.
10 (4) The basis of qualified property shall be the
11 basis used to compute the depreciation deduction for
12 federal income tax purposes.
13 (5) If the basis of the property for federal income
14 tax depreciation purposes is increased after it has been
15 placed in service in Illinois by the taxpayer, the amount
16 of such increase shall be deemed property placed in
17 service on the date of such increase in basis.
18 (6) The term "placed in service" shall have the
19 same meaning as under Section 46 of the Internal Revenue
20 Code.
21 (7) If during any taxable year, any property ceases
22 to be qualified property in the hands of the taxpayer
23 within 48 months after being placed in service, or the
24 situs of any qualified property is moved outside Illinois
25 within 48 months after being placed in service, the
26 Personal Property Tax Replacement Income Tax for such
27 taxable year shall be increased. Such increase shall be
28 determined by (i) recomputing the investment credit which
29 would have been allowed for the year in which credit for
30 such property was originally allowed by eliminating such
31 property from such computation and, (ii) subtracting such
32 recomputed credit from the amount of credit previously
33 allowed. For the purposes of this paragraph (7), a
34 reduction of the basis of qualified property resulting
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1 from a redetermination of the purchase price shall be
2 deemed a disposition of qualified property to the extent
3 of such reduction.
4 (8) Unless the investment credit is extended by
5 law, the basis of qualified property shall not include
6 costs incurred after December 31, 2003, except for costs
7 incurred pursuant to a binding contract entered into on
8 or before December 31, 2003.
9 (9) Each taxable year, a partnership may elect to
10 pass through to its partners the credits to which the
11 partnership is entitled under this subsection (e) for the
12 taxable year. A partner may use the credit allocated to
13 him or her under this paragraph only against the tax
14 imposed in subsections (c) and (d) of this Section. If
15 the partnership makes that election, those credits shall
16 be allocated among the partners in the partnership in
17 accordance with the rules set forth in Section 704(b) of
18 the Internal Revenue Code, and the rules promulgated
19 under that Section, and the allocated amount of the
20 credits shall be allowed to the partners for that taxable
21 year. The partnership shall make this election on its
22 Personal Property Tax Replacement Income Tax return for
23 that taxable year. The election to pass through the
24 credits shall be irrevocable.
25 (f) Investment credit; Enterprise Zone.
26 (1) A taxpayer shall be allowed a credit against
27 the tax imposed by subsections (a) and (b) of this
28 Section for investment in qualified property which is
29 placed in service in an Enterprise Zone created pursuant
30 to the Illinois Enterprise Zone Act. For partners and for
31 shareholders of Subchapter S corporations, there shall be
32 allowed a credit under this subsection (f) to be
33 determined in accordance with the determination of income
34 and distributive share of income under Sections 702 and
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1 704 and Subchapter S of the Internal Revenue Code. The
2 credit shall be .5% of the basis for such property. The
3 credit shall be available only in the taxable year in
4 which the property is placed in service in the Enterprise
5 Zone and shall not be allowed to the extent that it would
6 reduce a taxpayer's liability for the tax imposed by
7 subsections (a) and (b) of this Section to below zero.
8 For tax years ending on or after December 31, 1985, the
9 credit shall be allowed for the tax year in which the
10 property is placed in service, or, if the amount of the
11 credit exceeds the tax liability for that year, whether
12 it exceeds the original liability or the liability as
13 later amended, such excess may be carried forward and
14 applied to the tax liability of the 5 taxable years
15 following the excess credit year. The credit shall be
16 applied to the earliest year for which there is a
17 liability. If there is credit from more than one tax year
18 that is available to offset a liability, the credit
19 accruing first in time shall be applied first.
20 (2) The term qualified property means property
21 which:
22 (A) is tangible, whether new or used,
23 including buildings and structural components of
24 buildings;
25 (B) is depreciable pursuant to Section 167 of
26 the Internal Revenue Code, except that "3-year
27 property" as defined in Section 168(c)(2)(A) of that
28 Code is not eligible for the credit provided by this
29 subsection (f);
30 (C) is acquired by purchase as defined in
31 Section 179(d) of the Internal Revenue Code;
32 (D) is used in the Enterprise Zone by the
33 taxpayer; and
34 (E) has not been previously used in Illinois
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1 in such a manner and by such a person as would
2 qualify for the credit provided by this subsection
3 (f) or subsection (e).
4 (3) The basis of qualified property shall be the
5 basis used to compute the depreciation deduction for
6 federal income tax purposes.
7 (4) If the basis of the property for federal income
8 tax depreciation purposes is increased after it has been
9 placed in service in the Enterprise Zone by the taxpayer,
10 the amount of such increase shall be deemed property
11 placed in service on the date of such increase in basis.
12 (5) The term "placed in service" shall have the
13 same meaning as under Section 46 of the Internal Revenue
14 Code.
15 (6) If during any taxable year, any property ceases
16 to be qualified property in the hands of the taxpayer
17 within 48 months after being placed in service, or the
18 situs of any qualified property is moved outside the
19 Enterprise Zone within 48 months after being placed in
20 service, the tax imposed under subsections (a) and (b) of
21 this Section for such taxable year shall be increased.
