103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
HB2978

 

Introduced 2/16/2023, by Rep. Adam M. Niemerg

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/201

    Amends the Illinois Income Tax Act. Reduces the rate of tax on corporations from 7% to 5.5%. Effective immediately.


LRB103 25945 HLH 52297 b

 

 

A BILL FOR

 

HB2978LRB103 25945 HLH 52297 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing Section 201 as follows:
 
6    (35 ILCS 5/201)
7    Sec. 201. Tax imposed.
8    (a) In general. A tax measured by net income is hereby
9imposed on every individual, corporation, trust and estate for
10each taxable year ending after July 31, 1969 on the privilege
11of earning or receiving income in or as a resident of this
12State. Such tax shall be in addition to all other occupation or
13privilege taxes imposed by this State or by any municipal
14corporation or political subdivision thereof.
15    (b) Rates. The tax imposed by subsection (a) of this
16Section shall be determined as follows, except as adjusted by
17subsection (d-1):
18        (1) In the case of an individual, trust or estate, for
19    taxable years ending prior to July 1, 1989, an amount
20    equal to 2 1/2% of the taxpayer's net income for the
21    taxable year.
22        (2) In the case of an individual, trust or estate, for
23    taxable years beginning prior to July 1, 1989 and ending

 

 

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1    after June 30, 1989, an amount equal to the sum of (i) 2
2    1/2% of the taxpayer's net income for the period prior to
3    July 1, 1989, as calculated under Section 202.3, and (ii)
4    3% of the taxpayer's net income for the period after June
5    30, 1989, as calculated under Section 202.3.
6        (3) In the case of an individual, trust or estate, for
7    taxable years beginning after June 30, 1989, and ending
8    prior to January 1, 2011, an amount equal to 3% of the
9    taxpayer's net income for the taxable year.
10        (4) In the case of an individual, trust, or estate,
11    for taxable years beginning prior to January 1, 2011, and
12    ending after December 31, 2010, an amount equal to the sum
13    of (i) 3% of the taxpayer's net income for the period prior
14    to January 1, 2011, as calculated under Section 202.5, and
15    (ii) 5% of the taxpayer's net income for the period after
16    December 31, 2010, as calculated under Section 202.5.
17        (5) In the case of an individual, trust, or estate,
18    for taxable years beginning on or after January 1, 2011,
19    and ending prior to January 1, 2015, an amount equal to 5%
20    of the taxpayer's net income for the taxable year.
21        (5.1) In the case of an individual, trust, or estate,
22    for taxable years beginning prior to January 1, 2015, and
23    ending after December 31, 2014, an amount equal to the sum
24    of (i) 5% of the taxpayer's net income for the period prior
25    to January 1, 2015, as calculated under Section 202.5, and
26    (ii) 3.75% of the taxpayer's net income for the period

 

 

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1    after December 31, 2014, as calculated under Section
2    202.5.
3        (5.2) In the case of an individual, trust, or estate,
4    for taxable years beginning on or after January 1, 2015,
5    and ending prior to July 1, 2017, an amount equal to 3.75%
6    of the taxpayer's net income for the taxable year.
7        (5.3) In the case of an individual, trust, or estate,
8    for taxable years beginning prior to July 1, 2017, and
9    ending after June 30, 2017, an amount equal to the sum of
10    (i) 3.75% of the taxpayer's net income for the period
11    prior to July 1, 2017, as calculated under Section 202.5,
12    and (ii) 4.95% of the taxpayer's net income for the period
13    after June 30, 2017, as calculated under Section 202.5.
14        (5.4) In the case of an individual, trust, or estate,
15    for taxable years beginning on or after July 1, 2017, an
16    amount equal to 4.95% of the taxpayer's net income for the
17    taxable year.
18        (6) In the case of a corporation, for taxable years
19    ending prior to July 1, 1989, an amount equal to 4% of the
20    taxpayer's net income for the taxable year.
21        (7) In the case of a corporation, for taxable years
22    beginning prior to July 1, 1989 and ending after June 30,
23    1989, an amount equal to the sum of (i) 4% of the
24    taxpayer's net income for the period prior to July 1,
25    1989, as calculated under Section 202.3, and (ii) 4.8% of
26    the taxpayer's net income for the period after June 30,

 

 

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1    1989, as calculated under Section 202.3.
2        (8) In the case of a corporation, for taxable years
3    beginning after June 30, 1989, and ending prior to January
4    1, 2011, an amount equal to 4.8% of the taxpayer's net
5    income for the taxable year.
6        (9) In the case of a corporation, for taxable years
7    beginning prior to January 1, 2011, and ending after
8    December 31, 2010, an amount equal to the sum of (i) 4.8%
9    of the taxpayer's net income for the period prior to
10    January 1, 2011, as calculated under Section 202.5, and
11    (ii) 7% of the taxpayer's net income for the period after
12    December 31, 2010, as calculated under Section 202.5.
13        (10) In the case of a corporation, for taxable years
14    beginning on or after January 1, 2011, and ending prior to
15    January 1, 2015, an amount equal to 7% of the taxpayer's
16    net income for the taxable year.
17        (11) In the case of a corporation, for taxable years
18    beginning prior to January 1, 2015, and ending after
19    December 31, 2014, an amount equal to the sum of (i) 7% of
20    the taxpayer's net income for the period prior to January
21    1, 2015, as calculated under Section 202.5, and (ii) 5.25%
22    of the taxpayer's net income for the period after December
23    31, 2014, as calculated under Section 202.5.
24        (12) In the case of a corporation, for taxable years
25    beginning on or after January 1, 2015, and ending prior to
26    July 1, 2017, an amount equal to 5.25% of the taxpayer's

 

 

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1    net income for the taxable year.
2        (13) In the case of a corporation, for taxable years
3    beginning prior to July 1, 2017, and ending after June 30,
4    2017, an amount equal to the sum of (i) 5.25% of the
5    taxpayer's net income for the period prior to July 1,
6    2017, as calculated under Section 202.5, and (ii) 7% of
7    the taxpayer's net income for the period after June 30,
8    2017, as calculated under Section 202.5.
9        (14) In the case of a corporation, for taxable years
10    beginning on or after July 1, 2017 and ending prior to
11    January 1, 2023, an amount equal to 7% of the taxpayer's
12    net income for the taxable year.
13    (15) In the case of a corporation, for taxable years
14beginning prior to January 1, 2023, and ending after December
1531, 2022, an amount equal to the sum of (i) 7% of the
16taxpayer's net income for the period prior to January 1, 2023,
17as calculated under Section 202.5, and (ii) 5.5% of the
18taxpayer's net income for the period after December 31, 2022,
19as calculated under Section 202.5.
20    (16) In the case of a corporation, for taxable years
21beginning on or after January 1, 2023, an amount equal to 5.5%
22of the taxpayer's net income for the taxable year.
23    The rates under this subsection (b) are subject to the
24provisions of Section 201.5.
25    (b-5) Surcharge; sale or exchange of assets, properties,
26and intangibles of organization gaming licensees. For each of

 

 

