HB5255 102ND GENERAL ASSEMBLY

LRB102 25352 HLH 34631 b

102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB5255

Introduced 1/31/2022, by Rep. Keith R. Wheeler

SYNOPSIS AS INTRODUCED:

New Act
35 ILCS 10/5-5
35 ILCS 10/5-45
35 ILCS 10/5-77

Creates the Business Location Efficiency Incentive Act of 2022. Provides that a company or its representative that negotiates or applies for economic development assistance from the Department of Commerce and Economic Opportunity may apply for increased economic development assistance if the project is located in an area that satisfies the Act's standards for affordable workforce housing or affordable and accessible mass transit. Amends the Economic Development for a Growing Economy Tax Credit Act. Provides that the Department may not enter into any new agreements after June 30, 2032 (currently, June 30, 2022). Makes changes concerning the maximum credit amount under the Act. Provides that the Department of Commerce and Economic Opportunity may award a taxpayer an increased credit amount or other benefits within the agreement if the taxpayer demonstrates that, in addition to the investment at the project location, the taxpayer plans to make a non-project-specific capital investment in the furtherance of community or supply-chain development within the general surrounding area of the project. Effective immediately, except that provisions creating the Business Location Efficiency Incentive Act of 2022 take effect on January 1, 2023.

A BILL FOR

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Business Location Efficiency Incentive Act of 2022.

Section 5. Definitions. In this Act:

"Accessible and affordable mass transit" means access to transit stops with regular and frequent service within one mile from the project site and pedestrian access to transit stops.

"Affordable workforce housing" means owner-occupied or rental housing that costs, based on current census data for the municipality where the project is located or any municipality within 3 miles of the municipality where the project is located, no more than 35% of the median salary at the project site, exclusive of the highest 10% of the site's salaries. If the project is located in an unincorporated area, "affordable workforce housing" means no more than 35% of the median salary at the project site, excluding the highest 10% of the site's salaries, based on the median cost of rental or of owner-occupied housing in the county where the unincorporated area is located.

"Applicant" means a company or its representative that negotiates or applies for economic development assistance from the Department.

"Department" or "DCEO" means the Department of Commerce and Economic Opportunity.

"Economic development assistance" means State tax credits and tax exemptions given as an incentive to an eligible company after certification by DCEO under the Economic Development for a Growing Economy Tax Credit Act (EDGE).

"Employee housing or transportation remediation plan" means a plan to increase affordable housing or transportation options, or both, for employees earning up to the median annual salary of the workforce at the project. The plan may include, but is not limited to, an employer-financed or assisted housing program that can be supplemented by State or federal grants, shuttle services between the place of employment and existing transit stops or other reasonably accessible places, facilitation of employee carpooling, or similar services.

"Existence of infrastructure" means the existence within 1,500 feet of the proposed site of roads, sewers, sidewalks, and other utilities and a description of the investments or improvements, if any, that an applicant expects State or local government to make to that infrastructure.

"Location efficient" means a project that maximizes the use of existing investments in infrastructure, avoids or minimizes additional government expenditures for new infrastructure, and has nearby housing affordable to the permanent workforce of the project or has accessible and affordable mass transit or its equivalent or some combination of both.

"Location efficiency report" means a report that is prepared by an applicant for increased State economic development assistance under Section 10 and follows this Act and any related Department guidelines, and that describes the existence of (i) affordable workforce housing or (ii) accessible and affordable mass transit or its equivalent.

Section 10. Economic development assistance awards.

(a) An applicant that also wants to be considered for increased economic development assistance under this Act shall submit a location efficiency report.

(b) The Department may give an applicant an increased tax credit or extension if the applicant's location efficiency report demonstrates that the applicant is seeking assistance for a project to be located in an area that satisfies this Act's standards for affordable workforce housing or affordable and accessible mass transit. If the Department determines from the location efficiency report that the applicant is seeking assistance in an area that is not location efficient, the Department may award an increase in State economic development assistance if an applicant (i) submits, and the Department accepts, an applicant's employee housing and transportation remediation plan or (ii) creates jobs in a labor surplus area, as defined by the Department of Employment Security at the end of each calendar year.

(c) Applicants locating or expanding at location-efficient sites, with approved location efficiency plans, or creating jobs in labor surplus areas may receive (i) up to 10% more than the maximum allowable tax credits for which they are eligible under the Economic Development for a Growing Economy Tax Credit Act, but not to equal or exceed 100% of the applicant's tax liability or (ii) such other adjustment of those tax credits, including but not limited to extensions, as the Department deems appropriate.

(d) The Department may provide technical assistance to employers requesting assistance in developing an appropriate employee housing or transportation plan.