22 Such increase shall be determined by (i) recomputing the
23 investment credit which would have been allowed for the
24 year in which credit for such property was originally
25 allowed by eliminating such property from such
26 computation, and (ii) subtracting such recomputed credit
27 from the amount of credit previously allowed. For the
28 purposes of this paragraph (6), a reduction of the basis
29 of qualified property resulting from a redetermination of
30 the purchase price shall be deemed a disposition of
31 qualified property to the extent of such reduction.
32 (g) Jobs Tax Credit; Enterprise Zone and Foreign
33 Trade Zone or Sub-Zone.
34 (1) A taxpayer conducting a trade or business in an
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1 enterprise zone or a High Impact Business designated by
2 the Department of Commerce and Community Affairs
3 conducting a trade or business in a federally designated
4 Foreign Trade Zone or Sub-Zone shall be allowed a credit
5 against the tax imposed by subsections (a) and (b) of
6 this Section in the amount of $500 per eligible employee
7 hired to work in the zone during the taxable year.
8 (2) To qualify for the credit:
9 (A) the taxpayer must hire 5 or more eligible
10 employees to work in an enterprise zone or federally
11 designated Foreign Trade Zone or Sub-Zone during the
12 taxable year;
13 (B) the taxpayer's total employment within the
14 enterprise zone or federally designated Foreign
15 Trade Zone or Sub-Zone must increase by 5 or more
16 full-time employees beyond the total employed in
17 that zone at the end of the previous tax year for
18 which a jobs tax credit under this Section was
19 taken, or beyond the total employed by the taxpayer
20 as of December 31, 1985, whichever is later; and
21 (C) the eligible employees must be employed
22 180 consecutive days in order to be deemed hired for
23 purposes of this subsection.
24 (3) An "eligible employee" means an employee who
25 is:
26 (A) Certified by the Department of Commerce
27 and Community Affairs as "eligible for services"
28 pursuant to regulations promulgated in accordance
29 with Title II of the Job Training Partnership Act,
30 Training Services for the Disadvantaged or Title III
31 of the Job Training Partnership Act, Employment and
32 Training Assistance for Dislocated Workers Program.
33 (B) Hired after the enterprise zone or
34 federally designated Foreign Trade Zone or Sub-Zone
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1 was designated or the trade or business was located
2 in that zone, whichever is later.
3 (C) Employed in the enterprise zone or Foreign
4 Trade Zone or Sub-Zone. An employee is employed in
5 an enterprise zone or federally designated Foreign
6 Trade Zone or Sub-Zone if his services are rendered
7 there or it is the base of operations for the
8 services performed.
9 (D) A full-time employee working 30 or more
10 hours per week.
11 (4) For tax years ending on or after December 31,
12 1985 and prior to December 31, 1988, the credit shall be
13 allowed for the tax year in which the eligible employees
14 are hired. For tax years ending on or after December 31,
15 1988, the credit shall be allowed for the tax year
16 immediately following the tax year in which the eligible
17 employees are hired. If the amount of the credit exceeds
18 the tax liability for that year, whether it exceeds the
19 original liability or the liability as later amended,
20 such excess may be carried forward and applied to the tax
21 liability of the 5 taxable years following the excess
22 credit year. The credit shall be applied to the earliest
23 year for which there is a liability. If there is credit
24 from more than one tax year that is available to offset a
25 liability, earlier credit shall be applied first.
26 (5) The Department of Revenue shall promulgate such
27 rules and regulations as may be deemed necessary to carry
28 out the purposes of this subsection (g).
29 (6) The credit shall be available for eligible
30 employees hired on or after January 1, 1986.
31 (h) Investment credit; High Impact Business.
32 (1) Subject to subsection (b) of Section 5.5 of the
33 Illinois Enterprise Zone Act, a taxpayer shall be allowed
34 a credit against the tax imposed by subsections (a) and
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1 (b) of this Section for investment in qualified property
2 which is placed in service by a Department of Commerce
3 and Community Affairs designated High Impact Business.
4 The credit shall be .5% of the basis for such property.
5 The credit shall not be available until the minimum
6 investments in qualified property set forth in Section
7 5.5 of the Illinois Enterprise Zone Act have been
8 satisfied and shall not be allowed to the extent that it
9 would reduce a taxpayer's liability for the tax imposed
10 by subsections (a) and (b) of this Section to below zero.
11 The credit applicable to such minimum investments shall
12 be taken in the taxable year in which such minimum
13 investments have been completed. The credit for
14 additional investments beyond the minimum investment by a
15 designated high impact business shall be available only
16 in the taxable year in which the property is placed in
17 service and shall not be allowed to the extent that it
18 would reduce a taxpayer's liability for the tax imposed
19 by subsections (a) and (b) of this Section to below zero.