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1taxable years 2019 through 2027, a surcharge is imposed on all
2taxpayers on income arising from the sale or exchange of
3capital assets, depreciable business property, real property
4used in the trade or business, and Section 197 intangibles (i)
5of an organization licensee under the Illinois Horse Racing
6Act of 1975 and (ii) of an organization gaming licensee under
7the Illinois Gambling Act. The amount of the surcharge is
8equal to the amount of federal income tax liability for the
9taxable year attributable to those sales and exchanges. The
10surcharge imposed shall not apply if:
11        (1) the organization gaming license, organization
12    license, or racetrack property is transferred as a result
13    of any of the following:
14            (A) bankruptcy, a receivership, or a debt
15        adjustment initiated by or against the initial
16        licensee or the substantial owners of the initial
17        licensee;
18            (B) cancellation, revocation, or termination of
19        any such license by the Illinois Gaming Board or the
20        Illinois Racing Board;
21            (C) a determination by the Illinois Gaming Board
22        that transfer of the license is in the best interests
23        of Illinois gaming;
24            (D) the death of an owner of the equity interest in
25        a licensee;
26            (E) the acquisition of a controlling interest in

 

 

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1        the stock or substantially all of the assets of a
2        publicly traded company;
3            (F) a transfer by a parent company to a wholly
4        owned subsidiary; or
5            (G) the transfer or sale to or by one person to
6        another person where both persons were initial owners
7        of the license when the license was issued; or
8        (2) the controlling interest in the organization
9    gaming license, organization license, or racetrack
10    property is transferred in a transaction to lineal
11    descendants in which no gain or loss is recognized or as a
12    result of a transaction in accordance with Section 351 of
13    the Internal Revenue Code in which no gain or loss is
14    recognized; or
15        (3) live horse racing was not conducted in 2010 at a
16    racetrack located within 3 miles of the Mississippi River
17    under a license issued pursuant to the Illinois Horse
18    Racing Act of 1975.
19    The transfer of an organization gaming license,
20organization license, or racetrack property by a person other
21than the initial licensee to receive the organization gaming
22license is not subject to a surcharge. The Department shall
23adopt rules necessary to implement and administer this
24subsection.
25    (c) Personal Property Tax Replacement Income Tax.
26Beginning on July 1, 1979 and thereafter, in addition to such

 

 

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1income tax, there is also hereby imposed the Personal Property
2Tax Replacement Income Tax measured by net income on every
3corporation (including Subchapter S corporations), partnership
4and trust, for each taxable year ending after June 30, 1979.
5Such taxes are imposed on the privilege of earning or
6receiving income in or as a resident of this State. The
7Personal Property Tax Replacement Income Tax shall be in
8addition to the income tax imposed by subsections (a) and (b)
9of this Section and in addition to all other occupation or
10privilege taxes imposed by this State or by any municipal
11corporation or political subdivision thereof.
12    (d) Additional Personal Property Tax Replacement Income
13Tax Rates. The personal property tax replacement income tax
14imposed by this subsection and subsection (c) of this Section
15in the case of a corporation, other than a Subchapter S
16corporation and except as adjusted by subsection (d-1), shall
17be an additional amount equal to 2.85% of such taxpayer's net
18income for the taxable year, except that beginning on January
191, 1981, and thereafter, the rate of 2.85% specified in this
20subsection shall be reduced to 2.5%, and in the case of a
21partnership, trust or a Subchapter S corporation shall be an
22additional amount equal to 1.5% of such taxpayer's net income
23for the taxable year.
24    (d-1) Rate reduction for certain foreign insurers. In the
25case of a foreign insurer, as defined by Section 35A-5 of the
26Illinois Insurance Code, whose state or country of domicile

 

 

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1imposes on insurers domiciled in Illinois a retaliatory tax
2(excluding any insurer whose premiums from reinsurance assumed
3are 50% or more of its total insurance premiums as determined
4under paragraph (2) of subsection (b) of Section 304, except
5that for purposes of this determination premiums from
6reinsurance do not include premiums from inter-affiliate
7reinsurance arrangements), beginning with taxable years ending
8on or after December 31, 1999, the sum of the rates of tax
9imposed by subsections (b) and (d) shall be reduced (but not
10increased) to the rate at which the total amount of tax imposed
11under this Act, net of all credits allowed under this Act,
12shall equal (i) the total amount of tax that would be imposed
13on the foreign insurer's net income allocable to Illinois for
14the taxable year by such foreign insurer's state or country of
15domicile if that net income were subject to all income taxes
16and taxes measured by net income imposed by such foreign
17insurer's state or country of domicile, net of all credits
18allowed or (ii) a rate of zero if no such tax is imposed on
19such income by the foreign insurer's state of domicile. For
20the purposes of this subsection (d-1), an inter-affiliate
21includes a mutual insurer under common management.
22        (1) For the purposes of subsection (d-1), in no event
23    shall the sum of the rates of tax imposed by subsections
24    (b) and (d) be reduced below the rate at which the sum of:
25            (A) the total amount of tax imposed on such
26        foreign insurer under this Act for a taxable year, net

 

 

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1        of all credits allowed under this Act, plus
2            (B) the privilege tax imposed by Section 409 of
3        the Illinois Insurance Code, the fire insurance
4        company tax imposed by Section 12 of the Fire
5        Investigation Act, and the fire department taxes
6        imposed under Section 11-10-1 of the Illinois
7        Municipal Code,
8    equals 1.25% for taxable years ending prior to December
9    31, 2003, or 1.75% for taxable years ending on or after
10    December 31, 2003, of the net taxable premiums written for
11    the taxable year, as described by subsection (1) of
12    Section 409 of the Illinois Insurance Code. This paragraph
13    will in no event increase the rates imposed under
14    subsections (b) and (d).
15        (2) Any reduction in the rates of tax imposed by this
16    subsection shall be applied first against the rates
17    imposed by subsection (b) and only after the tax imposed
18    by subsection (a) net of all credits allowed under this
19    Section other than the credit allowed under subsection (i)
20    has been reduced to zero, against the rates imposed by
21    subsection (d).
22    This subsection (d-1) is exempt from the provisions of
23Section 250.
24    (e) Investment credit. A taxpayer shall be allowed a
25credit against the Personal Property Tax Replacement Income
26Tax for investment in qualified property.