Section 15. Summaries; progress reports.

(a) The Department shall include summaries of the initial employee housing or transportation plans for each assisted project in the annual compilation and publication of project progress reports required under subsection (d) of Section 20 of the Corporate Accountability for Tax Expenditures Act. Companies that fail to do so or that make inadequate progress shall have their increased tax credit or extension eliminated. Applicants and submitted data are subject to all disclosure, reporting, and recapture provisions provided under the Corporate Accountability for Tax Expenditure Act.

(b) By June 1, 2023 and by June 1 of each year thereafter through 2032, the Department shall include, when appropriate, data on the outcomes or status of approved employee housing or transportation plans in the project progress reports required under the Corporate Accountability for Tax Expenditure Act.

Section 20. Duration of incentives; report to General Assembly.

(a) Any multi-year incentive awarded under this Act shall continue for the time period called for in the agreement with the Department and shall not be altered by the repeal of this Act.

(b) By January 1, 2024, the Department shall submit to the Speaker of the House of Representatives and the President of the Senate, for assignment to the appropriate committees, a report on the incentives awarded under this Act and the Department's activities, findings, and recommendations with respect to this Act and its extension, amendment, or repeal. The report, when acted upon by those committees, shall be distributed to each member of the General Assembly.

Section 25. Repeal. This Act is repealed on December 31, 2032.

Section 900. The Economic Development for a Growing Economy Tax Credit Act is amended by changing Sections 5-5, 5-45, and 5-77 as follows:

(35 ILCS 10/5-5)

Sec. 5-5. Definitions. As used in this Act:

"Agreement" means the Agreement between a Taxpayer and the Department under the provisions of Section 5-50 of this Act.

"Applicant" means a Taxpayer that is operating a business located or that the Taxpayer plans to locate within the State of Illinois and that is engaged in interstate or intrastate commerce for the purpose of manufacturing, processing, assembling, warehousing, or distributing products, conducting research and development, providing tourism services, or providing services in interstate commerce, office industries, or agricultural processing, but excluding retail, retail food, health, or professional services. "Applicant" does not include a Taxpayer who closes or substantially reduces an operation at one location in the State and relocates substantially the same operation to another location in the State. This does not prohibit a Taxpayer from expanding its operations at another location in the State, provided that existing operations of a similar nature located within the State are not closed or substantially reduced. This also does not prohibit a Taxpayer from moving its operations from one location in the State to another location in the State for the purpose of expanding the operation provided that the Department determines that expansion cannot reasonably be accommodated within the municipality in which the business is located, or in the case of a business located in an incorporated area of the county, within the county in which the business is located, after conferring with the chief elected official of the municipality or county and taking into consideration any evidence offered by the municipality or county regarding the ability to accommodate expansion within the municipality or county.

"Credit" means the amount agreed to between the Department and Applicant under this Act, but not to exceed the lesser of: (1) the sum of (i) 50% of the Incremental Income Tax attributable to New Employees at the Applicant's project and (ii) 10% of the training costs of New Employees; or (2) 100% of the Incremental Income Tax attributable to New Employees at the Applicant's project. However, if the project is located in an underserved area, then the amount of the Credit may not exceed the lesser of: (1) the sum of (i) 75% of the Incremental Income Tax attributable to New Employees at the Applicant's project and (ii) 10% of the training costs of New Employees; or (2) 100% of the Incremental Income Tax attributable to New Employees at the Applicant's project. If an Applicant agrees to hire the required number of New Employees, then the maximum amount of the Credit for that Applicant may be increased by an amount not to exceed 50% 25% of the Incremental Income Tax attributable to retained employees at the Applicant's project; however, if the project is located in an underserved area, then the amount of the Credit for that Applicant may be increased by an amount not to exceed 75% of the Incremental Income Tax attributable to retained employees at the Applicant's project. In provided that, in order to receive the increase for retained employees, the Applicant must provide the additional evidence required under paragraph (3) of subsection (b) of Section 5-25.

"Department" means the Department of Commerce and Economic Opportunity.

"Director" means the Director of Commerce and Economic Opportunity.

"Full-time Employee" means an individual who is employed for consideration for at least 35 hours each week or who renders any other standard of service generally accepted by industry custom or practice as full-time employment. An individual for whom a W-2 is issued by a Professional Employer Organization (PEO) is a full-time employee if employed in the service of the Applicant for consideration for at least 35 hours each week or who renders any other standard of service generally accepted by industry custom or practice as full-time employment to Applicant.

"Incremental Income Tax" means the total amount withheld during the taxable year from the compensation of New Employees and, if applicable, retained employees under Article 7 of the Illinois Income Tax Act arising from employment at a project that is the subject of an Agreement.

