103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
HB3686

 

Introduced 2/17/2023, by Rep. Dave Severin

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/201

    Amends the Illinois Income Tax Act. Provides that the rate of tax on individuals, trusts, and estates is 4.85% (currently, 4.95%). Makes a conforming change concerning the pass-through entity tax. Effective immediately.


LRB103 28572 HLH 54953 b

 

 

A BILL FOR

 

HB3686LRB103 28572 HLH 54953 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 and
16    ending prior to January 1, 2024, an amount equal to 4.95%
17    of the taxpayer's net income for the taxable year.
18        (5.5) In the case of an individual, trust, or estate,
19    for taxable years beginning prior to January 1, 2024, and
20    ending after December 31, 2023, an amount equal to the sum
21    of (i) 4.95% of the taxpayer's net income for the period
22    prior to January 1, 2023, as calculated under Section
23    202.5, and (ii) 4.85% of the taxpayer's net income for the
24    period after December 31, 2022, as calculated under
25    Section 202.5.
26        (5.6) In the case of an individual, trust, or estate,

 

 

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1    for taxable years beginning on or after January 1, 2024,
2    an amount equal to 4.85% of the taxpayer's net income for
3    the taxable year.
4        (6) In the case of a corporation, for taxable years
5    ending prior to July 1, 1989, an amount equal to 4% of the
6    taxpayer's net income for the taxable year.
7        (7) In the case of a corporation, for taxable years
8    beginning prior to July 1, 1989 and ending after June 30,
9    1989, an amount equal to the sum of (i) 4% of the
10    taxpayer's net income for the period prior to July 1,
11    1989, as calculated under Section 202.3, and (ii) 4.8% of
12    the taxpayer's net income for the period after June 30,
13    1989, as calculated under Section 202.3.
14        (8) In the case of a corporation, for taxable years
15    beginning after June 30, 1989, and ending prior to January
16    1, 2011, an amount equal to 4.8% of the taxpayer's net
17    income for the taxable year.
18        (9) In the case of a corporation, for taxable years
19    beginning prior to January 1, 2011, and ending after
20    December 31, 2010, an amount equal to the sum of (i) 4.8%
21    of the taxpayer's net income for the period prior to
22    January 1, 2011, as calculated under Section 202.5, and
23    (ii) 7% of the taxpayer's net income for the period after
24    December 31, 2010, as calculated under Section 202.5.
25        (10) In the case of a corporation, for taxable years
26    beginning on or after January 1, 2011, and ending prior to

 

 

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1    January 1, 2015, an amount equal to 7% of the taxpayer's
2    net income for the taxable year.
3        (11) In the case of a corporation, for taxable years
4    beginning prior to January 1, 2015, and ending after
5    December 31, 2014, an amount equal to the sum of (i) 7% of
6    the taxpayer's net income for the period prior to January
7    1, 2015, as calculated under Section 202.5, and (ii) 5.25%
8    of the taxpayer's net income for the period after December
9    31, 2014, as calculated under Section 202.5.
10        (12) In the case of a corporation, for taxable years
11    beginning on or after January 1, 2015, and ending prior to
12    July 1, 2017, an amount equal to 5.25% of the taxpayer's
13    net income for the taxable year.
14        (13) In the case of a corporation, for taxable years
15    beginning prior to July 1, 2017, and ending after June 30,
16    2017, an amount equal to the sum of (i) 5.25% of the
17    taxpayer's net income for the period prior to July 1,
18    2017, as calculated under Section 202.5, and (ii) 7% of
19    the taxpayer's net income for the period after June 30,
20    2017, as calculated under Section 202.5.
21        (14) In the case of a corporation, for taxable years
22    beginning on or after July 1, 2017, an amount equal to 7%
23    of the taxpayer's net income for the taxable year.
24    The rates under this subsection (b) are subject to the
25provisions of Section 201.5.
26    (b-5) Surcharge; sale or exchange of assets, properties,