20 For tax years ending on or after December 31, 1987, the
21 credit shall be allowed for the tax year in which the
22 property is placed in service, or, if the amount of the
23 credit exceeds the tax liability for that year, whether
24 it exceeds the original liability or the liability as
25 later amended, such excess may be carried forward and
26 applied to the tax liability of the 5 taxable years
27 following the excess credit year. The credit shall be
28 applied to the earliest year for which there is a
29 liability. If there is credit from more than one tax
30 year that is available to offset a liability, the credit
31 accruing first in time shall be applied first.
32 Changes made in this subdivision (h)(1) by Public
33 Act 88-670 restore changes made by Public Act 85-1182 and
34 reflect existing law.
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1 (2) The term qualified property means property
2 which:
3 (A) is tangible, whether new or used,
4 including buildings and structural components of
5 buildings;
6 (B) is depreciable pursuant to Section 167 of
7 the Internal Revenue Code, except that "3-year
8 property" as defined in Section 168(c)(2)(A) of that
9 Code is not eligible for the credit provided by this
10 subsection (h);
11 (C) is acquired by purchase as defined in
12 Section 179(d) of the Internal Revenue Code; and
13 (D) is not eligible for the Enterprise Zone
14 Investment Credit provided by subsection (f) of this
15 Section.
16 (3) The basis of qualified property shall be the
17 basis used to compute the depreciation deduction for
18 federal income tax purposes.
19 (4) If the basis of the property for federal income
20 tax depreciation purposes is increased after it has been
21 placed in service in a federally designated Foreign Trade
22 Zone or Sub-Zone located in Illinois by the taxpayer, the
23 amount of such increase shall be deemed property placed
24 in service on the date of such increase in basis.
25 (5) The term "placed in service" shall have the
26 same meaning as under Section 46 of the Internal Revenue
27 Code.
28 (6) If during any taxable year ending on or before
29 December 31, 1996, any property ceases to be qualified
30 property in the hands of the taxpayer within 48 months
31 after being placed in service, or the situs of any
32 qualified property is moved outside Illinois within 48
33 months after being placed in service, the tax imposed
34 under subsections (a) and (b) of this Section for such
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1 taxable year shall be increased. Such increase shall be
2 determined by (i) recomputing the investment credit which
3 would have been allowed for the year in which credit for
4 such property was originally allowed by eliminating such
5 property from such computation, and (ii) subtracting such
6 recomputed credit from the amount of credit previously
7 allowed. For the purposes of this paragraph (6), a
8 reduction of the basis of qualified property resulting
9 from a redetermination of the purchase price shall be
10 deemed a disposition of qualified property to the extent
11 of such reduction.
12 (7) Beginning with tax years ending after December
13 31, 1996, if a taxpayer qualifies for the credit under
14 this subsection (h) and thereby is granted a tax
15 abatement and the taxpayer relocates its entire facility
16 in violation of the explicit terms and length of the
17 contract under Section 18-183 of the Property Tax Code,
18 the tax imposed under subsections (a) and (b) of this
19 Section shall be increased for the taxable year in which
20 the taxpayer relocated its facility by an amount equal to
21 the amount of credit received by the taxpayer under this
22 subsection (h).
23 (i) A credit shall be allowed against the tax imposed by
24 subsections (a) and (b) of this Section for the tax imposed
25 by subsections (c) and (d) of this Section. This credit
26 shall be computed by multiplying the tax imposed by
27 subsections (c) and (d) of this Section by a fraction, the
28 numerator of which is base income allocable to Illinois and
29 the denominator of which is Illinois base income, and further
30 multiplying the product by the tax rate imposed by
31 subsections (a) and (b) of this Section.
32 Any credit earned on or after December 31, 1986 under
33 this subsection which is unused in the year the credit is
34 computed because it exceeds the tax liability imposed by
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1 subsections (a) and (b) for that year (whether it exceeds the
2 original liability or the liability as later amended) may be
3 carried forward and applied to the tax liability imposed by
4 subsections (a) and (b) of the 5 taxable years following the
5 excess credit year. This credit shall be applied first to
6 the earliest year for which there is a liability. If there
7 is a credit under this subsection from more than one tax year
8 that is available to offset a liability the earliest credit
9 arising under this subsection shall be applied first.
10 If, during any taxable year ending on or after December
11 31, 1986, the tax imposed by subsections (c) and (d) of this
12 Section for which a taxpayer has claimed a credit under this
13 subsection (i) is reduced, the amount of credit for such tax
14 shall also be reduced. Such reduction shall be determined by
15 recomputing the credit to take into account the reduced tax
16 imposed by subsection (c) and (d). If any portion of the
17 reduced amount of credit has been carried to a different
18 taxable year, an amended return shall be filed for such
19 taxable year to reduce the amount of credit claimed.
