HB0689 EngrossedLRB099 04511 HLH 24539 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)  (from Ch. 120, par. 2-201)
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 equal
20    to 2 1/2% of the taxpayer's net income for the taxable
21    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, for
11    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, for
18    taxable years beginning on or after January 1, 2011, and
19    ending prior to January 1, 2015, an amount equal to 5% of
20    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 202.5.
2        (5.2) Except as provided in paragraph (5.5), in In the
3    case of an individual, trust, or estate, for taxable years
4    beginning on or after January 1, 2015, and ending prior to
5    January 1, 2025, an amount equal to 3.75% of the taxpayer's
6    net income for the taxable year.
7        (5.3) Except as provided in paragraph (5.5), in In the
8    case of an individual, trust, or estate, for taxable years
9    beginning prior to January 1, 2025, and ending after
10    December 31, 2024, an amount equal to the sum of (i) 3.75%
11    of the taxpayer's net income for the period prior to
12    January 1, 2025, as calculated under Section 202.5, and
13    (ii) 3.25% of the taxpayer's net income for the period
14    after December 31, 2024, as calculated under Section 202.5.
15        (5.4) Except as provided in paragraph (5.5), in In the
16    case of an individual, trust, or estate, for taxable years
17    beginning on or after January 1, 2025, an amount equal to
18    3.25% of the taxpayer's net income for the taxable year.
19        (5.5) If and only if an amendment to the Illinois
20    Constitution allowing a graduated income tax is approved by
21    the voters at an election occurring in 2016, then, in the
22    case of an individual, trust, or estate, for taxable years
23    beginning on or after January 1, 2017:
24            (A) for taxpayers who are married filing a joint
25        return or head of household:
26                (i) an amount equal to 3.5% of the portion of

 

 

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1            the taxpayer's net income for the taxable year that
2            is $200,000 or less;
3                (ii) an amount equal to 3.75% of the portion of
4            the taxpayer's net income for the taxable year that
5            is more than $200,000 but not more than $750,000;
6                (iii) an amount equal to 8.75% of the portion
7            of the taxpayer's net income for the taxable year
8            that is more than $750,000 but not more than
9            $1,500,000; and
10                (iv) an amount equal to 9.75% of the portion of
11            the taxpayer's net income for the taxable year that
12            is more than $1,500,000; and
13            (B) for all other taxpayers:
14                (i) an amount equal to 3.5% of the portion of
15            the taxpayer's net income for the taxable year that
16            is $100,000 or less;
17                (ii) an amount equal to 3.75% of the portion of
18            the taxpayer's net income for the taxable year that
19            is more than $100,000 but not more than $500,000;
20                (iii) an amount equal to 8.75% of the portion
21            of the taxpayer's net income for the taxable year
22            that is more than $500,000 but not more than
23            $1,000,000; and
24                (iv) an amount equal to 9.75% of the portion of
25            the taxpayer's net income for the taxable year that
26            is more than $1,000,000.

 

 

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1        If and only if an amendment to the Illinois
2    Constitution allowing a graduated income tax is approved by
3    the voters at an election occurring in 2016, then, for
4    taxable years beginning prior to January 1, 2017 and ending
5    after December 31, 2016, in the case of an individual,
6    trust, or estate, an amount equal to the sum of (i) 3.75%
7    of the taxpayer's net income for the period prior to
8    January 1, 2017, as calculated under Section 202.5, and
9    (ii) the rate set forth for that taxpayer under
10    subparagraph (A) or (B) of this paragraph for the period
11    after December 31, 2016, as calculated under Section 202.5.
12        (6) In the case of a corporation, for taxable years
13    ending prior to July 1, 1989, an amount equal to 4% of the
14    taxpayer's net income for the taxable year.
15        (7) In the case of a corporation, for taxable years
16    beginning prior to July 1, 1989 and ending after June 30,
17    1989, an amount equal to the sum of (i) 4% of the
18    taxpayer's net income for the period prior to July 1, 1989,
19    as calculated under Section 202.3, and (ii) 4.8% of the
20    taxpayer's net income for the period after June 30, 1989,
21    as calculated under Section 202.3.
22        (8) In the case of a corporation, for taxable years
23    beginning after June 30, 1989, and ending prior to January
24    1, 2011, an amount equal to 4.8% of the taxpayer's net
25    income for the taxable year.
26        (9) In the case of a corporation, for taxable years

 

 