 

 

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

 

 

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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 license when the license was issued; or
9        (2) the controlling interest in the organization
10    gaming license, organization license, or racetrack
11    property is transferred in a transaction to lineal
12    descendants in which no gain or loss is recognized or as a
13    result of a transaction in accordance with Section 351 of
14    the Internal Revenue Code in which no gain or loss is
15    recognized; or
16        (3) live horse racing was not conducted in 2010 at a
17    racetrack located within 3 miles of the Mississippi River
18    under a license issued pursuant to the Illinois Horse
19    Racing Act of 1975.
20    The transfer of an organization gaming license,
21organization license, or racetrack property by a person other
22than the initial licensee to receive the organization gaming
23license is not subject to a surcharge. The Department shall
24adopt rules necessary to implement and administer this
25subsection.
26    (c) Personal Property Tax Replacement Income Tax.

 

 

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1Beginning on July 1, 1979 and thereafter, in addition to such
2income tax, there is also hereby imposed the Personal Property
3Tax Replacement Income Tax measured by net income on every
4corporation (including Subchapter S corporations), partnership
5and trust, for each taxable year ending after June 30, 1979.
6Such taxes are imposed on the privilege of earning or
7receiving income in or as a resident of this State. The
8Personal Property Tax Replacement Income Tax shall be in
9addition to the income tax imposed by subsections (a) and (b)
10of this Section and in addition to all other occupation or
11privilege taxes imposed by this State or by any municipal
12corporation or political subdivision thereof.
13    (d) Additional Personal Property Tax Replacement Income
14Tax Rates. The personal property tax replacement income tax
15imposed by this subsection and subsection (c) of this Section
16in the case of a corporation, other than a Subchapter S
17corporation and except as adjusted by subsection (d-1), shall
18be an additional amount equal to 2.85% of such taxpayer's net
19income for the taxable year, except that beginning on January
201, 1981, and thereafter, the rate of 2.85% specified in this
21subsection shall be reduced to 2.5%, and in the case of a
22partnership, trust or a Subchapter S corporation shall be an
23additional amount equal to 1.5% of such taxpayer's net income
24for the taxable year.
25    (d-1) Rate reduction for certain foreign insurers. In the
26case of a foreign insurer, as defined by Section 35A-5 of the

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        on or after July 1, 2006 in a River Edge Redevelopment
2        Zone established pursuant to the River Edge
3        Redevelopment Zone Act; and
4            (E) has not previously been used in Illinois in
5        such a manner and by such a person as would qualify for
6        the credit provided by this subsection (e) or
7        subsection (f).
8        (3) For purposes of this subsection (e),
9    "manufacturing" means the material staging and production
10    of tangible personal property by procedures commonly
11    regarded as manufacturing, processing, fabrication, or
12    assembling which changes some existing material into new
13    shapes, new qualities, or new combinations. For purposes
14    of this subsection (e) the term "mining" shall have the
15    same meaning as the term "mining" in Section 613(c) of the
16    Internal Revenue Code. For purposes of this subsection
17    (e), the term "retailing" means the sale of tangible
18    personal property for use or consumption and not for
19    resale, or services rendered in conjunction with the sale
20    of tangible personal property for use or consumption and
21    not for resale. For purposes of this subsection (e),
22    "tangible personal property" has the same meaning as when
23    that term is used in the Retailers' Occupation Tax Act,
24    and, for taxable years ending after December 31, 2008,
25    does not include the generation, transmission, or
26    distribution of electricity.