 

 

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1        (1) A taxpayer shall be allowed a credit equal to .5%
2    of the basis of qualified property placed in service
3    during the taxable year, provided such property is placed
4    in service on or after July 1, 1984. There shall be allowed
5    an additional credit equal to .5% of the basis of
6    qualified property placed in service during the taxable
7    year, provided such property is placed in service on or
8    after July 1, 1986, and the taxpayer's base employment
9    within Illinois has increased by 1% or more over the
10    preceding year as determined by the taxpayer's employment
11    records filed with the Illinois Department of Employment
12    Security. Taxpayers who are new to Illinois shall be
13    deemed to have met the 1% growth in base employment for the
14    first year in which they file employment records with the
15    Illinois Department of Employment Security. The provisions
16    added to this Section by Public Act 85-1200 (and restored
17    by Public Act 87-895) shall be construed as declaratory of
18    existing law and not as a new enactment. If, in any year,
19    the increase in base employment within Illinois over the
20    preceding year is less than 1%, the additional credit
21    shall be limited to that percentage times a fraction, the
22    numerator of which is .5% and the denominator of which is
23    1%, but shall not exceed .5%. The investment credit shall
24    not be allowed to the extent that it would reduce a
25    taxpayer's liability in any tax year below zero, nor may
26    any credit for qualified property be allowed for any year

 

 

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1    other than the year in which the property was placed in
2    service in Illinois. For tax years ending on or after
3    December 31, 1987, and on or before December 31, 1988, the
4    credit shall be allowed for the tax year in which the
5    property is placed in service, or, if the amount of the
6    credit exceeds the tax liability for that year, whether it
7    exceeds the original liability or the liability as later
8    amended, such excess may be carried forward and applied to
9    the tax liability of the 5 taxable years following the
10    excess credit years if the taxpayer (i) makes investments
11    which cause the creation of a minimum of 2,000 full-time
12    equivalent jobs in Illinois, (ii) is located in an
13    enterprise zone established pursuant to the Illinois
14    Enterprise Zone Act and (iii) is certified by the
15    Department of Commerce and Community Affairs (now
16    Department of Commerce and Economic Opportunity) as
17    complying with the requirements specified in clause (i)
18    and (ii) by July 1, 1986. The Department of Commerce and
19    Community Affairs (now Department of Commerce and Economic
20    Opportunity) shall notify the Department of Revenue of all
21    such certifications immediately. For tax years ending
22    after December 31, 1988, the credit shall be allowed for
23    the tax year in which the property is placed in service,
24    or, if the amount of the credit exceeds the tax liability
25    for that year, whether it exceeds the original liability
26    or the liability as later amended, such excess may be

 

 

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1    carried forward and applied to the tax liability of the 5
2    taxable years following the excess credit years. The
3    credit shall be applied to the earliest year for which
4    there is a liability. If there is credit from more than one
5    tax year that is available to offset a liability, earlier
6    credit shall be applied first.
7        (2) The term "qualified property" means property
8    which:
9            (A) is tangible, whether new or used, including
10        buildings and structural components of buildings and
11        signs that are real property, but not including land
12        or improvements to real property that are not a
13        structural component of a building such as
14        landscaping, sewer lines, local access roads, fencing,
15        parking lots, and other appurtenances;
16            (B) is depreciable pursuant to Section 167 of the
17        Internal Revenue Code, except that "3-year property"
18        as defined in Section 168(c)(2)(A) of that Code is not
19        eligible for the credit provided by this subsection
20        (e);
21            (C) is acquired by purchase as defined in Section
22        179(d) of the Internal Revenue Code;
23            (D) is used in Illinois by a taxpayer who is
24        primarily engaged in manufacturing, or in mining coal
25        or fluorite, or in retailing, or was placed in service
26        on or after July 1, 2006 in a River Edge Redevelopment

 

 

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1        Zone established pursuant to the River Edge
2        Redevelopment Zone Act; and
3            (E) has not previously been used in Illinois in
4        such a manner and by such a person as would qualify for
5        the credit provided by this subsection (e) or
6        subsection (f).
7        (3) For purposes of this subsection (e),
8    "manufacturing" means the material staging and production
9    of tangible personal property by procedures commonly
10    regarded as manufacturing, processing, fabrication, or
11    assembling which changes some existing material into new
12    shapes, new qualities, or new combinations. For purposes
13    of this subsection (e) the term "mining" shall have the
14    same meaning as the term "mining" in Section 613(c) of the
15    Internal Revenue Code. For purposes of this subsection
16    (e), the term "retailing" means the sale of tangible
17    personal property for use or consumption and not for
18    resale, or services rendered in conjunction with the sale
19    of tangible personal property for use or consumption and
20    not for resale. For purposes of this subsection (e),
21    "tangible personal property" has the same meaning as when
22    that term is used in the Retailers' Occupation Tax Act,
23    and, for taxable years ending after December 31, 2008,
24    does not include the generation, transmission, or
25    distribution of electricity.
26        (4) The basis of qualified property shall be the basis

 

 

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1    used to compute the depreciation deduction for federal
2    income tax purposes.
3        (5) If the basis of the property for federal income
4    tax depreciation purposes is increased after it has been
5    placed in service in Illinois by the taxpayer, the amount
6    of such increase shall be deemed property placed in
7    service on the date of such increase in basis.
8        (6) The term "placed in service" shall have the same
9    meaning as under Section 46 of the Internal Revenue Code.
10        (7) If during any taxable year, any property ceases to
11    be qualified property in the hands of the taxpayer within
12    48 months after being placed in service, or the situs of
13    any qualified property is moved outside Illinois within 48
14    months after being placed in service, the Personal
15    Property Tax Replacement Income Tax for such taxable year
16    shall be increased. Such increase shall be determined by
17    (i) recomputing the investment credit which would have
18    been allowed for the year in which credit for such
19    property was originally allowed by eliminating such
20    property from such computation and, (ii) subtracting such
21    recomputed credit from the amount of credit previously
22    allowed. For the purposes of this paragraph (7), a
23    reduction of the basis of qualified property resulting
24    from a redetermination of the purchase price shall be
25    deemed a disposition of qualified property to the extent
26    of such reduction.

 

 

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1        (8) Unless the investment credit is extended by law,
2    the basis of qualified property shall not include costs
3    incurred after December 31, 2018, except for costs
4    incurred pursuant to a binding contract entered into on or
5    before December 31, 2018.
6        (9) Each taxable year ending before December 31, 2000,
7    a partnership may elect to pass through to its partners
8    the credits to which the partnership is entitled under
9    this subsection (e) for the taxable year. A partner may
10    use the credit allocated to him or her under this
11    paragraph only against the tax imposed in subsections (c)
12    and (d) of this Section. If the partnership makes that
13    election, those credits shall be allocated among the
14    partners in the partnership in accordance with the rules
15    set forth in Section 704(b) of the Internal Revenue Code,
16    and the rules promulgated under that Section, and the
17    allocated amount of the credits shall be allowed to the
18    partners for that taxable year. The partnership shall make
19    this election on its Personal Property Tax Replacement
20    Income Tax return for that taxable year. The election to
21    pass through the credits shall be irrevocable.
22        For taxable years ending on or after December 31,
23    2000, a partner that qualifies its partnership for a
24    subtraction under subparagraph (I) of paragraph (2) of
25    subsection (d) of Section 203 or a shareholder that
26    qualifies a Subchapter S corporation for a subtraction

 

 

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1    under subparagraph (S) of paragraph (2) of subsection (b)
2    of Section 203 shall be allowed a credit under this
3    subsection (e) equal to its share of the credit earned
4    under this subsection (e) during the taxable year by the
5    partnership or Subchapter S corporation, determined in
6    accordance with the determination of income and
7    distributive share of income under Sections 702 and 704
8    and Subchapter S of the Internal Revenue Code. This
9    paragraph is exempt from the provisions of Section 250.
10    (f) Investment credit; Enterprise Zone; River Edge
11Redevelopment Zone.
12        (1) A taxpayer shall be allowed a credit against the
13    tax imposed by subsections (a) and (b) of this Section for
14    investment in qualified property which is placed in
15    service in an Enterprise Zone created pursuant to the
16    Illinois Enterprise Zone Act or, for property placed in
17    service on or after July 1, 2006, a River Edge
18    Redevelopment Zone established pursuant to the River Edge
19    Redevelopment Zone Act. For partners, shareholders of
20    Subchapter S corporations, and owners of limited liability
21    companies, if the liability company is treated as a
22    partnership for purposes of federal and State income
23    taxation, there shall be allowed a credit under this
24    subsection (f) to be determined in accordance with the
25    determination of income and distributive share of income
26    under Sections 702 and 704 and Subchapter S of the