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1    beginning prior to January 1, 2011, and ending after
2    December 31, 2010, an amount equal to the sum of (i) 4.8%
3    of the taxpayer's net income for the period prior to
4    January 1, 2011, as calculated under Section 202.5, and
5    (ii) 7% of the taxpayer's net income for the period after
6    December 31, 2010, as calculated under Section 202.5.
7        (10) In the case of a corporation, for taxable years
8    beginning on or after January 1, 2011, and ending prior to
9    January 1, 2015, an amount equal to 7% of the taxpayer's
10    net income for the taxable year.
11        (11) In the case of a corporation, for taxable years
12    beginning prior to January 1, 2015, and ending after
13    December 31, 2014, an amount equal to the sum of (i) 7% of
14    the taxpayer's net income for the period prior to January
15    1, 2015, as calculated under Section 202.5, and (ii) 5.25%
16    of the taxpayer's net income for the period after December
17    31, 2014, as calculated under Section 202.5.
18        (12) In the case of a corporation, for taxable years
19    beginning on or after January 1, 2015, and ending prior to
20    January 1, 2025, an amount equal to 5.25% of the taxpayer's
21    net income for the taxable year.
22        (13) In the case of a corporation, for taxable years
23    beginning prior to January 1, 2025, and ending after
24    December 31, 2024, an amount equal to the sum of (i) 5.25%
25    of the taxpayer's net income for the period prior to
26    January 1, 2025, as calculated under Section 202.5, and

 

 

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1    (ii) 4.8% of the taxpayer's net income for the period after
2    December 31, 2024, as calculated under Section 202.5.
3        (14) In the case of a corporation, for taxable years
4    beginning on or after January 1, 2025, an amount equal to
5    4.8% of the taxpayer's net income for the taxable year.
6    The rates under this subsection (b) are subject to the
7provisions of Section 201.5.
8    (c) Personal Property Tax Replacement Income Tax.
9Beginning on July 1, 1979 and thereafter, in addition to such
10income tax, there is also hereby imposed the Personal Property
11Tax Replacement Income Tax measured by net income on every
12corporation (including Subchapter S corporations), partnership
13and trust, for each taxable year ending after June 30, 1979.
14Such taxes are imposed on the privilege of earning or receiving
15income in or as a resident of this State. The Personal Property
16Tax Replacement Income Tax shall be in addition to the income
17tax imposed by subsections (a) and (b) of this Section and in
18addition to all other occupation or privilege taxes imposed by
19this State or by any municipal corporation or political
20subdivision thereof.
21    (d) Additional Personal Property Tax Replacement Income
22Tax Rates. The personal property tax replacement income tax
23imposed by this subsection and subsection (c) of this Section
24in the case of a corporation, other than a Subchapter S
25corporation and except as adjusted by subsection (d-1), shall
26be an additional amount equal to 2.85% of such taxpayer's net

 

 

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1income for the taxable year, except that beginning on January
21, 1981, and thereafter, the rate of 2.85% specified in this
3subsection shall be reduced to 2.5%, and in the case of a
4partnership, trust or a Subchapter S corporation shall be an
5additional amount equal to 1.5% of such taxpayer's net income
6for the taxable year.
7    (d-1) Rate reduction for certain foreign insurers. In the
8case of a foreign insurer, as defined by Section 35A-5 of the
9Illinois Insurance Code, whose state or country of domicile
10imposes on insurers domiciled in Illinois a retaliatory tax
11(excluding any insurer whose premiums from reinsurance assumed
12are 50% or more of its total insurance premiums as determined
13under paragraph (2) of subsection (b) of Section 304, except
14that for purposes of this determination premiums from
15reinsurance do not include premiums from inter-affiliate
16reinsurance arrangements), beginning with taxable years ending
17on or after December 31, 1999, the sum of the rates of tax
18imposed by subsections (b) and (d) shall be reduced (but not
19increased) to the rate at which the total amount of tax imposed
20under this Act, net of all credits allowed under this Act,
21shall equal (i) the total amount of tax that would be imposed
22on the foreign insurer's net income allocable to Illinois for
23the taxable year by such foreign insurer's state or country of
24domicile if that net income were subject to all income taxes
25and taxes measured by net income imposed by such foreign
26insurer's state or country of domicile, net of all credits

 

 