"New Construction EDGE Agreement" means the Agreement between a Taxpayer and the Department under the provisions of Section 5-51 of this Act.

"New Construction EDGE Credit" means an amount agreed to between the Department and the Applicant under this Act as part of a New Construction EDGE Agreement that does not exceed 50% of the Incremental Income Tax attributable to New Construction EDGE Employees at the Applicant's project; however, if the New Construction EDGE Project is located in an underserved area, then the amount of the New Construction EDGE Credit may not exceed 75% of the Incremental Income Tax attributable to New Construction EDGE Employees at the Applicant's New Construction EDGE Project.

"New Construction EDGE Employee" means a laborer or worker who is employed by an Illinois contractor or subcontractor in the actual construction work on the site of a New Construction EDGE Project, pursuant to a New Construction EDGE Agreement.

"New Construction EDGE Incremental Income Tax" means the total amount withheld during the taxable year from the compensation of New Construction EDGE Employees.

"New Construction EDGE Project" means the building of a Taxpayer's structure or building, or making improvements of any kind to real property. "New Construction EDGE Project" does not include the routine operation, routine repair, or routine maintenance of existing structures, buildings, or real property.

"New Employee" means:

(a) A Full-time Employee first employed by a Taxpayer in the project that is the subject of an Agreement and who is hired after the Taxpayer enters into the tax credit Agreement.

(b) The term "New Employee" does not include:

(1) an employee of the Taxpayer who performs a job that was previously performed by another employee, if that job existed for at least 6 months before hiring the employee;

(2) an employee of the Taxpayer who was previously employed in Illinois by a Related Member of the Taxpayer and whose employment was shifted to the Taxpayer after the Taxpayer entered into the tax credit Agreement; or

(3) a child, grandchild, parent, or spouse, other than a spouse who is legally separated from the individual, of any individual who has a direct or an indirect ownership interest of at least 5% in the profits, capital, or value of the Taxpayer.

(c) Notwithstanding paragraph (1) of subsection (b), an employee may be considered a New Employee under the Agreement if the employee performs a job that was previously performed by an employee who was:

(1) treated under the Agreement as a New Employee; and

(2) promoted by the Taxpayer to another job.

(d) Notwithstanding subsection (a), the Department may award Credit to an Applicant with respect to an employee hired prior to the date of the Agreement if:

(1) the Applicant is in receipt of a letter from the Department stating an intent to enter into a credit Agreement;

(2) the letter described in paragraph (1) is issued by the Department not later than 15 days after the effective date of this Act; and

(3) the employee was hired after the date the letter described in paragraph (1) was issued.

"Noncompliance Date" means, in the case of a Taxpayer that is not complying with the requirements of the Agreement or the provisions of this Act, the day following the last date upon which the Taxpayer was in compliance with the requirements of the Agreement and the provisions of this Act, as determined by the Director, pursuant to Section 5-65.

"Pass Through Entity" means an entity that is exempt from the tax under subsection (b) or (c) of Section 205 of the Illinois Income Tax Act.

"Professional Employer Organization" (PEO) means an employee leasing company, as defined in Section 206.1(A)(2) of the Illinois Unemployment Insurance Act.

"Related Member" means a person that, with respect to the Taxpayer during any portion of the taxable year, is any one of the following:

(1) An individual stockholder, if the stockholder and the members of the stockholder's family (as defined in Section 318 of the Internal Revenue Code) own directly, indirectly, beneficially, or constructively, in the aggregate, at least 50% of the value of the Taxpayer's outstanding stock.

(2) A partnership, estate, or trust and any partner or beneficiary, if the partnership, estate, or trust, and its partners or beneficiaries own directly, indirectly, beneficially, or constructively, in the aggregate, at least 50% of the profits, capital, stock, or value of the Taxpayer.

(3) A corporation, and any party related to the corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under the attribution rules of Section 318 of the Internal Revenue Code, if the Taxpayer owns directly, indirectly, beneficially, or constructively at least 50% of the value of the corporation's outstanding stock.

(4) A corporation and any party related to that corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under the attribution rules of Section 318 of the Internal Revenue Code, if the corporation and all such related parties own in the aggregate at least 50% of the profits, capital, stock, or value of the Taxpayer.

(5) A person to or from whom there is attribution of stock ownership in accordance with Section 1563(e) of the Internal Revenue Code, except, for purposes of determining whether a person is a Related Member under this paragraph, 20% shall be substituted for 5% wherever 5% appears in Section 1563(e) of the Internal Revenue Code.

"Taxpayer" means an individual, corporation, partnership, or other entity that has any Illinois Income Tax liability.