 

 

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1    Internal Revenue Code. The credit shall be .5% of the
2    basis for such property. The credit shall be available
3    only in the taxable year in which the property is placed in
4    service in the Enterprise Zone or River Edge Redevelopment
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. For
8    tax years ending on or after December 31, 1985, the credit
9    shall be allowed for the tax year in which the property is
10    placed in service, or, if the amount of the credit exceeds
11    the tax liability for that year, whether it exceeds the
12    original liability or the liability as later amended, such
13    excess may be carried forward and applied to the tax
14    liability of the 5 taxable years following the excess
15    credit year. The credit shall be applied to the earliest
16    year for which there is a liability. If there is credit
17    from more than one tax year that is available to offset a
18    liability, the credit accruing first in time shall be
19    applied first.
20        (2) The term qualified property means property which:
21            (A) is tangible, whether new or used, including
22        buildings and structural components of buildings;
23            (B) is depreciable pursuant to Section 167 of the
24        Internal Revenue Code, except that "3-year property"
25        as defined in Section 168(c)(2)(A) of that Code is not
26        eligible for the credit provided by this subsection

 

 

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1        (f);
2            (C) is acquired by purchase as defined in Section
3        179(d) of the Internal Revenue Code;
4            (D) is used in the Enterprise Zone or River Edge
5        Redevelopment Zone by the taxpayer; and
6            (E) has not been previously used in Illinois in
7        such a manner and by such a person as would qualify for
8        the credit provided by this subsection (f) or
9        subsection (e).
10        (3) The basis of qualified property shall be the basis
11    used to compute the depreciation deduction for federal
12    income tax purposes.
13        (4) If the basis of the property for federal income
14    tax depreciation purposes is increased after it has been
15    placed in service in the Enterprise Zone or River Edge
16    Redevelopment Zone by the taxpayer, the amount of such
17    increase shall be deemed property placed in service on the
18    date of such increase in basis.
19        (5) The term "placed in service" shall have the same
20    meaning as under Section 46 of the Internal Revenue Code.
21        (6) If during any taxable year, any property ceases to
22    be qualified property in the hands of the taxpayer within
23    48 months after being placed in service, or the situs of
24    any qualified property is moved outside the Enterprise
25    Zone or River Edge Redevelopment Zone within 48 months
26    after being placed in service, the tax imposed under

 

 

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1    subsections (a) and (b) of this Section for such taxable
2    year shall be increased. Such increase shall be determined
3    by (i) recomputing the investment credit which would have
4    been allowed for the year in which credit for such
5    property was originally allowed by eliminating such
6    property from such computation, and (ii) subtracting such
7    recomputed credit from the amount of credit previously
8    allowed. For the purposes of this paragraph (6), a
9    reduction of the basis of qualified property resulting
10    from a redetermination of the purchase price shall be
11    deemed a disposition of qualified property to the extent
12    of such reduction.
13        (7) There shall be allowed an additional credit equal
14    to 0.5% of the basis of qualified property placed in
15    service during the taxable year in a River Edge
16    Redevelopment Zone, provided such property is placed in
17    service on or after July 1, 2006, and the taxpayer's base
18    employment within Illinois has increased by 1% or more
19    over the preceding year as determined by the taxpayer's
20    employment records filed with the Illinois Department of
21    Employment Security. Taxpayers who are new to Illinois
22    shall be deemed to have met the 1% growth in base
23    employment for the first year in which they file
24    employment records with the Illinois Department of
25    Employment Security. If, in any year, the increase in base
26    employment within Illinois over the preceding year is less

 

 

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1    than 1%, the additional credit shall be limited to that
2    percentage times a fraction, the numerator of which is
3    0.5% and the denominator of which is 1%, but shall not
4    exceed 0.5%.
5        (8) For taxable years beginning on or after January 1,
6    2021, there shall be allowed an Enterprise Zone
7    construction jobs credit against the taxes imposed under
8    subsections (a) and (b) of this Section as provided in
9    Section 13 of the Illinois Enterprise Zone Act.
10        The credit or credits may not reduce the taxpayer's
11    liability to less than zero. If the amount of the credit or
12    credits exceeds the taxpayer's liability, the excess may
13    be carried forward and applied against the taxpayer's
14    liability in succeeding calendar years in the same manner
15    provided under paragraph (4) of Section 211 of this Act.
16    The credit or credits shall be applied to the earliest
17    year for which there is a tax liability. If there are
18    credits from more than one taxable year that are available
19    to offset a liability, the earlier credit shall be applied
20    first.
21        For partners, shareholders of Subchapter S
22    corporations, and owners of limited liability companies,
23    if the liability company is treated as a partnership for
24    the purposes of federal and State income taxation, there
25    shall be allowed a credit under this Section to be
26    determined in accordance with the determination of income

 

 

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1    and distributive share of income under Sections 702 and
2    704 and Subchapter S of the Internal Revenue Code.
3        The total aggregate amount of credits awarded under
4    the Blue Collar Jobs Act (Article 20 of Public Act 101-9)
5    shall not exceed $20,000,000 in any State fiscal year.
6        This paragraph (8) is exempt from the provisions of
7    Section 250.
8    (g) (Blank).
9    (h) Investment credit; High Impact Business.
10        (1) Subject to subsections (b) and (b-5) of Section
11    5.5 of the Illinois Enterprise Zone Act, a taxpayer shall
12    be allowed a credit against the tax imposed by subsections
13    (a) and (b) of this Section for investment in qualified
14    property which is placed in service by a Department of
15    Commerce and Economic Opportunity designated High Impact
16    Business. The credit shall be .5% of the basis for such
17    property. The credit shall not be available (i) until the
18    minimum investments in qualified property set forth in
19    subdivision (a)(3)(A) of Section 5.5 of the Illinois
20    Enterprise Zone Act have been satisfied or (ii) until the
21    time authorized in subsection (b-5) of the Illinois
22    Enterprise Zone Act for entities designated as High Impact
23    Businesses under subdivisions (a)(3)(B), (a)(3)(C), and
24    (a)(3)(D) of Section 5.5 of the Illinois Enterprise Zone
25    Act, and shall not be allowed to the extent that it would
26    reduce a taxpayer's liability for the tax imposed by

 

 

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1    subsections (a) and (b) of this Section to below zero. The
2    credit applicable to such investments shall be taken in
3    the taxable year in which such investments have been
4    completed. The credit for additional investments beyond
5    the minimum investment by a designated high impact
6    business authorized under subdivision (a)(3)(A) of Section
7    5.5 of the Illinois Enterprise Zone Act shall be available
8    only in the taxable year in which the property is placed in
9    service and shall not be allowed to the extent that it
10    would reduce a taxpayer's liability for the tax imposed by
11    subsections (a) and (b) of this Section to below zero. For
12    tax years ending on or after December 31, 1987, the credit
13    shall be allowed for the tax year in which the property is
14    placed in service, or, if the amount of the credit exceeds
15    the tax liability for that year, whether it exceeds the
16    original liability or the liability as later amended, such
17    excess may be carried forward and applied to the tax
18    liability of the 5 taxable years following the excess
19    credit year. The credit shall be applied to the earliest
20    year for which there is a liability. If there is credit
21    from more than one tax year that is available to offset a
22    liability, the credit accruing first in time shall be
23    applied first.
24        Changes made in this subdivision (h)(1) by Public Act
25    88-670 restore changes made by Public Act 85-1182 and
26    reflect existing law.