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1allowed or (ii) a rate of zero if no such tax is imposed on such
2income by the foreign insurer's state of domicile. For the
3purposes of this subsection (d-1), an inter-affiliate includes
4a mutual insurer under common management.
5        (1) For the purposes of subsection (d-1), in no event
6    shall the sum of the rates of tax imposed by subsections
7    (b) and (d) be reduced below the rate at which the sum of:
8            (A) the total amount of tax imposed on such foreign
9        insurer under this Act for a taxable year, net of all
10        credits allowed under this Act, plus
11            (B) the privilege tax imposed by Section 409 of the
12        Illinois Insurance Code, the fire insurance company
13        tax imposed by Section 12 of the Fire Investigation
14        Act, and the fire department taxes imposed under
15        Section 11-10-1 of the Illinois Municipal Code,
16    equals 1.25% for taxable years ending prior to December 31,
17    2003, or 1.75% for taxable years ending on or after
18    December 31, 2003, of the net taxable premiums written for
19    the taxable year, as described by subsection (1) of Section
20    409 of the Illinois Insurance Code. This paragraph will in
21    no event increase the rates imposed under subsections (b)
22    and (d).
23        (2) Any reduction in the rates of tax imposed by this
24    subsection shall be applied first against the rates imposed
25    by subsection (b) and only after the tax imposed by
26    subsection (a) net of all credits allowed under this

 

 

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1    Section other than the credit allowed under subsection (i)
2    has been reduced to zero, against the rates imposed by
3    subsection (d).
4    This subsection (d-1) is exempt from the provisions of
5Section 250.
6    (e) Investment credit. A taxpayer shall be allowed a credit
7against the Personal Property Tax Replacement Income Tax for
8investment in qualified property.
9        (1) A taxpayer shall be allowed a credit equal to .5%
10    of the basis of qualified property placed in service during
11    the taxable year, provided such property is placed in
12    service on or after July 1, 1984. There shall be allowed an
13    additional credit equal to .5% of the basis of qualified
14    property placed in service during the taxable year,
15    provided such property is placed in service on or after
16    July 1, 1986, and the taxpayer's base employment within
17    Illinois has increased by 1% or more over the preceding
18    year as determined by the taxpayer's employment records
19    filed with the Illinois Department of Employment Security.
20    Taxpayers who are new to Illinois shall be deemed to have
21    met the 1% growth in base employment for the first year in
22    which they file employment records with the Illinois
23    Department of Employment Security. The provisions added to
24    this Section by Public Act 85-1200 (and restored by Public
25    Act 87-895) shall be construed as declaratory of existing
26    law and not as a new enactment. If, in any year, the

 

 

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1    increase in base employment within Illinois over the
2    preceding year is less than 1%, the additional credit shall
3    be limited to that percentage times a fraction, the
4    numerator of which is .5% and the denominator of which is
5    1%, but shall not exceed .5%. The investment credit shall
6    not be allowed to the extent that it would reduce a
7    taxpayer's liability in any tax year below zero, nor may
8    any credit for qualified property be allowed for any year
9    other than the year in which the property was placed in
10    service in Illinois. For tax years ending on or after
11    December 31, 1987, and on or before December 31, 1988, the
12    credit shall be allowed for the tax year in which the
13    property is placed in service, or, if the amount of the
14    credit exceeds the tax liability for that year, whether it
15    exceeds the original liability or the liability as later
16    amended, such excess may be carried forward and applied to
17    the tax liability of the 5 taxable years following the
18    excess credit years if the taxpayer (i) makes investments
19    which cause the creation of a minimum of 2,000 full-time
20    equivalent jobs in Illinois, (ii) is located in an
21    enterprise zone established pursuant to the Illinois
22    Enterprise Zone Act and (iii) is certified by the
23    Department of Commerce and Community Affairs (now
24    Department of Commerce and Economic Opportunity) as
25    complying with the requirements specified in clause (i) and
26    (ii) by July 1, 1986. The Department of Commerce and

 

 

