103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB0119

 

Introduced 1/24/2023, by Sen. Steve Stadelman

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/228
35 ILCS 31/10
35 ILCS 31/20

    Amends the Historic Preservation Tax Credit Act. Extends the sunset of the credit to December 31, 2028 (currently, December 31, 2023). Provides that, in each calendar year beginning on or after January 1, 2024 and ending on or before December 31, 2028, the State Historic Preservation Office in the Department of Natural Resources is authorized to allocate $75,000,000 (currently, $15,000,000) in tax credits under the Act. Amends the Illinois Income Tax Act to make conforming changes. Effective immediately.


LRB103 06051 HLH 51081 b

 

 

A BILL FOR

 

SB0119LRB103 06051 HLH 51081 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 228 as follows:
 
6    (35 ILCS 5/228)
7    Sec. 228. Historic preservation credit. For tax years
8beginning on or after January 1, 2019 and ending on or before
9December 31, 2028 December 31, 2023, a taxpayer who qualifies
10for a credit under the Historic Preservation Tax Credit Act is
11entitled to a credit against the taxes imposed under
12subsections (a) and (b) of Section 201 of this Act as provided
13in that Act. If the taxpayer is a partnership, Subchapter S
14corporation, or a limited liability company the credit shall
15be allowed to the partners, shareholders, or members in
16accordance with the determination of income and distributive
17share of income under Sections 702 and 704 and Subchapter S of
18the Internal Revenue Code provided that credits granted to a
19partnership, a limited liability company taxed as a
20partnership, or other multiple owners of property shall be
21passed through to the partners, members, or owners
22respectively on a pro rata basis or pursuant to an executed
23agreement among the partners, members, or owners documenting

 

 

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1any alternate distribution method. If the amount of any tax
2credit awarded under this Section exceeds the qualified
3taxpayer's income tax liability for the year in which the
4qualified rehabilitation plan was placed in service, the
5excess amount may be carried forward as provided in the
6Historic Preservation Tax Credit Act.
7(Source: P.A. 101-81, eff. 7-12-19; 102-741, eff. 5-6-22.)
 
8    Section 10. The Historic Preservation Tax Credit Act is
9amended by changing Sections 10 and 20 as follows:
 
10    (35 ILCS 31/10)
11    Sec. 10. Allowable credit.
12    (a) To the extent authorized by this Act, for taxable
13years beginning on or after January 1, 2019 and ending on or
14before December 31, 2028 December 31, 2023, there shall be
15allowed a tax credit to the qualified taxpayer against the tax
16imposed by subsections (a) and (b) of Section 201 of the
17Illinois Income Tax Act in an aggregate amount equal to 25% of
18qualified expenditures, but not to exceed $3,000,000, incurred
19undertaking a qualified rehabilitation plan, provided that the
20total amount of such expenditures must (i) equal $5,000 or
21more and (ii) exceed the adjusted basis of the structure on the
22first day the qualified rehabilitation plan commenced. If the
23qualified rehabilitation plan spans multiple years, the
24aggregate credit for the entire project shall be allowed in

 

 

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1the last taxable year.
2    (b) To obtain a tax credit certificate pursuant to this
3Section, the qualified taxpayer must apply with the Division.
4The Division shall determine the amount of eligible
5rehabilitation expenditures within 45 days after receipt of a
6complete application. The taxpayer must provide to the
7Division a third-party cost certification conducted by a
8certified public accountant verifying (i) the qualified and
9non-qualified rehabilitation expenses and (ii) that the
10qualified expenditures exceed the adjusted basis of the
11structure on the first day the qualified rehabilitation plan
12commenced. The accountant shall provide appropriate review and
13testing of invoices. The Division is authorized, but not
14required, to accept this third-party cost certification to
15determine the amount of qualified expenditures. The Division
16and the National Park Service shall determine whether the
17rehabilitation is consistent with the Standards of the
18Secretary of the United States Department of the Interior.
19    (c) If the amount of any tax credit awarded under this Act
20exceeds the qualified taxpayer's income tax liability for the
21year in which the qualified rehabilitation plan was placed in
22service, the excess amount may be carried forward for
23deduction from the taxpayer's income tax liability in the next
24succeeding year or years until the total amount of the credit
25has been used, except that a credit may not be carried forward
26for deduction after the tenth taxable year after the taxable