 

 

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1        (2) The term qualified property means property which:
2            (A) is tangible, whether new or used, including
3        buildings and structural components of buildings;
4            (B) is depreciable pursuant to Section 167 of the
5        Internal Revenue Code, except that "3-year property"
6        as defined in Section 168(c)(2)(A) of that Code is not
7        eligible for the credit provided by this subsection
8        (h);
9            (C) is acquired by purchase as defined in Section
10        179(d) of the Internal Revenue Code; and
11            (D) is not eligible for the Enterprise Zone
12        Investment Credit provided by subsection (f) of this
13        Section.
14        (3) The basis of qualified property shall be the basis
15    used to compute the depreciation deduction for federal
16    income tax purposes.
17        (4) If the basis of the property for federal income
18    tax depreciation purposes is increased after it has been
19    placed in service in a federally designated Foreign Trade
20    Zone or Sub-Zone located in Illinois by the taxpayer, the
21    amount of such increase shall be deemed property placed in
22    service on the date of such increase in basis.
23        (5) The term "placed in service" shall have the same
24    meaning as under Section 46 of the Internal Revenue Code.
25        (6) If during any taxable year ending on or before
26    December 31, 1996, any property ceases to be qualified

 

 

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1    property in the hands of the taxpayer within 48 months
2    after being placed in service, or the situs of any
3    qualified property is moved outside Illinois within 48
4    months after being placed in service, the tax imposed
5    under subsections (a) and (b) of this Section for such
6    taxable year shall be increased. Such increase shall be
7    determined by (i) recomputing the investment credit which
8    would have been allowed for the year in which credit for
9    such property was originally allowed by eliminating such
10    property from such computation, and (ii) subtracting such
11    recomputed credit from the amount of credit previously
12    allowed. For the purposes of this paragraph (6), a
13    reduction of the basis of qualified property resulting
14    from a redetermination of the purchase price shall be
15    deemed a disposition of qualified property to the extent
16    of such reduction.
17        (7) Beginning with tax years ending after December 31,
18    1996, if a taxpayer qualifies for the credit under this
19    subsection (h) and thereby is granted a tax abatement and
20    the taxpayer relocates its entire facility in violation of
21    the explicit terms and length of the contract under
22    Section 18-183 of the Property Tax Code, the tax imposed
23    under subsections (a) and (b) of this Section shall be
24    increased for the taxable year in which the taxpayer
25    relocated its facility by an amount equal to the amount of
26    credit received by the taxpayer under this subsection (h).

 

 

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1    (h-5) High Impact Business construction jobs credit. For
2taxable years beginning on or after January 1, 2021, there
3shall also be allowed a High Impact Business construction jobs
4credit against the tax imposed under subsections (a) and (b)
5of this Section as provided in subsections (i) and (j) of
6Section 5.5 of the Illinois Enterprise Zone Act.
7    The credit or credits may not reduce the taxpayer's
8liability to less than zero. If the amount of the credit or
9credits exceeds the taxpayer's liability, the excess may be
10carried forward and applied against the taxpayer's liability
11in succeeding calendar years in the manner provided under
12paragraph (4) of Section 211 of this Act. The credit or credits
13shall be applied to the earliest year for which there is a tax
14liability. If there are credits from more than one taxable
15year that are available to offset a liability, the earlier
16credit shall be applied first.
17    For partners, shareholders of Subchapter S corporations,
18and owners of limited liability companies, if the liability
19company is treated as a partnership for the purposes of
20federal and State income taxation, there shall be allowed a
21credit under this Section to be determined in accordance with
22the determination of income and distributive share of income
23under Sections 702 and 704 and Subchapter S of the Internal
24Revenue Code.
25    The total aggregate amount of credits awarded under the
26Blue Collar Jobs Act (Article 20 of Public Act 101-9) shall not

 

 

HB2978- 27 -LRB103 25945 HLH 52297 b

1exceed $20,000,000 in any State fiscal year.
2    This subsection (h-5) is exempt from the provisions of
3Section 250.
4    (i) Credit for Personal Property Tax Replacement Income
5Tax. For tax years ending prior to December 31, 2003, a credit
6shall be allowed against the tax imposed by subsections (a)
7and (b) of this Section for the tax imposed by subsections (c)
8and (d) of this Section. This credit shall be computed by
9multiplying the tax imposed by subsections (c) and (d) of this
10Section by a fraction, the numerator of which is base income
11allocable to Illinois and the denominator of which is Illinois
12base income, and further multiplying the product by the tax
13rate imposed by subsections (a) and (b) of this Section.
14    Any credit earned on or after December 31, 1986 under this
15subsection which is unused in the year the credit is computed
16because it exceeds the tax liability imposed by subsections
17(a) and (b) for that year (whether it exceeds the original
18liability or the liability as later amended) may be carried
19forward and applied to the tax liability imposed by
20subsections (a) and (b) of the 5 taxable years following the
21excess credit year, provided that no credit may be carried
22forward to any year ending on or after December 31, 2003. This
23credit shall be applied first to the earliest year for which
24there is a liability. If there is a credit under this
25subsection from more than one tax year that is available to
26offset a liability the earliest credit arising under this

 

 

HB2978- 28 -LRB103 25945 HLH 52297 b

1subsection shall be applied first.
2    If, during any taxable year ending on or after December
331, 1986, the tax imposed by subsections (c) and (d) of this
4Section for which a taxpayer has claimed a credit under this
5subsection (i) is reduced, the amount of credit for such tax
6shall also be reduced. Such reduction shall be determined by
7recomputing the credit to take into account the reduced tax
8imposed by subsections (c) and (d). If any portion of the
9reduced amount of credit has been carried to a different
10taxable year, an amended return shall be filed for such
11taxable year to reduce the amount of credit claimed.
12    (j) Training expense credit. Beginning with tax years
13ending on or after December 31, 1986 and prior to December 31,
142003, a taxpayer shall be allowed a credit against the tax
15imposed by subsections (a) and (b) under this Section for all
16amounts paid or accrued, on behalf of all persons employed by
17the taxpayer in Illinois or Illinois residents employed
18outside of Illinois by a taxpayer, for educational or
19vocational training in semi-technical or technical fields or
20semi-skilled or skilled fields, which were deducted from gross
21income in the computation of taxable income. The credit
22against the tax imposed by subsections (a) and (b) shall be
231.6% of such training expenses. For partners, shareholders of
24subchapter S corporations, and owners of limited liability
25companies, if the liability company is treated as a
26partnership for purposes of federal and State income taxation,