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1    Community Affairs (now Department of Commerce and Economic
2    Opportunity) shall notify the Department of Revenue of all
3    such certifications immediately. For tax years ending
4    after December 31, 1988, the credit shall be allowed for
5    the tax year in which the property is placed in service,
6    or, if the amount of the credit exceeds the tax liability
7    for that year, whether it exceeds the original liability or
8    the liability as later amended, such excess may be carried
9    forward and applied to the tax liability of the 5 taxable
10    years following the excess credit years. The credit shall
11    be applied to the earliest year for which there is a
12    liability. If there is credit from more than one tax year
13    that is available to offset a liability, earlier credit
14    shall be applied first.
15        (2) The term "qualified property" means property
16    which:
17            (A) is tangible, whether new or used, including
18        buildings and structural components of buildings and
19        signs that are real property, but not including land or
20        improvements to real property that are not a structural
21        component of a building such as landscaping, sewer
22        lines, local access roads, fencing, parking lots, and
23        other appurtenances;
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        (e);
3            (C) is acquired by purchase as defined in Section
4        179(d) of the Internal Revenue Code;
5            (D) is used in Illinois by a taxpayer who is
6        primarily engaged in manufacturing, or in mining coal
7        or fluorite, or in retailing, or was placed in service
8        on or after July 1, 2006 in a River Edge Redevelopment
9        Zone established pursuant to the River Edge
10        Redevelopment Zone Act; and
11            (E) has not previously been used in Illinois in
12        such a manner and by such a person as would qualify for
13        the credit provided by this subsection (e) or
14        subsection (f).
15        (3) For purposes of this subsection (e),
16    "manufacturing" means the material staging and production
17    of tangible personal property by procedures commonly
18    regarded as manufacturing, processing, fabrication, or
19    assembling which changes some existing material into new
20    shapes, new qualities, or new combinations. For purposes of
21    this subsection (e) the term "mining" shall have the same
22    meaning as the term "mining" in Section 613(c) of the
23    Internal Revenue Code. For purposes of this subsection (e),
24    the term "retailing" means the sale of tangible personal
25    property for use or consumption and not for resale, or
26    services rendered in conjunction with the sale of tangible

 

 

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1    personal property for use or consumption and not for
2    resale. For purposes of this subsection (e), "tangible
3    personal property" has the same meaning as when that term
4    is used in the Retailers' Occupation Tax Act, and, for
5    taxable years ending after December 31, 2008, does not
6    include the generation, transmission, or distribution of
7    electricity.
8        (4) The basis of qualified property shall be the basis
9    used to compute the depreciation deduction for federal
10    income tax purposes.
11        (5) If the basis of the property for federal income tax
12    depreciation purposes is increased after it has been placed
13    in service in Illinois by the taxpayer, the amount of such
14    increase shall be deemed property placed in service on the
15    date of such increase in basis.
16        (6) The term "placed in service" shall have the same
17    meaning as under Section 46 of the Internal Revenue Code.
18        (7) If during any taxable year, any property ceases to
19    be qualified property in the hands of the taxpayer within
20    48 months after being placed in service, or the situs of
21    any qualified property is moved outside Illinois within 48
22    months after being placed in service, the Personal Property
23    Tax Replacement Income Tax for such taxable year shall be
24    increased. Such increase shall be determined by (i)
25    recomputing the investment credit which would have been
26    allowed for the year in which credit for such property was

 

 

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

 

 

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1    that taxable year. The election to pass through the credits
2    shall be irrevocable.
3        For taxable years ending on or after December 31, 2000,
4    a partner that qualifies its partnership for a subtraction
5    under subparagraph (I) of paragraph (2) of subsection (d)
6    of Section 203 or a shareholder that qualifies a Subchapter
7    S corporation for a subtraction under subparagraph (S) of
8    paragraph (2) of subsection (b) of Section 203 shall be
9    allowed a credit under this subsection (e) equal to its
10    share of the credit earned under this subsection (e) during
11    the taxable year by the partnership or Subchapter S
12    corporation, determined in accordance with the
13    determination of income and distributive share of income
14    under Sections 702 and 704 and Subchapter S of the Internal
15    Revenue Code. This paragraph is exempt from the provisions
16    of Section 250.
17    (f) Investment credit; Enterprise Zone; River Edge
18Redevelopment Zone.
19        (1) A taxpayer shall be allowed a credit against the
20    tax imposed by subsections (a) and (b) of this Section for
21    investment in qualified property which is placed in service
22    in an Enterprise Zone created pursuant to the Illinois
23    Enterprise Zone Act or, for property placed in service on
24    or after July 1, 2006, a River Edge Redevelopment Zone
25    established pursuant to the River Edge Redevelopment Zone
26    Act. For partners, shareholders of Subchapter S

 

 