 

 

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1year in which the qualified rehabilitation plan was placed in
2service. Upon completion of the project and approval of the
3complete application, the Division shall issue a single
4certificate in the amount of the eligible credits equal to 25%
5of the qualified expenditures incurred during the eligible
6taxable years, not to exceed the lesser of the allocated
7amount or $3,000,000 per single qualified rehabilitation plan.
8Prior to the issuance of the tax credit certificate, the
9qualified taxpayer must provide to the Division verification
10that the rehabilitated structure is a qualified historic
11structure. At the time the certificate is issued, an issuance
12fee up to the maximum amount of 2% of the amount of the credits
13issued by the certificate may be collected from the qualified
14taxpayer to administer the Act. If collected, this issuance
15fee shall be directed to the Division Historic Property
16Administrative Fund or other such fund as appropriate for use
17of the Division in the administration of the Historic
18Preservation Tax Credit Program. The taxpayer must attach the
19certificate or legal documentation of her or his proportional
20share of the certificate to the tax return on which the credits
21are to be claimed. The tax credit under this Section may not
22reduce the taxpayer's liability to less than zero. If the
23amount of the credit exceeds the tax liability for the year,
24the excess credit may be carried forward and applied to the tax
25liability of the 10 taxable years following the first excess
26credit year. The taxpayer is not eligible to receive credits

 

 

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1under this Section and under Section 221 of the Illinois
2Income Tax Act for the same qualified expenditures or
3qualified rehabilitation plan.
4    (d) If the taxpayer is (i) a corporation having an
5election in effect under Subchapter S of the federal Internal
6Revenue Code, (ii) a partnership, or (iii) a limited liability
7company, the credit provided under this Act may be claimed by
8the shareholders of the corporation, the partners of the
9partnership, or the members of the limited liability company
10in the same manner as those shareholders, partners, or members
11account for their proportionate shares of the income or losses
12of the corporation, partnership, or limited liability company,
13or as provided in the bylaws or other executed agreement of the
14corporation, partnership, or limited liability company.
15Credits granted to a partnership, a limited liability company
16taxed as a partnership, or other multiple owners of property
17shall be passed through to the partners, members, or owners
18respectively on a pro rata basis or pursuant to an executed
19agreement among the partners, members, or owners documenting
20any alternate distribution method.
21    (e) If a recapture event occurs during the recapture
22period with respect to a qualified historic structure, then
23for any taxable year in which the credits are allowed as
24specified in this Act, the tax under the applicable Section of
25this Act shall be increased by applying the recapture
26percentage set forth below to the tax decrease resulting from

 

 

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1the application of credits allowed under this Act to the
2taxable year in question.
3    For the purposes of this subsection, the recapture
4percentage shall be determined as follows:
5        (1) if the recapture event occurs within the first
6    year after commencement of the recapture period, then the
7    recapture percentage is 100%;
8        (2) if the recapture event occurs within the second
9    year after commencement of the recapture period, then the
10    recapture percentage is 80%;
11        (3) if the recapture event occurs within the third
12    year after commencement of the recapture period, then the
13    recapture percentage is 60%;
14        (4) if the recapture event occurs within the fourth
15    year after commencement of the recapture period, then the
16    recapture percentage is 40%; and
17        (5) if the recapture event occurs within the fifth
18    year after commencement of the recapture period, then the
19    recapture percentage is 20%.
20    In the case of any recapture event, the carryforwards
21under this Act shall be adjusted by reason of such event.
22    (f) The Division may adopt rules to implement this Section
23in addition to the rules expressly authorized herein.
24(Source: P.A. 101-81, eff. 7-12-19; 102-741, eff. 5-6-22.)
 