 

 

HB2978- 29 -LRB103 25945 HLH 52297 b

1there shall be allowed a credit under this subsection (j) to be
2determined in accordance with the determination of income and
3distributive share of income under Sections 702 and 704 and
4subchapter S of the Internal Revenue Code.
5    Any credit allowed under this subsection which is unused
6in the year the credit is earned may be carried forward to each
7of the 5 taxable years following the year for which the credit
8is first computed until it is used. This credit shall be
9applied first to the earliest year for which there is a
10liability. If there is a credit under this subsection from
11more than one tax year that is available to offset a liability,
12the earliest credit arising under this subsection shall be
13applied first. No carryforward credit may be claimed in any
14tax year ending on or after December 31, 2003.
15    (k) Research and development credit. For tax years ending
16after July 1, 1990 and prior to December 31, 2003, and
17beginning again for tax years ending on or after December 31,
182004, and ending prior to January 1, 2027, a taxpayer shall be
19allowed a credit against the tax imposed by subsections (a)
20and (b) of this Section for increasing research activities in
21this State. The credit allowed against the tax imposed by
22subsections (a) and (b) shall be equal to 6 1/2% of the
23qualifying expenditures for increasing research activities in
24this State. For partners, shareholders of subchapter S
25corporations, and owners of limited liability companies, if
26the liability company is treated as a partnership for purposes

 

 

HB2978- 30 -LRB103 25945 HLH 52297 b

1of federal and State income taxation, there shall be allowed a
2credit under this subsection to be determined in accordance
3with the determination of income and distributive share of
4income under Sections 702 and 704 and subchapter S of the
5Internal Revenue Code.
6    For purposes of this subsection, "qualifying expenditures"
7means the qualifying expenditures as defined for the federal
8credit for increasing research activities which would be
9allowable under Section 41 of the Internal Revenue Code and
10which are conducted in this State, "qualifying expenditures
11for increasing research activities in this State" means the
12excess of qualifying expenditures for the taxable year in
13which incurred over qualifying expenditures for the base
14period, "qualifying expenditures for the base period" means
15the average of the qualifying expenditures for each year in
16the base period, and "base period" means the 3 taxable years
17immediately preceding the taxable year for which the
18determination is being made.
19    Any credit in excess of the tax liability for the taxable
20year may be carried forward. A taxpayer may elect to have the
21unused credit shown on its final completed return carried over
22as a credit against the tax liability for the following 5
23taxable years or until it has been fully used, whichever
24occurs first; provided that no credit earned in a tax year
25ending prior to December 31, 2003 may be carried forward to any
26year ending on or after December 31, 2003.

 

 

HB2978- 31 -LRB103 25945 HLH 52297 b

1    If an unused credit is carried forward to a given year from
22 or more earlier years, that credit arising in the earliest
3year will be applied first against the tax liability for the
4given year. If a tax liability for the given year still
5remains, the credit from the next earliest year will then be
6applied, and so on, until all credits have been used or no tax
7liability for the given year remains. Any remaining unused
8credit or credits then will be carried forward to the next
9following year in which a tax liability is incurred, except
10that no credit can be carried forward to a year which is more
11than 5 years after the year in which the expense for which the
12credit is given was incurred.
13    No inference shall be drawn from Public Act 91-644 in
14construing this Section for taxable years beginning before
15January 1, 1999.
16    It is the intent of the General Assembly that the research
17and development credit under this subsection (k) shall apply
18continuously for all tax years ending on or after December 31,
192004 and ending prior to January 1, 2027, including, but not
20limited to, the period beginning on January 1, 2016 and ending
21on July 6, 2017 (the effective date of Public Act 100-22). All
22actions taken in reliance on the continuation of the credit
23under this subsection (k) by any taxpayer are hereby
24validated.
25    (l) Environmental Remediation Tax Credit.
26        (i) For tax years ending after December 31, 1997 and

 

 

HB2978- 32 -LRB103 25945 HLH 52297 b

1    on or before December 31, 2001, a taxpayer shall be
2    allowed a credit against the tax imposed by subsections
3    (a) and (b) of this Section for certain amounts paid for
4    unreimbursed eligible remediation costs, as specified in
5    this subsection. For purposes of this Section,
6    "unreimbursed eligible remediation costs" means costs
7    approved by the Illinois Environmental Protection Agency
8    ("Agency") under Section 58.14 of the Environmental
9    Protection Act that were paid in performing environmental
10    remediation at a site for which a No Further Remediation
11    Letter was issued by the Agency and recorded under Section
12    58.10 of the Environmental Protection Act. The credit must
13    be claimed for the taxable year in which Agency approval
14    of the eligible remediation costs is granted. The credit
15    is not available to any taxpayer if the taxpayer or any
16    related party caused or contributed to, in any material
17    respect, a release of regulated substances on, in, or
18    under the site that was identified and addressed by the
19    remedial action pursuant to the Site Remediation Program
20    of the Environmental Protection Act. After the Pollution
21    Control Board rules are adopted pursuant to the Illinois
22    Administrative Procedure Act for the administration and
23    enforcement of Section 58.9 of the Environmental
24    Protection Act, determinations as to credit availability
25    for purposes of this Section shall be made consistent with
26    those rules. For purposes of this Section, "taxpayer"

 

 

HB2978- 33 -LRB103 25945 HLH 52297 b

1    includes a person whose tax attributes the taxpayer has
2    succeeded to under Section 381 of the Internal Revenue
3    Code and "related party" includes the persons disallowed a
4    deduction for losses by paragraphs (b), (c), and (f)(1) of
5    Section 267 of the Internal Revenue Code by virtue of
6    being a related taxpayer, as well as any of its partners.
7    The credit allowed against the tax imposed by subsections
8    (a) and (b) shall be equal to 25% of the unreimbursed
9    eligible remediation costs in excess of $100,000 per site,
10    except that the $100,000 threshold shall not apply to any
11    site contained in an enterprise zone as determined by the
12    Department of Commerce and Community Affairs (now
13    Department of Commerce and Economic Opportunity). The
14    total credit allowed shall not exceed $40,000 per year
15    with a maximum total of $150,000 per site. For partners
16    and shareholders of subchapter S corporations, there shall
17    be allowed a credit under this subsection to be determined
18    in accordance with the determination of income and
19    distributive share of income under Sections 702 and 704
20    and subchapter S of the Internal Revenue Code.
21        (ii) A credit allowed under this subsection that is
22    unused in the year the credit is earned may be carried
23    forward to each of the 5 taxable years following the year
24    for which the credit is first earned until it is used. The
25    term "unused credit" does not include any amounts of
26    unreimbursed eligible remediation costs in excess of the

 

 