 

 

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

 

 

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

 

 

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

 

 

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1    under Sections 702 and 704 and Subchapter S of the
2    Internal Revenue Code. The credit shall be .5% of the
3    basis for such property. The credit shall be available
4    only in the taxable year in which the property is placed in
5    service in the Enterprise Zone or River Edge Redevelopment
6    Zone and shall not be allowed to the extent that it would
7    reduce a taxpayer's liability for the tax imposed by
8    subsections (a) and (b) of this Section to below zero. For
9    tax years ending on or after December 31, 1985, the credit
10    shall be allowed for the tax year in which the property is
11    placed in service, or, if the amount of the credit exceeds
12    the tax liability for that year, whether it exceeds the
13    original liability or the liability as later amended, such
14    excess may be carried forward and applied to the tax
15    liability of the 5 taxable years following the excess
16    credit year. The credit shall be applied to the earliest
17    year for which there is a liability. If there is credit
18    from more than one tax year that is available to offset a
19    liability, the credit accruing first in time shall be
20    applied first.
21        (2) The term qualified property means property which:
22            (A) is tangible, whether new or used, including
23        buildings and structural components of buildings;
24            (B) is depreciable pursuant to Section 167 of the
25        Internal Revenue Code, except that "3-year property"
26        as defined in Section 168(c)(2)(A) of that Code is not

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

HB3686- 27 -LRB103 28572 HLH 54953 b

1Blue Collar Jobs Act (Article 20 of Public Act 101-9) shall not
2exceed $20,000,000 in any State fiscal year.
3    This subsection (h-5) is exempt from the provisions of
4Section 250.
5    (i) Credit for Personal Property Tax Replacement Income
6Tax. For tax years ending prior to December 31, 2003, a credit
7shall be allowed against the tax imposed by subsections (a)
8and (b) of this Section for the tax imposed by subsections (c)
9and (d) of this Section. This credit shall be computed by
10multiplying the tax imposed by subsections (c) and (d) of this
11Section by a fraction, the numerator of which is base income
12allocable to Illinois and the denominator of which is Illinois
13base income, and further multiplying the product by the tax
14rate imposed by subsections (a) and (b) of this Section.
15    Any credit earned on or after December 31, 1986 under this
16subsection which is unused in the year the credit is computed
17because it exceeds the tax liability imposed by subsections
18(a) and (b) for that year (whether it exceeds the original
19liability or the liability as later amended) may be carried
20forward and applied to the tax liability imposed by
21subsections (a) and (b) of the 5 taxable years following the
22excess credit year, provided that no credit may be carried
23forward to any year ending on or after December 31, 2003. This
24credit shall be applied first to the earliest year for which
25there is a liability. If there is a credit under this
26subsection from more than one tax year that is available to

 

 

HB3686- 28 -LRB103 28572 HLH 54953 b

1offset a liability the earliest credit arising under this
2subsection shall be applied first.
3    If, during any taxable year ending on or after December
431, 1986, the tax imposed by subsections (c) and (d) of this
5Section for which a taxpayer has claimed a credit under this
6subsection (i) is reduced, the amount of credit for such tax
7shall also be reduced. Such reduction shall be determined by
8recomputing the credit to take into account the reduced tax
9imposed by subsections (c) and (d). If any portion of the
10reduced amount of credit has been carried to a different
11taxable year, an amended return shall be filed for such
12taxable year to reduce the amount of credit claimed.
13    (j) Training expense credit. Beginning with tax years
14ending on or after December 31, 1986 and prior to December 31,
152003, a taxpayer shall be allowed a credit against the tax
16imposed by subsections (a) and (b) under this Section for all
17amounts paid or accrued, on behalf of all persons employed by
18the taxpayer in Illinois or Illinois residents employed
19outside of Illinois by a taxpayer, for educational or
20vocational training in semi-technical or technical fields or
21semi-skilled or skilled fields, which were deducted from gross
22income in the computation of taxable income. The credit
23against the tax imposed by subsections (a) and (b) shall be
241.6% of such training expenses. For partners, shareholders of
25subchapter S corporations, and owners of limited liability
26companies, if the liability company is treated as a

 

 