20 (j) Training expense credit. Beginning with tax years
21 ending on or after December 31, 1986, a taxpayer shall be
22 allowed a credit against the tax imposed by subsection (a)
23 and (b) under this Section for all amounts paid or accrued,
24 on behalf of all persons employed by the taxpayer in Illinois
25 or Illinois residents employed outside of Illinois by a
26 taxpayer, for educational or vocational training in
27 semi-technical or technical fields or semi-skilled or skilled
28 fields, which were deducted from gross income in the
29 computation of taxable income. The credit against the tax
30 imposed by subsections (a) and (b) shall be 1.6% of such
31 training expenses. For partners and for shareholders of
32 subchapter S corporations, there shall be allowed a credit
33 under this subsection (j) to be determined in accordance with
34 the determination of income and distributive share of income
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1 under Sections 702 and 704 and subchapter S of the Internal
2 Revenue Code.
3 Any credit allowed under this subsection which is unused
4 in the year the credit is earned may be carried forward to
5 each of the 5 taxable years following the year for which the
6 credit is first computed until it is used. This credit shall
7 be applied first to the earliest year for which there is a
8 liability. If there is a credit under this subsection from
9 more than one tax year that is available to offset a
10 liability the earliest credit arising under this subsection
11 shall be applied first.
12 (k) Research and development credit.
13 Beginning with tax years ending after July 1, 1990, a
14 taxpayer shall be allowed a credit against the tax imposed by
15 subsections (a) and (b) of this Section for increasing
16 research activities in this State. The credit allowed
17 against the tax imposed by subsections (a) and (b) shall be
18 equal to 6 1/2% of the qualifying expenditures for increasing
19 research activities in this State.
20 For purposes of this subsection, "qualifying
21 expenditures" means the qualifying expenditures as defined
22 for the federal credit for increasing research activities
23 which would be allowable under Section 41 of the Internal
24 Revenue Code and which are conducted in this State,
25 "qualifying expenditures for increasing research activities
26 in this State" means the excess of qualifying expenditures
27 for the taxable year in which incurred over qualifying
28 expenditures for the base period, "qualifying expenditures
29 for the base period" means the average of the qualifying
30 expenditures for each year in the base period, and "base
31 period" means the 3 taxable years immediately preceding the
32 taxable year for which the determination is being made.
33 Any credit in excess of the tax liability for the taxable
34 year may be carried forward. A taxpayer may elect to have the
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1 unused credit shown on its final completed return carried
2 over as a credit against the tax liability for the following
3 5 taxable years or until it has been fully used, whichever
4 occurs first.
5 If an unused credit is carried forward to a given year
6 from 2 or more earlier years, that credit arising in the
7 earliest year will be applied first against the tax liability
8 for the given year. If a tax liability for the given year
9 still remains, the credit from the next earliest year will
10 then be applied, and so on, until all credits have been used
11 or no tax liability for the given year remains. Any
12 remaining unused credit or credits then will be carried
13 forward to the next following year in which a tax liability
14 is incurred, except that no credit can be carried forward to
15 a year which is more than 5 years after the year in which the
16 expense for which the credit is given was incurred.
17 Unless extended by law, the credit shall not include
18 costs incurred after December 31, 2004, except for costs
19 incurred pursuant to a binding contract entered into on or
20 before December 31, 2004.
21 (l) Environmental Remediation Tax Credit.
22 (i) For tax years ending after December 31, 1997
23 and on or before December 31, 2001, a taxpayer shall be
24 allowed a credit against the tax imposed by subsections
25 (a) and (b) of this Section for certain amounts paid for
26 unreimbursed eligible remediation costs, as specified in
27 this subsection. For purposes of this Section,
28 "unreimbursed eligible remediation costs" means costs
29 approved by the Illinois Environmental Protection Agency
30 ("Agency") under Section 58.14 of the Environmental
31 Protection Act that were paid in performing environmental
32 remediation at a site for which a No Further Remediation
33 Letter was issued by the Agency and recorded under
34 Section 58.10 of the Environmental Protection Act. The
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1 credit must be claimed for the taxable year in which
2 Agency approval of the eligible remediation costs is
3 granted. The credit is not available to any taxpayer if
4 the taxpayer or any related party caused or contributed
5 to, in any material respect, a release of regulated
6 substances on, in, or under the site that was identified
7 and addressed by the remedial action pursuant to the Site
8 Remediation Program of the Environmental Protection Act.
9 After the Pollution Control Board rules are adopted
10 pursuant to the Illinois Administrative Procedure Act for
11 the administration and enforcement of Section 58.9 of the
12 Environmental Protection Act, determinations as to credit
13 availability for purposes of this Section shall be made
14 consistent with those rules. For purposes of this
15 Section, "taxpayer" includes a person whose tax
16 attributes the taxpayer has succeeded to under Section
17 381 of the Internal Revenue Code and "related party"
18 includes the persons disallowed a deduction for losses by
19 paragraphs (b), (c), and (f)(1) of Section 267 of the
20 Internal Revenue Code by virtue of being a related
21 taxpayer, as well as any of its partners. The credit
22 allowed against the tax imposed by subsections (a) and
23 (b) shall be equal to 25% of the unreimbursed eligible
24 remediation costs in excess of $100,000 per site, except
25 that the $100,000 threshold shall not apply to any site
26 contained in an enterprise zone as determined by the
27 Department of Commerce and Community Affairs. The total
28 credit allowed shall not exceed $40,000 per year with a
29 maximum total of $150,000 per site. For partners and
30 shareholders of subchapter S corporations, there shall be
31 allowed a credit under this subsection to be determined
32 in accordance with the determination of income and
33 distributive share of income under Sections 702 and 704
34 of subchapter S of the Internal Revenue Code.