25    (35 ILCS 31/20)

 

 

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1    Sec. 20. Limitations, reporting, and monitoring.
2    (a) In each every calendar year beginning on or after
3January 1, 2019 and ending on or before December 31, 2023 that
4this program is in effect, the Division is authorized to
5allocate $15,000,000 in tax credits in addition to any
6unallocated, returned, or rescinded allocations from previous
7years, pursuant to qualified rehabilitation plans. In each
8calendar year beginning on or after January 1, 2024 and ending
9on or before December 31, 2028, the Division is authorized to
10allocate $75,000,000 in tax credits in addition to any
11unallocated, returned, or rescinded allocations from previous
12years, pursuant to qualified rehabilitation plans. The
13Division shall not allocate or award more than $3,000,000 in
14tax credits with regard to a single qualified rehabilitation
15plan. In allocating tax credits under this Act, the Division
16must prioritize applications that meet one or more of the
17following:
18        (1) the structure is located in a county that borders
19    a State with a historic income-producing property
20    rehabilitation credit;
21        (2) the structure was previously owned by a federal,
22    state, or local governmental entity for no less than 6
23    months;
24        (3) the structure is located in a census tract that
25    has a median family income at or below the State median
26    family income; data from the most recent 5-year estimate

 

 

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1    from the American Community Survey (ACS), published by the
2    U.S. Census Bureau, shall be used to determine
3    eligibility;
4        (4) the qualified rehabilitation plan includes in the
5    development partnership a Community Development Entity or
6    a low-profit (B Corporation) or not-for-profit
7    organization, as defined by Section 501(c)(3) of the
8    Internal Revenue Code; or
9        (5) the structure is located in an area declared under
10    an Emergency Declaration or Major Disaster Declaration
11    under the federal Robert T. Stafford Disaster Relief and
12    Emergency Assistance Act. The declaration must be no older
13    than 3 years at the time of application.
14    (b) The annual aggregate authorization of $15,000,000 set
15forth in subsection (a) shall be allocated by the Division, in
16such proportion as determined by the Director twice in each
17calendar year that the program is in effect, provided that the
18amount initially allocated by the Division for the first
19calendar year application period shall not exceed 65% of the
20total amount available for allocation. Any unallocated amount
21remaining as of the end of the second application period of a
22given calendar year shall be rolled over and added to the total
23authorized amount for the next available calendar year. The
24qualified rehabilitation plan must meet a readiness test, as
25defined by the Division, in order for the application to
26qualify. In any given application period, applications that

 

 

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1qualify under this Act will be prioritized as set forth in
2subsection (a) and placed in a queue based on the date and time
3the application is received. Applicants whose applications
4qualify but do not receive an allocation must reapply to be
5considered in subsequent application periods.
6    (c) Subject to appropriation to the Division, moneys in
7the Historic Property Administrative Fund shall be used, on a
8biennial basis, beginning at the end of the second fiscal year
9after the effective date of this Act, to hire a qualified third
10party to prepare a biennial report to assess the overall
11impact of this Act from the qualified rehabilitation plans
12under this Act completed in that year and in previous years.
13Baseline data of the metrics in the report shall be collected
14at the initiation of a qualified rehabilitation plan. The
15overall economic impact shall include at least:
16        (1) the number of applications, project locations, and
17    proposed use of qualified historic structures;
18        (2) the amount of credits awarded and the number and
19    location of projects receiving credit allocations;
20        (3) the status of ongoing projects and projected
21    qualifying expenditures for ongoing projects;
22        (4) for completed projects, the total amount of
23    qualifying rehabilitation expenditures and non-qualifying
24    expenditures, the number of housing units created and the
25    number of housing units that qualify as affordable, and
26    the total square footage rehabilitated and developed;

 

 