HB3686- 29 -LRB103 28572 HLH 54953 b

1partnership for purposes of federal and State income taxation,
2there shall be allowed a credit under this subsection (j) to be
3determined in accordance with the determination of income and
4distributive share of income under Sections 702 and 704 and
5subchapter S of the Internal Revenue Code.
6    Any credit allowed under this subsection which is unused
7in the year the credit is earned may be carried forward to each
8of the 5 taxable years following the year for which the credit
9is first computed until it is used. This credit shall be
10applied first to the earliest year for which there is a
11liability. If there is a credit under this subsection from
12more than one tax year that is available to offset a liability,
13the earliest credit arising under this subsection shall be
14applied first. No carryforward credit may be claimed in any
15tax year ending on or after December 31, 2003.
16    (k) Research and development credit. For tax years ending
17after July 1, 1990 and prior to December 31, 2003, and
18beginning again for tax years ending on or after December 31,
192004, and ending prior to January 1, 2027, a taxpayer shall be
20allowed a credit against the tax imposed by subsections (a)
21and (b) of this Section for increasing research activities in
22this State. The credit allowed against the tax imposed by
23subsections (a) and (b) shall be equal to 6 1/2% of the
24qualifying expenditures for increasing research activities in
25this State. For partners, shareholders of subchapter S
26corporations, and owners of limited liability companies, if

 

 

HB3686- 30 -LRB103 28572 HLH 54953 b

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

 

 

HB3686- 31 -LRB103 28572 HLH 54953 b

1year ending on or after December 31, 2003.
2    If an unused credit is carried forward to a given year from
32 or more earlier years, that credit arising in the earliest
4year will be applied first against the tax liability for the
5given year. If a tax liability for the given year still
6remains, the credit from the next earliest year will then be
7applied, and so on, until all credits have been used or no tax
8liability for the given year remains. Any remaining unused
9credit or credits then will be carried forward to the next
10following year in which a tax liability is incurred, except
11that no credit can be carried forward to a year which is more
12than 5 years after the year in which the expense for which the
13credit is given was incurred.
14    No inference shall be drawn from Public Act 91-644 in
15construing this Section for taxable years beginning before
16January 1, 1999.
17    It is the intent of the General Assembly that the research
18and development credit under this subsection (k) shall apply
19continuously for all tax years ending on or after December 31,
202004 and ending prior to January 1, 2027, including, but not
21limited to, the period beginning on January 1, 2016 and ending
22on July 6, 2017 (the effective date of Public Act 100-22). All
23actions taken in reliance on the continuation of the credit
24under this subsection (k) by any taxpayer are hereby
25validated.
26    (l) Environmental Remediation Tax Credit.

 

 

HB3686- 32 -LRB103 28572 HLH 54953 b

1        (i) For tax years ending after December 31, 1997 and
2    on or before December 31, 2001, a taxpayer shall be
3    allowed a credit against the tax imposed by subsections
4    (a) and (b) of this Section for certain amounts paid for
5    unreimbursed eligible remediation costs, as specified in
6    this subsection. For purposes of this Section,
7    "unreimbursed eligible remediation costs" means costs
8    approved by the Illinois Environmental Protection Agency
9    ("Agency") under Section 58.14 of the Environmental
10    Protection Act that were paid in performing environmental
11    remediation at a site for which a No Further Remediation
12    Letter was issued by the Agency and recorded under Section
13    58.10 of the Environmental Protection Act. The credit must
14    be claimed for the taxable year in which Agency approval
15    of the eligible remediation costs is granted. The credit
16    is not available to any taxpayer if the taxpayer or any
17    related party caused or contributed to, in any material
18    respect, a release of regulated substances on, in, or
19    under the site that was identified and addressed by the
20    remedial action pursuant to the Site Remediation Program
21    of the Environmental Protection Act. After the Pollution
22    Control Board rules are adopted pursuant to the Illinois
23    Administrative Procedure Act for the administration and
24    enforcement of Section 58.9 of the Environmental
25    Protection Act, determinations as to credit availability
26    for purposes of this Section shall be made consistent with