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1 (ii) A credit allowed under this subsection that is
2 unused in the year the credit is earned may be carried
3 forward to each of the 5 taxable years following the year
4 for which the credit is first earned until it is used.
5 The term "unused credit" does not include any amounts of
6 unreimbursed eligible remediation costs in excess of the
7 maximum credit per site authorized under paragraph (i).
8 This credit shall be applied first to the earliest year
9 for which there is a liability. If there is a credit
10 under this subsection from more than one tax year that is
11 available to offset a liability, the earliest credit
12 arising under this subsection shall be applied first. A
13 credit allowed under this subsection may be sold to a
14 buyer as part of a sale of all or part of the remediation
15 site for which the credit was granted. The purchaser of
16 a remediation site and the tax credit shall succeed to
17 the unused credit and remaining carry-forward period of
18 the seller. To perfect the transfer, the assignor shall
19 record the transfer in the chain of title for the site
20 and provide written notice to the Director of the
21 Illinois Department of Revenue of the assignor's intent
22 to sell the remediation site and the amount of the tax
23 credit to be transferred as a portion of the sale. In no
24 event may a credit be transferred to any taxpayer if the
25 taxpayer or a related party would not be eligible under
26 the provisions of subsection (i).
27 (iii) For purposes of this Section, the term "site"
28 shall have the same meaning as under Section 58.2 of the
29 Environmental Protection Act.
30 (Source: P.A. 89-235, eff. 8-4-95; 89-519, eff. 7-18-96;
31 89-591, eff. 8-1-96; 90-123, eff. 7-21-97; 90-458, eff.
32 8-17-97; 90-605, eff. 6-30-98; 90-655, eff. 7-30-98; 90-717,
33 eff. 8-7-98; 90-792, eff. 1-1-99; revised 9-16-98.)
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1 (35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
2 Sec. 1501. Definitions.
3 (a) In general. When used in this Act, where not
4 otherwise distinctly expressed or manifestly incompatible
5 with the intent thereof:
6 (1) Business income. The term "business income"
7 means income arising from transactions and activity in
8 the regular course of the taxpayer's trade or business,
9 net of the deductions allocable thereto, and includes
10 income from tangible and intangible property if the
11 acquisition, management, and disposition of the property
12 constitute integral parts of the taxpayer's regular trade
13 or business operations. Such term does not include
14 compensation or the deductions allocable thereto.
15 (2) Commercial domicile. The term "commercial
16 domicile" means the principal place from which the trade
17 or business of the taxpayer is directed or managed.
18 (3) Compensation. The term "compensation" means
19 wages, salaries, commissions and any other form of
20 remuneration paid to employees for personal services.
21 (4) Corporation. The term "corporation" includes
22 associations, joint-stock companies, insurance companies
23 and cooperatives. Any entity, including a limited
24 liability company formed under the Illinois Limited
25 Liability Company Act, shall be treated as a corporation
26 if it is so classified for federal income tax purposes.
27 (5) Department. The term "Department" means the
28 Department of Revenue of this State.
29 (6) Director. The term "Director" means the
30 Director of Revenue of this State.
31 (7) Fiduciary. The term "fiduciary" means a
32 guardian, trustee, executor, administrator, receiver, or
33 any person acting in any fiduciary capacity for any
34 person.
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1 (8) Financial organization.
2 (A) The term "financial organization" means
3 any bank, bank holding company, trust company,
4 savings bank, industrial bank, land bank, safe
5 deposit company, private banker, savings and loan
6 association, building and loan association, credit
7 union, currency exchange, cooperative bank, small
8 loan company, sales finance company, investment
9 company, or any person which is owned by a bank or
10 bank holding company. For the purpose of this
11 Section a "person" will include only those persons
12 which a bank holding company may acquire and hold an
13 interest in, directly or indirectly, under the
14 provisions of the Bank Holding Company Act of 1956
15 (12 U.S.C. 1841, et seq.), except where interests in
16 any person must be disposed of within certain
17 required time limits under the Bank Holding Company
18 Act of 1956.
19 (B) For purposes of subparagraph (A) of this
20 paragraph, the term "bank" includes (i) any entity
21 that is regulated by the Comptroller of the Currency
22 under the National Bank Act, or by the Federal
23 Reserve Board, or by the Federal Deposit Insurance
24 Corporation and (ii) any federally or State
25 chartered bank operating as a credit card bank.