"Underserved area" means a geographic area that meets one or more of the following conditions:

(1) the area has a poverty rate of at least 20% according to the latest federal decennial census;

(2) 75% or more of the children in the area participate in the federal free lunch program according to reported statistics from the State Board of Education;

(3) at least 20% of the households in the area receive assistance under the Supplemental Nutrition Assistance Program (SNAP); or

(4) the area has an average unemployment rate, as determined by the Illinois Department of Employment Security, that is more than 120% of the national unemployment average, as determined by the U.S. Department of Labor, for a period of at least 2 consecutive calendar years preceding the date of the application.

(Source: P.A. 101-9, eff. 6-5-19; 102-330, eff. 1-1-22.)

(35 ILCS 10/5-45)

Sec. 5-45. Amount and duration of the credit.

(a) The Department shall determine the amount and duration of the credit awarded under this Act. The duration of the credit may not exceed 10 taxable years. The credit may be stated as a percentage of the Incremental Income Tax attributable to the applicant's project and may include a fixed dollar limitation.

(b) Notwithstanding subsection (a), and except as the credit may be applied in a carryover year pursuant to Section 211(4) of the Illinois Income Tax Act, the credit may be applied against the State income tax liability in more than 10 taxable years but not in more than 15 taxable years for an eligible business that (i) qualifies under this Act and the Corporate Headquarters Relocation Act and has in fact undertaken a qualifying project within the time frame specified by the Department of Commerce and Economic Opportunity under that Act, and (ii) applies against its State income tax liability, during the entire 15-year period, no more than 60% of the maximum credit per year that would otherwise be available under this Act.

(c) Nothing in this Section shall prevent the Department, in consultation with the Department of Revenue, from adopting rules to extend the sunset of any earned, existing, and unused tax credit or credits a taxpayer may be in possession of, as provided for in Section 605-1070 605-1055 of the Department of Commerce and Economic Opportunity Law of the Civil Administrative Code of Illinois, notwithstanding the carry-forward provisions pursuant to paragraph (4) of Section 211 of the Illinois Income Tax Act.

(d) Notwithstanding subsection (a) or (b), a recipient of a credit may request a certificate of transferability of credit from the Department for the amount of credit not previously claimed. A transferability certificate so issued may be transferred or sold by the recipient to another Illinois taxpayer. Transferors and sellers shall submit to the Department of Revenue a notification of any transfer or sale of tax credits within 30 days after the transfer or sale of those tax credits. The notification, which shall be in the form prescribed by the Department, shall include the transferor's tax credit balance prior to transfer, the credit certificate number, the identifying number of the EDGE agreement, the transferor's remaining tax credit balance after transfer, all tax identification numbers for both transferor and transferee, the date of transfer, the amount transferred, a copy of the credit certificate, and any other information required by the Department of Revenue. The transfer or sale of the credit does not extend the time in which credit can be used. The carry forward period for a credit that is transferred or sold begins on the date on which the credit was originally granted by the Department. To the extent the transferor did not have rights to claim or use the credit at the time of the transfer or sale, the Department of Revenue shall either disallow the credit claimed by the transferee or recapture the credit from the transferee through any collection method authorized by statute. In such case, the transferee's recourse is against the transferor.

(e) The Department may award a Taxpayer an increased credit amount or other benefits within the Agreement if the Taxpayer demonstrates that, in addition to the investment at the project location, the Taxpayer plans to make a non-project-specific capital investment in the furtherance of community or supply-chain development within the general surrounding area of the project. In determining the type of eligible investment allowed under this Section (e), the Department shall consider the proximity of the non-project specific investment to the development, the amount and purpose of the non-project specific investment, and the overall economic development benefit for the surrounding area. Non-project specific investments may include, but are not limited to, partnerships with educational systems, including school, community college, or university, workforce development programs, infrastructure and technological infrastructure investments that serve a greater area than the project, affordable housing and real estate development, health care services, and other purposes as deemed appropriate by the Department. Non-project-specific investments may also include contracts that utilize existing business and economic development projects or support new businesses and economic development projects in the surrounding area.

(Source: P.A. 102-16, eff. 6-17-21; revised 12-6-21.)

(35 ILCS 10/5-77)

Sec. 5-77. Sunset of new Agreements. The Department shall not enter into any new Agreements under the provisions of Section 5-50 of this Act after June 30, 2032 June 30, 2022.

(Source: P.A. 99-925, eff. 1-20-17; 100-511, eff. 9-18-17.)

Section 999. Effective date. This Act takes effect upon becoming law, except that Sections 1 through 25 take effect on January 1, 2023.