 

 

HB3686- 33 -LRB103 28572 HLH 54953 b

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

 

 

HB3686- 34 -LRB103 28572 HLH 54953 b

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

 

 

HB3686- 35 -LRB103 28572 HLH 54953 b

1custodian of one or more qualifying pupils shall be allowed a
2credit against the tax imposed by subsections (a) and (b) of
3this Section for qualified education expenses incurred on
4behalf of the qualifying pupils. The credit shall be equal to
525% of qualified education expenses, but in no event may the
6total credit under this subsection claimed by a family that is
7the custodian of qualifying pupils exceed (i) $500 for tax
8years ending prior to December 31, 2017, and (ii) $750 for tax
9years ending on or after December 31, 2017. In no event shall a
10credit under this subsection reduce the taxpayer's liability
11under this Act to less than zero. Notwithstanding any other
12provision of law, for taxable years beginning on or after
13January 1, 2017, no taxpayer may claim a credit under this
14subsection (m) if the taxpayer's adjusted gross income for the
15taxable year exceeds (i) $500,000, in the case of spouses
16filing a joint federal tax return or (ii) $250,000, in the case
17of all other taxpayers. This subsection is exempt from the
18provisions of Section 250 of this Act.
19    For purposes of this subsection:
20    "Qualifying pupils" means individuals who (i) are
21residents of the State of Illinois, (ii) are under the age of
2221 at the close of the school year for which a credit is
23sought, and (iii) during the school year for which a credit is
24sought were full-time pupils enrolled in a kindergarten
25through twelfth grade education program at any school, as
26defined in this subsection.

 

 

HB3686- 36 -LRB103 28572 HLH 54953 b

1    "Qualified education expense" means the amount incurred on
2behalf of a qualifying pupil in excess of $250 for tuition,
3book fees, and lab fees at the school in which the pupil is
4enrolled during the regular school year.
5    "School" means any public or nonpublic elementary or
6secondary school in Illinois that is in compliance with Title
7VI of the Civil Rights Act of 1964 and attendance at which
8satisfies the requirements of Section 26-1 of the School Code,
9except that nothing shall be construed to require a child to
10attend any particular public or nonpublic school to qualify
11for the credit under this Section.
12    "Custodian" means, with respect to qualifying pupils, an
13Illinois resident who is a parent, the parents, a legal
14guardian, or the legal guardians of the qualifying pupils.
15    (n) River Edge Redevelopment Zone site remediation tax
16credit.
17        (i) For tax years ending on or after December 31,
18    2006, a taxpayer shall be allowed a credit against the tax
19    imposed by subsections (a) and (b) of this Section for
20    certain amounts paid for unreimbursed eligible remediation
21    costs, as specified in this subsection. For purposes of
22    this Section, "unreimbursed eligible remediation costs"
23    means costs approved by the Illinois Environmental
24    Protection Agency ("Agency") under Section 58.14a of the
25    Environmental Protection Act that were paid in performing
26    environmental remediation at a site within a River Edge

 

 

HB3686- 37 -LRB103 28572 HLH 54953 b

1    Redevelopment Zone for which a No Further Remediation
2    Letter was issued by the Agency and recorded under Section
3    58.10 of the Environmental Protection Act. The credit must
4    be claimed for the taxable year in which Agency approval
5    of the eligible remediation costs is granted. The credit
6    is not available to any taxpayer if the taxpayer or any
7    related party caused or contributed to, in any material
8    respect, a release of regulated substances on, in, or
9    under the site that was identified and addressed by the
10    remedial action pursuant to the Site Remediation Program
11    of the Environmental Protection Act. Determinations as to
12    credit availability for purposes of this Section shall be
13    made consistent with rules adopted by the Pollution
14    Control Board pursuant to the Illinois Administrative
15    Procedure Act for the administration and enforcement of
16    Section 58.9 of the Environmental Protection Act. For
17    purposes of this Section, "taxpayer" includes a person
18    whose tax attributes the taxpayer has succeeded to under
19    Section 381 of the Internal Revenue Code and "related
20    party" includes the persons disallowed a deduction for
21    losses by paragraphs (b), (c), and (f)(1) of Section 267
22    of the Internal Revenue Code by virtue of being a related
23    taxpayer, as well as any of its partners. The credit
24    allowed against the tax imposed by subsections (a) and (b)
25    shall be equal to 25% of the unreimbursed eligible
26    remediation costs in excess of $100,000 per site.