26 (C) For purposes of subparagraph (A) of this
27 paragraph, the term "sales finance company" means a
28 person primarily engaged in the business of
29 purchasing or making loans upon the security of
30 retail installment contracts or retail charge
31 agreements or the outstanding balances under such
32 contracts or agreements. The term includes but is
33 not limited to persons: (i) to whom the Sales
34 Finance Agency Act is rendered inapplicable by
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1 subsection (b) of Section 17 thereof; (ii) engaged
2 in consumer sales finance activities governed by the
3 Sales Finance Agency Act or that would be governed
4 by that Act if conducted in this State; (iii)
5 engaged in activities governed by the Retail
6 Installment Sales Act, including the making or
7 purchasing of retail installment contracts or retail
8 charge agreements for "goods" or "services" as
9 defined in that Act, or activities that would be
10 governed by that Act if conducted in this State;
11 (iv) engaged in activities governed by the Motor
12 Vehicle Retail Installment Sales Act or that would
13 be governed by that Act if conducted in this State;
14 (v) engaged in commercial finance activities
15 governed by the Illinois Uniform Commercial Code or
16 that would be governed by that Code if conducted in
17 this State; or (vi) engaged in the finance leasing
18 of tangible personal property where "finance
19 leasing" is activity that is the economic equivalent
20 of an extension of credit and for which a deduction
21 for depreciation under Section 167 of the Internal
22 Revenue Code of 1986 is not available to a lessor.
23 (D) Subparagraphs (B) and (C) of this
24 paragraph are declaratory of existing law and apply
25 retroactively, for all tax years beginning on or
26 before December 31, 1996, to all original returns,
27 to all amended returns filed no later than 30 days
28 after the effective date of this amendatory Act of
29 1996, and to all notices issued on or before the
30 effective date of this amendatory Act of 1996 under
31 subsection (a) of Section 903, subsection (a) of
32 Section 904, subsection (e) of Section 909, or
33 Section 912. A taxpayer that is a "financial
34 organization" that engages in any transaction with
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1 an affiliate shall be a "financial organization" for
2 all purposes of this Act.
3 (E) For all tax years beginning on or before
4 December 31, 1996, a taxpayer that falls within the
5 definition of a "financial organization" under
6 subparagraphs (B) or (C) of this paragraph, but who
7 does not fall within the definition of a "financial
8 organization" under the Proposed Regulations issued
9 by the Department of Revenue on July 19, 1996, may
10 irrevocably elect to apply the Proposed Regulations
11 for all of those years as though the Proposed
12 Regulations had been lawfully promulgated, adopted,
13 and in effect for all of those years. For purposes
14 of applying subparagraphs (B) or (C) of this
15 paragraph to all of those years, the election
16 allowed by this subparagraph applies only to the
17 taxpayer making the election and to those members of
18 the taxpayer's unitary business group who are
19 ordinarily required to apportion business income
20 under the same subsection of Section 304 of this Act
21 as the taxpayer making the election. No election
22 allowed by this subparagraph shall be made under a
23 claim filed under subsection (d) of Section 909 more
24 than 30 days after the effective date of this
25 amendatory Act of 1996.
26 (9) Fiscal year. The term "fiscal year" means an
27 accounting period of 12 months ending on the last day of
28 any month other than December.
29 (10) Includes and including. The terms "includes"
30 and "including" when used in a definition contained in
31 this Act shall not be deemed to exclude other things
32 otherwise within the meaning of the term defined.
33 (11) Internal Revenue Code. The term "Internal
34 Revenue Code" means the United States Internal Revenue
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1 Code of 1954 or any successor law or laws relating to
2 federal income taxes in effect for the taxable year.
3 (12) Mathematical error. The term "mathematical
4 error" includes the following types of errors, omissions,
5 or defects in a return filed by a taxpayer which prevents
6 acceptance of the return as filed for processing:
7 (A) arithmetic errors or incorrect
8 computations on the return or supporting schedules;
9 (B) entries on the wrong lines;
10 (C) omission of required supporting forms or
11 schedules or the omission of the information in
12 whole or in part called for thereon; and
13 (D) an attempt to claim, exclude, deduct, or
14 improperly report, in a manner directly contrary to
15 the provisions of the Act and regulations thereunder
16 any item of income, exemption, deduction, or credit.
17 (13) Nonbusiness income. The term "nonbusiness
18 income" means all income other than business income or
19 compensation.
20 (14) Nonresident. The term "nonresident" means a
21 person who is not a resident.
22 (15) Paid, incurred and accrued. The terms "paid",
23 "incurred" and "accrued" shall be construed according to
24 the method of accounting upon the basis of which the
25 person's base income is computed under this Act.
26 (16) Partnership and partner. The term
27 "partnership" includes a syndicate, group, pool, joint
28 venture or other unincorporated organization, through or
29 by means of which any business, financial operation, or
30 venture is carried on, and which is not, within the
31 meaning of this Act, a trust or estate or a corporation;
32 and the term "partner" includes a member in such
33 syndicate, group, pool, joint venture or organization.
34 Any entity, including a limited liability company
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1 formed under the Illinois Limited Liability Company Act,
2 shall be treated as a partnership if it is so classified
3 for federal income tax purposes.
4 For purposes of the tax imposed at subsection (c) of
5 Section 201 of this Act, the term "partnership" does not
6 include a syndicate, group, pool, joint venture or other
7 unincorporated organization established for the sole
8 purpose of playing the Illinois State Lottery.