HB2978- 34 -LRB103 25945 HLH 52297 b

1    maximum credit per site authorized under paragraph (i).
2    This credit shall be applied first to the earliest year
3    for which there is a liability. If there is a credit under
4    this subsection from more than one tax year that is
5    available to offset a liability, the earliest credit
6    arising under this subsection shall be applied first. A
7    credit allowed under this subsection may be sold to a
8    buyer as part of a sale of all or part of the remediation
9    site for which the credit was granted. The purchaser of a
10    remediation site and the tax credit shall succeed to the
11    unused credit and remaining carry-forward period of the
12    seller. To perfect the transfer, the assignor shall record
13    the transfer in the chain of title for the site and provide
14    written notice to the Director of the Illinois Department
15    of Revenue of the assignor's intent to sell the
16    remediation site and the amount of the tax credit to be
17    transferred as a portion of the sale. In no event may a
18    credit be transferred to any taxpayer if the taxpayer or a
19    related party would not be eligible under the provisions
20    of subsection (i).
21        (iii) For purposes of this Section, the term "site"
22    shall have the same meaning as under Section 58.2 of the
23    Environmental Protection Act.
24    (m) Education expense credit. Beginning with tax years
25ending after December 31, 1999, a taxpayer who is the
26custodian of one or more qualifying pupils shall be allowed a

 

 

HB2978- 35 -LRB103 25945 HLH 52297 b

1credit against the tax imposed by subsections (a) and (b) of
2this Section for qualified education expenses incurred on
3behalf of the qualifying pupils. The credit shall be equal to
425% of qualified education expenses, but in no event may the
5total credit under this subsection claimed by a family that is
6the custodian of qualifying pupils exceed (i) $500 for tax
7years ending prior to December 31, 2017, and (ii) $750 for tax
8years ending on or after December 31, 2017. In no event shall a
9credit under this subsection reduce the taxpayer's liability
10under this Act to less than zero. Notwithstanding any other
11provision of law, for taxable years beginning on or after
12January 1, 2017, no taxpayer may claim a credit under this
13subsection (m) if the taxpayer's adjusted gross income for the
14taxable year exceeds (i) $500,000, in the case of spouses
15filing a joint federal tax return or (ii) $250,000, in the case
16of all other taxpayers. This subsection is exempt from the
17provisions of Section 250 of this Act.
18    For purposes of this subsection:
19    "Qualifying pupils" means individuals who (i) are
20residents of the State of Illinois, (ii) are under the age of
2121 at the close of the school year for which a credit is
22sought, and (iii) during the school year for which a credit is
23sought were full-time pupils enrolled in a kindergarten
24through twelfth grade education program at any school, as
25defined in this subsection.
26    "Qualified education expense" means the amount incurred on

 

 

HB2978- 36 -LRB103 25945 HLH 52297 b

1behalf of a qualifying pupil in excess of $250 for tuition,
2book fees, and lab fees at the school in which the pupil is
3enrolled during the regular school year.
4    "School" means any public or nonpublic elementary or
5secondary school in Illinois that is in compliance with Title
6VI of the Civil Rights Act of 1964 and attendance at which
7satisfies the requirements of Section 26-1 of the School Code,
8except that nothing shall be construed to require a child to
9attend any particular public or nonpublic school to qualify
10for the credit under this Section.
11    "Custodian" means, with respect to qualifying pupils, an
12Illinois resident who is a parent, the parents, a legal
13guardian, or the legal guardians of the qualifying pupils.
14    (n) River Edge Redevelopment Zone site remediation tax
15credit.
16        (i) For tax years ending on or after December 31,
17    2006, a taxpayer shall be allowed a credit against the tax
18    imposed by subsections (a) and (b) of this Section for
19    certain amounts paid for unreimbursed eligible remediation
20    costs, as specified in this subsection. For purposes of
21    this Section, "unreimbursed eligible remediation costs"
22    means costs approved by the Illinois Environmental
23    Protection Agency ("Agency") under Section 58.14a of the
24    Environmental Protection Act that were paid in performing
25    environmental remediation at a site within a River Edge
26    Redevelopment Zone for which a No Further Remediation

 

 

HB2978- 37 -LRB103 25945 HLH 52297 b

1    Letter was issued by the Agency and recorded under Section
2    58.10 of the Environmental Protection Act. The credit must
3    be claimed for the taxable year in which Agency approval
4    of the eligible remediation costs is granted. The credit
5    is not available to any taxpayer if the taxpayer or any
6    related party caused or contributed to, in any material
7    respect, a release of regulated substances on, in, or
8    under the site that was identified and addressed by the
9    remedial action pursuant to the Site Remediation Program
10    of the Environmental Protection Act. Determinations as to
11    credit availability for purposes of this Section shall be
12    made consistent with rules adopted by the Pollution
13    Control Board pursuant to the Illinois Administrative
14    Procedure Act for the administration and enforcement of
15    Section 58.9 of the Environmental Protection Act. For
16    purposes of this Section, "taxpayer" includes a person
17    whose tax attributes the taxpayer has succeeded to under
18    Section 381 of the Internal Revenue Code and "related
19    party" includes the persons disallowed a deduction for
20    losses by paragraphs (b), (c), and (f)(1) of Section 267
21    of the Internal Revenue Code by virtue of being a related
22    taxpayer, as well as any of its partners. The credit
23    allowed against the tax imposed by subsections (a) and (b)
24    shall be equal to 25% of the unreimbursed eligible
25    remediation costs in excess of $100,000 per site.
26        (ii) A credit allowed under this subsection that is

 

 

HB2978- 38 -LRB103 25945 HLH 52297 b

1    unused in the year the credit is earned may be carried
2    forward to each of the 5 taxable years following the year
3    for which the credit is first earned until it is used. This
4    credit shall be applied first to the earliest year for
5    which there is a liability. If there is a credit under this
6    subsection from more than one tax year that is available
7    to offset a liability, the earliest credit arising under
8    this subsection shall be applied first. A credit allowed
9    under this subsection may be sold to a buyer as part of a
10    sale of all or part of the remediation site for which the
11    credit was granted. The purchaser of a remediation site
12    and the tax credit shall succeed to the unused credit and
13    remaining carry-forward period of the seller. To perfect
14    the transfer, the assignor shall record the transfer in
15    the chain of title for the site and provide written notice
16    to the Director of the Illinois Department of Revenue of
17    the assignor's intent to sell the remediation site and the
18    amount of the tax credit to be transferred as a portion of
19    the sale. In no event may a credit be transferred to any
20    taxpayer if the taxpayer or a related party would not be
21    eligible under the provisions of subsection (i).
22        (iii) For purposes of this Section, the term "site"
23    shall have the same meaning as under Section 58.2 of the
24    Environmental Protection Act.
25    (o) For each of taxable years during the Compassionate Use
26of Medical Cannabis Program, a surcharge is imposed on all

 

 

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1taxpayers on income arising from the sale or exchange of
2capital assets, depreciable business property, real property
3used in the trade or business, and Section 197 intangibles of
4an organization registrant under the Compassionate Use of
5Medical Cannabis Program Act. The amount of the surcharge is
6equal to the amount of federal income tax liability for the
7taxable year attributable to those sales and exchanges. The
8surcharge imposed does not apply if:
9        (1) the medical cannabis cultivation center
10    registration, medical cannabis dispensary registration, or
11    the property of a registration is transferred as a result
12    of any of the following:
13            (A) bankruptcy, a receivership, or a debt
14        adjustment initiated by or against the initial
15        registration or the substantial owners of the initial
16        registration;
17            (B) cancellation, revocation, or termination of
18        any registration by the Illinois Department of Public
19        Health;
20            (C) a determination by the Illinois Department of
21        Public Health that transfer of the registration is in
22        the best interests of Illinois qualifying patients as
23        defined by the Compassionate Use of Medical Cannabis
24        Program Act;
25            (D) the death of an owner of the equity interest in
26        a registrant;