 

 

HB3686- 38 -LRB103 28572 HLH 54953 b

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

 

 

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1of Medical Cannabis Program, 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 of
5an organization registrant under the Compassionate Use of
6Medical Cannabis Program Act. The amount of the surcharge is
7equal to the amount of federal income tax liability for the
8taxable year attributable to those sales and exchanges. The
9surcharge imposed does not apply if:
10        (1) the medical cannabis cultivation center
11    registration, medical cannabis dispensary registration, or
12    the property of a registration 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        registration or the substantial owners of the initial
17        registration;
18            (B) cancellation, revocation, or termination of
19        any registration by the Illinois Department of Public
20        Health;
21            (C) a determination by the Illinois Department of
22        Public Health that transfer of the registration is in
23        the best interests of Illinois qualifying patients as
24        defined by the Compassionate Use of Medical Cannabis
25        Program Act;
26            (D) the death of an owner of the equity interest in

 

 

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

 

 

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

 

 

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

 

 

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1    corporation then its partners or shareholders) in
2    accordance with the determination of income and
3    distributive share of income under Sections 702 and 704
4    and Subchapter S of the Internal Revenue Code. If the
5    amount of the credit allowed under this paragraph exceeds
6    the partner's or shareholder's liability for tax imposed
7    under subsections (a) and (b) of Section 201 of this Act
8    for the taxable year, such excess shall be treated as an
9    overpayment for purposes of Section 909 of this Act.
10        (5) Nonresidents. A nonresident individual who is a
11    partner or shareholder of a partnership or Subchapter S
12    corporation for a taxable year for which an election is in
13    effect under paragraph (1) shall not be required to file
14    an income tax return under this Act for such taxable year
15    if the only source of net income of the individual (or the
16    individual and the individual's spouse in the case of a
17    joint return) is from an entity making the election under
18    paragraph (1) and the credit allowed to the partner or
19    shareholder under paragraph (4) equals or exceeds the
20    individual's liability for the tax imposed under
21    subsections (a) and (b) of Section 201 of this Act for the
22    taxable year.
23        (6) Liability for tax. Except as provided in this
24    paragraph, a partnership or Subchapter S making the
25    election under paragraph (1) is liable for the
26    entity-level tax imposed under paragraph (2). If the

 

 

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

 

 

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1    or Subchapter S corporation for the taxable year for which
2    an election under paragraph (1) is in effect.
3        (9) Requirement to pay estimated tax. For each taxable
4    year for which an election under paragraph (1) is in
5    effect, a partnership or Subchapter S corporation is
6    required to pay estimated tax for such taxable year under
7    Sections 803 and 804 of this Act if the amount payable as
8    estimated tax can reasonably be expected to exceed $500.
9        (10) The provisions of this subsection shall apply
10    only with respect to taxable years for which the
11    limitation on individual deductions applies under Section
12    164(b)(6) of the Internal Revenue Code.
13(Source: P.A. 101-9, eff. 6-5-19; 101-31, eff. 6-28-19;
14101-207, eff. 8-2-19; 101-363, eff. 8-9-19; 102-558, eff.
158-20-21; 102-658, eff. 8-27-21.)
 
16    Section 99. Effective date. This Act takes effect upon
17becoming law.