9 (17) Part-year resident. The term "part-year
10 resident" means an individual who became a resident
11 during the taxable year or ceased to be a resident during
12 the taxable year. Under Section 1501 (a) (20) (A) (i)
13 residence commences with presence in this State for other
14 than a temporary or transitory purpose and ceases with
15 absence from this State for other than a temporary or
16 transitory purpose. Under Section 1501 (a) (20) (A) (ii)
17 residence commences with the establishment of domicile in
18 this State and ceases with the establishment of domicile
19 in another State.
20 (18) Person. The term "person" shall be construed
21 to mean and include an individual, a trust, estate,
22 partnership, association, firm, company, corporation,
23 limited liability company, or fiduciary. For purposes of
24 Section 1301 and 1302 of this Act, a "person" means (i)
25 an individual, (ii) a corporation, (iii) an officer,
26 agent, or employee of a corporation, (iv) a member, agent
27 or employee of a partnership, or (v) a member, manager,
28 employee, officer, director, or agent of a limited
29 liability company who in such capacity commits an offense
30 specified in Section 1301 and 1302.
31 (18A) Records. The term "records" includes all
32 data maintained by the taxpayer, whether on paper,
33 microfilm, microfiche, or any type of machine-sensible
34 data compilation.
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1 (19) Regulations. The term "regulations" includes
2 rules promulgated and forms prescribed by the Department.
3 (20) Resident. The term "resident" means:
4 (A) an individual (i) who is in this State for
5 other than a temporary or transitory purpose during
6 the taxable year; or (ii) who is domiciled in this
7 State but is absent from the State for a temporary
8 or transitory purpose during the taxable year;
9 (B) The estate of a decedent who at his or her
10 death was domiciled in this State;
11 (C) A trust created by a will of a decedent
12 who at his death was domiciled in this State; and
13 (D) An irrevocable trust, the grantor of which
14 was domiciled in this State at the time such trust
15 became irrevocable. For purpose of this
16 subparagraph, a trust shall be considered
17 irrevocable to the extent that the grantor is not
18 treated as the owner thereof under Sections 671
19 through 678 of the Internal Revenue Code.
20 (21) Sales. The term "sales" means all gross
21 receipts of the taxpayer not allocated under Sections
22 301, 302 and 303.
23 (22) State. The term "state" when applied to a
24 jurisdiction other than this State means any state of the
25 United States, the District of Columbia, the Commonwealth
26 of Puerto Rico, any Territory or Possession of the United
27 States, and any foreign country, or any political
28 subdivision of any of the foregoing. For purposes of the
29 foreign tax credit under Section 601, the term "state"
30 means any state of the United States, the District of
31 Columbia, the Commonwealth of Puerto Rico, and any
32 territory or possession of the United States, or any
33 political subdivision of any of the foregoing, effective
34 for tax years ending on or after December 31, 1989.
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1 (23) Taxable year. The term "taxable year" means
2 the calendar year, or the fiscal year ending during such
3 calendar year, upon the basis of which the base income is
4 computed under this Act. "Taxable year" means, in the
5 case of a return made for a fractional part of a year
6 under the provisions of this Act, the period for which
7 such return is made.
8 (24) Taxpayer. The term "taxpayer" means any person
9 subject to the tax imposed by this Act.
10 (25) International banking facility. The term
11 international banking facility shall have the same
12 meaning as is set forth in the Illinois Banking Act or as
13 is set forth in the laws of the United States or
14 regulations of the Board of Governors of the Federal
15 Reserve System.
16 (26) Income Tax Return Preparer.
17 (A) The term "income tax return preparer"
18 means any person who prepares for compensation, or
19 who employs one or more persons to prepare for
20 compensation, any return of tax imposed by this Act
21 or any claim for refund of tax imposed by this Act.
22 The preparation of a substantial portion of a return
23 or claim for refund shall be treated as the
24 preparation of that return or claim for refund.
25 (B) A person is not an income tax return
26 preparer if all he or she does is
27 (i) furnish typing, reproducing, or other
28 mechanical assistance;
29 (ii) prepare returns or claims for
30 refunds for the employer by whom he or she is
31 regularly and continuously employed;
32 (iii) prepare as a fiduciary returns or
33 claims for refunds for any person; or
34 (iv) prepare claims for refunds for a
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1 taxpayer in response to any notice of
2 deficiency issued to that taxpayer or in
3 response to any waiver of restriction after the
4 commencement of an audit of that taxpayer or of
5 another taxpayer if a determination in the
6 audit of the other taxpayer directly or
7 indirectly affects the tax liability of the
8 taxpayer whose claims he or she is preparing.