 

 

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1            (E) the acquisition of a controlling interest in
2        the stock or substantially all of the assets of a
3        publicly traded company;
4            (F) a transfer by a parent company to a wholly
5        owned subsidiary; or
6            (G) the transfer or sale to or by one person to
7        another person where both persons were initial owners
8        of the registration when the registration was issued;
9        or
10        (2) the cannabis cultivation center registration,
11    medical cannabis dispensary registration, or the
12    controlling interest in a registrant's property is
13    transferred in a transaction to lineal descendants in
14    which no gain or loss is recognized or as a result of a
15    transaction in accordance with Section 351 of the Internal
16    Revenue Code in which no gain or loss is recognized.
17    (p) Pass-through entity tax.
18        (1) For taxable years ending on or after December 31,
19    2021 and beginning prior to January 1, 2026, a partnership
20    (other than a publicly traded partnership under Section
21    7704 of the Internal Revenue Code) or Subchapter S
22    corporation may elect to apply the provisions of this
23    subsection. A separate election shall be made for each
24    taxable year. Such election shall be made at such time,
25    and in such form and manner as prescribed by the
26    Department, and, once made, is irrevocable.

 

 

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1        (2) Entity-level tax. A partnership or Subchapter S
2    corporation electing to apply the provisions of this
3    subsection shall be subject to a tax for the privilege of
4    earning or receiving income in this State in an amount
5    equal to 4.95% of the taxpayer's net income for the
6    taxable year.
7        (3) Net income defined.
8            (A) In general. For purposes of paragraph (2), the
9        term net income has the same meaning as defined in
10        Section 202 of this Act, except that the following
11        provisions shall not apply:
12                (i) the standard exemption allowed under
13            Section 204;
14                (ii) the deduction for net losses allowed
15            under Section 207;
16                (iii) in the case of an S corporation, the
17            modification under Section 203(b)(2)(S); and
18                (iv) in the case of a partnership, the
19            modifications under Section 203(d)(2)(H) and
20            Section 203(d)(2)(I).
21            (B) Special rule for tiered partnerships. If a
22        taxpayer making the election under paragraph (1) is a
23        partner of another taxpayer making the election under
24        paragraph (1), net income shall be computed as
25        provided in subparagraph (A), except that the taxpayer
26        shall subtract its distributive share of the net

 

 

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1        income of the electing partnership (including its
2        distributive share of the net income of the electing
3        partnership derived as a distributive share from
4        electing partnerships in which it is a partner).
5        (4) Credit for entity level tax. Each partner or
6    shareholder of a taxpayer making the election under this
7    Section shall be allowed a credit against the tax imposed
8    under subsections (a) and (b) of Section 201 of this Act
9    for the taxable year of the partnership or Subchapter S
10    corporation for which an election is in effect ending
11    within or with the taxable year of the partner or
12    shareholder in an amount equal to 4.95% times the partner
13    or shareholder's distributive share of the net income of
14    the electing partnership or Subchapter S corporation, but
15    not to exceed the partner's or shareholder's share of the
16    tax imposed under paragraph (1) which is actually paid by
17    the partnership or Subchapter S corporation. If the
18    taxpayer is a partnership or Subchapter S corporation that
19    is itself a partner of a partnership making the election
20    under paragraph (1), the credit under this paragraph shall
21    be allowed to the taxpayer's partners or shareholders (or
22    if the partner is a partnership or Subchapter S
23    corporation then its partners or shareholders) in
24    accordance with the determination of income and
25    distributive share of income under Sections 702 and 704
26    and Subchapter S of the Internal Revenue Code. If the

 

 

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1    amount of the credit allowed under this paragraph exceeds
2    the partner's or shareholder's liability for tax imposed
3    under subsections (a) and (b) of Section 201 of this Act
4    for the taxable year, such excess shall be treated as an
5    overpayment for purposes of Section 909 of this Act.
6        (5) Nonresidents. A nonresident individual who is a
7    partner or shareholder of a partnership or Subchapter S
8    corporation for a taxable year for which an election is in
9    effect under paragraph (1) shall not be required to file
10    an income tax return under this Act for such taxable year
11    if the only source of net income of the individual (or the
12    individual and the individual's spouse in the case of a
13    joint return) is from an entity making the election under
14    paragraph (1) and the credit allowed to the partner or
15    shareholder under paragraph (4) equals or exceeds the
16    individual's liability for the tax imposed under
17    subsections (a) and (b) of Section 201 of this Act for the
18    taxable year.
19        (6) Liability for tax. Except as provided in this
20    paragraph, a partnership or Subchapter S making the
21    election under paragraph (1) is liable for the
22    entity-level tax imposed under paragraph (2). If the
23    electing partnership or corporation fails to pay the full
24    amount of tax deemed assessed under paragraph (2), the
25    partners or shareholders shall be liable to pay the tax
26    assessed (including penalties and interest). Each partner

 

 

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1    or shareholder shall be liable for the unpaid assessment
2    based on the ratio of the partner's or shareholder's share
3    of the net income of the partnership over the total net
4    income of the partnership. If the partnership or
5    Subchapter S corporation fails to pay the tax assessed
6    (including penalties and interest) and thereafter an
7    amount of such tax is paid by the partners or
8    shareholders, such amount shall not be collected from the
9    partnership or corporation.
10        (7) Foreign tax. For purposes of the credit allowed
11    under Section 601(b)(3) of this Act, tax paid by a
12    partnership or Subchapter S corporation to another state
13    which, as determined by the Department, is substantially
14    similar to the tax imposed under this subsection, shall be
15    considered tax paid by the partner or shareholder to the
16    extent that the partner's or shareholder's share of the
17    income of the partnership or Subchapter S corporation
18    allocated and apportioned to such other state bears to the
19    total income of the partnership or Subchapter S
20    corporation allocated or apportioned to such other state.
21        (8) Suspension of withholding. The provisions of
22    Section 709.5 of this Act shall not apply to a partnership
23    or Subchapter S corporation for the taxable year for which
24    an election under paragraph (1) is in effect.
25        (9) Requirement to pay estimated tax. For each taxable
26    year for which an election under paragraph (1) is in

 

 

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1    effect, a partnership or Subchapter S corporation is
2    required to pay estimated tax for such taxable year under
3    Sections 803 and 804 of this Act if the amount payable as
4    estimated tax can reasonably be expected to exceed $500.
5        (10) The provisions of this subsection shall apply
6    only with respect to taxable years for which the
7    limitation on individual deductions applies under Section
8    164(b)(6) of the Internal Revenue Code.
9(Source: P.A. 101-9, eff. 6-5-19; 101-31, eff. 6-28-19;
10101-207, eff. 8-2-19; 101-363, eff. 8-9-19; 102-558, eff.
118-20-21; 102-658, eff. 8-27-21.)
 
12    Section 99. Effective date. This Act takes effect upon
13becoming law.