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1        (5) direct, indirect, and induced economic impacts;
2        (6) temporary, permanent, and construction jobs
3    created; and
4        (7) sales, income, and property tax generation before
5    construction, during construction, and after completion.
6    The report to the General Assembly shall be filed with the
7Clerk of the House of Representatives and the Secretary of the
8Senate in electronic form only, in the manner that the Clerk
9and the Secretary shall direct.
10    (d) Any time prior to issuance of a tax credit
11certificate, the Director of the Division, the State Historic
12Preservation Officer, or staff of the Division may, upon
13reasonable notice of not less than 3 business days, conduct a
14site visit to the project to inspect and evaluate the project.
15    (e) Any time prior to the issuance of a tax credit
16certificate, the Director may, upon reasonable notice of not
17less than 30 calendar days, request a status report from the
18Applicant consisting of information and updates relevant to
19the status of the project. Status reports shall not be
20requested more than twice yearly.
21    (f) In order to demonstrate sufficient evidence of
22reviewable progress within 12 months after the date the
23Applicant received notification of allocation from the
24Division, the Director may require the Applicant to provide
25all of the following:
26        (1) a viable financial plan which demonstrates by way

 

 

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1    of an executed agreement that all financing has been
2    secured for the project; such financing shall include, but
3    not be limited to, equity investment as demonstrated by
4    letters of commitment from the owner of the property,
5    investment partners, and equity investors;
6        (2) (blank); and
7        (3) all historic approvals, including all federal and
8    State rehabilitation documents required by the Division.
9    The Director shall review the submitted evidence and may
10request additional documentation from the Applicant if
11necessary. The Applicant will have 30 calendar days to provide
12the information requested, otherwise the allocation may be
13rescinded at the discretion of the Director.
14    (g) In order to demonstrate sufficient evidence of
15reviewable progress within 24 months after the date the
16application received notification of approval from the
17Division, the Director may require the Applicant to provide
18detailed evidence that the Applicant has secured and closed on
19financing for the complete scope of rehabilitation for the
20project. To demonstrate evidence that the Applicant has
21secured and closed on financing, the Applicant will need to
22provide signed and processed loan agreements, bank financing
23documents or other legal and contractual evidence to
24demonstrate that adequate financing is available to complete
25the project. The Director shall review the submitted evidence
26and may request additional documentation from the Applicant if

 

 

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1necessary. The Applicant will have 30 calendar days to provide
2the information requested, otherwise the allocation may be
3rescinded at the discretion of the Director.
4    If the Applicant fails to document reviewable progress
5within 24 months of approval, the Director may notify the
6Applicant that the allocation is rescinded. However, should
7financing and construction be imminent, the Director may elect
8to grant the Applicant no more than 5 months to close on
9financing and commence construction. If the Applicant fails to
10meet these conditions in the required timeframe, the Director
11shall notify the Applicant that the allocation is rescinded.
12Any such rescinded allocation shall be added to the aggregate
13amount of credits available for allocation for the year in
14which the forfeiture occurred.
15    The amount of the qualified expenditures identified in the
16qualified taxpayer's certification of completion and reflected
17on the Historic Preservation Tax Credit certificate issued by
18the Director is subject to inspection, examination, and audit
19by the Department of Revenue.
20    The qualified taxpayer shall establish and maintain for a
21period of 4 years following the effective date on a project tax
22credit certificate such records as required by the Director.
23Such records include, but are not limited to, records
24documenting project expenditures and compliance with the U.S.
25Secretary of the Interior's Standards. The qualified taxpayer
26shall make such records available for review and verification

 

 

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1by the Director, the State Historic Preservation Officer, the
2Department of Revenue, or appropriate staff, as well as other
3appropriate State agencies. In the event the Director
4determines an Applicant has submitted a status report
5containing erroneous information or data not supported by
6records established and maintained under this Act, the
7Director may, after providing notice, require the Applicant to
8resubmit corrected reports.
9(Source: P.A. 102-741, eff. 5-6-22.)
 
10    Section 99. Effective date. This Act takes effect upon
11becoming law.