9 (27) Unitary business group. The term "unitary
10 business group" means a group of persons related through
11 common ownership whose business activities are integrated
12 with, dependent upon and contribute to each other. The
13 group will not include those members whose business
14 activity outside the United States is 80% or more of any
15 such member's total business activity; for purposes of
16 this paragraph and clause (a) (3) (B) (ii) of Section
17 304, business activity within the United States shall be
18 measured by means of the factors ordinarily applicable
19 under subsections (a), (b), (c), (d), or (h) of Section
20 304 except that, in the case of members ordinarily
21 required to apportion business income by means of the 3
22 factor formula of property, payroll and sales specified
23 in subsection (a) of Section 304, including the formula
24 as weighted in subsection (h) of Section 304, such
25 members shall not use the sales factor in the computation
26 and the results of the property and payroll factor
27 computations of subsection (a) of Section 304 shall be
28 divided by 2 (by one if either the property or payroll
29 factor has a denominator of zero). The computation
30 required by the preceding sentence shall, in each case,
31 involve the division of the member's property, payroll,
32 or revenue miles in the United States, insurance premiums
33 on property or risk in the United States, or financial
34 organization business income from sources within the
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1 United States, as the case may be, by the respective
2 worldwide figures for such items. Common ownership in
3 the case of corporations is the direct or indirect
4 control or ownership of more than 50% of the outstanding
5 voting stock of the persons carrying on unitary business
6 activity. Unitary business activity can ordinarily be
7 illustrated where the activities of the members are: (1)
8 in the same general line (such as manufacturing,
9 wholesaling, retailing of tangible personal property,
10 insurance, transportation or finance); or (2) are steps
11 in a vertically structured enterprise or process (such as
12 the steps involved in the production of natural
13 resources, which might include exploration, mining,
14 refining, and marketing); and, in either instance, the
15 members are functionally integrated through the exercise
16 of strong centralized management (where, for example,
17 authority over such matters as purchasing, financing, tax
18 compliance, product line, personnel, marketing and
19 capital investment is not left to each member). In no
20 event, however, will any unitary business group include
21 members which are ordinarily required to apportion
22 business income under different subsections of Section
23 304 except that for tax years ending on or after December
24 31, 1987 this prohibition shall not apply to a unitary
25 business group composed of one or more taxpayers all of
26 which apportion business income pursuant to subsection
27 (b) of Section 304, or all of which apportion business
28 income pursuant to subsection (d) of Section 304, and a
29 holding company of such single-factor taxpayers (see
30 definition of "financial organization" for rule regarding
31 holding companies of financial organizations). If a
32 unitary business group would, but for the preceding
33 sentence, include members that are ordinarily required to
34 apportion business income under different subsections of
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1 Section 304, then for each subsection of Section 304 for
2 which there are two or more members, there shall be a
3 separate unitary business group composed of such members.
4 For purposes of the preceding two sentences, a member is
5 "ordinarily required to apportion business income" under
6 a particular subsection of Section 304 if it would be
7 required to use the apportionment method prescribed by
8 such subsection except for the fact that it derives
9 business income solely from Illinois. If the unitary
10 business group members' accounting periods differ, the
11 common parent's accounting period or, if there is no
12 common parent, the accounting period of the member that
13 is expected to have, on a recurring basis, the greatest
14 Illinois income tax liability must be used to determine
15 whether to use the apportionment method provided in
16 subsection (a) or subsection (h) of Section 304. The
17 prohibition against membership in a unitary business
18 group for taxpayers ordinarily required to apportion
19 income under different subsections of Section 304 does
20 not apply to taxpayers required to apportion income under
21 subsection (a) and subsection (h) of Section 304. The
22 provisions of this amendatory Act of 1998 apply to tax
23 years ending on or after December 31, 1998.
24 Notwithstanding any other provision of this item (27), an
25 "attorney-in-fact" for a reciprocal insurance exchange,
26 as defined in Section 61 of the Illinois Insurance Code,
27 shall be included in the unitary business group that
28 includes the reciprocal insurance exchange.
29 (28) Subchapter S corporation. The term
30 "Subchapter S corporation" means a corporation for which
31 there is in effect an election under Section 1362 of the
32 Internal Revenue Code, or for which there is a federal
33 election to opt out of the provisions of the Subchapter S
34 Revision Act of 1982 and have applied instead the prior
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1 federal Subchapter S rules as in effect on July 1, 1982.
2 (b) Other definitions.
3 (1) Words denoting number, gender, and so forth,
4 when used in this Act, where not otherwise distinctly
5 expressed or manifestly incompatible with the intent
6 thereof:
7 (A) Words importing the singular include and
8 apply to several persons, parties or things;
9 (B) Words importing the plural include the
10 singular; and
11 (C) Words importing the masculine gender
12 include the feminine as well.
13 (2) "Company" or "association" as including
14 successors and assigns. The word "company" or
15 "association", when used in reference to a corporation,
16 shall be deemed to embrace the words "successors and
17 assigns of such company or association", and in like
18 manner as if these last-named words, or words of similar
19 import, were expressed.
20 (3) Other terms. Any term used in any Section of
21 this Act with respect to the application of, or in
22 connection with, the provisions of any other Section of
23 this Act shall have the same meaning as in such other
24 Section.
25 (Source: P.A. 89-399, eff. 8-20-95; 89-711, eff. 2-14-97;
26 90-613, eff. 7-9-98.)
27 Section 99. Effective date. This Act takes effect upon
28 becoming law.