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1    corporations, and owners of limited liability companies,
2    if the liability company is treated as a partnership for
3    purposes of federal and State income taxation, there shall
4    be allowed a credit under this subsection (f) to be
5    determined in accordance with the determination of income
6    and distributive share of income under Sections 702 and 704
7    and Subchapter S of the Internal Revenue Code. The credit
8    shall be .5% of the basis for such property. The credit
9    shall be available only in the taxable year in which the
10    property is placed in service in the Enterprise Zone or
11    River Edge Redevelopment Zone and shall not be allowed to
12    the extent that it would reduce a taxpayer's liability for
13    the tax imposed by subsections (a) and (b) of this Section
14    to below zero. For tax years ending on or after December
15    31, 1985, the credit shall be allowed for the tax year in
16    which the property is placed in service, or, if the amount
17    of the credit exceeds the tax liability for that year,
18    whether it exceeds the original liability or the liability
19    as later amended, such excess may be carried forward and
20    applied to the tax liability of the 5 taxable years
21    following the excess credit year. The credit shall be
22    applied to the earliest year for which there is a
23    liability. If there is credit from more than one tax year
24    that is available to offset a liability, the credit
25    accruing first in time shall be applied first.
26        (2) The term qualified property means property which:

 

 

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1            (A) is tangible, whether new or used, including
2        buildings and structural components of buildings;
3            (B) is depreciable pursuant to Section 167 of the
4        Internal Revenue Code, except that "3-year property"
5        as defined in Section 168(c)(2)(A) of that Code is not
6        eligible for the credit provided by this subsection
7        (f);
8            (C) is acquired by purchase as defined in Section
9        179(d) of the Internal Revenue Code;
10            (D) is used in the Enterprise Zone or River Edge
11        Redevelopment Zone by the taxpayer; and
12            (E) has not been previously used in Illinois in
13        such a manner and by such a person as would qualify for
14        the credit provided by this subsection (f) or
15        subsection (e).
16        (3) The basis of qualified property shall be the basis
17    used to compute the depreciation deduction for federal
18    income tax purposes.
19        (4) If the basis of the property for federal income tax
20    depreciation purposes is increased after it has been placed
21    in service in the Enterprise Zone or River Edge
22    Redevelopment Zone by the taxpayer, the amount of such
23    increase shall be deemed property placed in service on the
24    date of such increase in basis.
25        (5) The term "placed in service" shall have the same
26    meaning as under Section 46 of the Internal Revenue Code.

 

 

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1        (6) If during any taxable year, any property ceases to
2    be qualified property in the hands of the taxpayer within
3    48 months after being placed in service, or the situs of
4    any qualified property is moved outside the Enterprise Zone
5    or River Edge Redevelopment Zone within 48 months after
6    being placed in service, the tax imposed under subsections
7    (a) and (b) of this Section for such taxable year shall be
8    increased. Such increase shall be determined by (i)
9    recomputing the investment credit which would have been
10    allowed for the year in which credit for such property was
11    originally allowed by eliminating such property from such
12    computation, and (ii) subtracting such recomputed credit
13    from the amount of credit previously allowed. For the
14    purposes of this paragraph (6), a reduction of the basis of
15    qualified property resulting from a redetermination of the
16    purchase price shall be deemed a disposition of qualified
17    property to the extent of such reduction.
18        (7) There shall be allowed an additional credit equal
19    to 0.5% of the basis of qualified property placed in
20    service during the taxable year in a River Edge
21    Redevelopment Zone, provided such property is placed in
22    service on or after July 1, 2006, and the taxpayer's base
23    employment within Illinois has increased by 1% or more over
24    the preceding year as determined by the taxpayer's
25    employment records filed with the Illinois Department of
26    Employment Security. Taxpayers who are new to Illinois

 

 

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1    shall be deemed to have met the 1% growth in base
2    employment for the first year in which they file employment
3    records with the Illinois Department of Employment
4    Security. If, in any year, the increase in base employment
5    within Illinois over the preceding year is less than 1%,
6    the additional credit shall be limited to that percentage
7    times a fraction, the numerator of which is 0.5% and the
8    denominator of which is 1%, but shall not exceed 0.5%.
9    (g) (Blank).
10    (h) Investment credit; High Impact Business.
11        (1) Subject to subsections (b) and (b-5) of Section 5.5
12    of the Illinois Enterprise Zone Act, a taxpayer shall be
13    allowed a credit against the tax imposed by subsections (a)
14    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 the
4    taxable year in which such investments have been completed.
5    The credit for additional investments beyond the minimum
6    investment by a designated high impact business authorized
7    under subdivision (a)(3)(A) of Section 5.5 of the Illinois
8    Enterprise Zone Act shall be available only in the taxable
9    year in which the property is placed in service and shall
10    not be allowed to the extent that it would reduce a
11    taxpayer's liability for the tax imposed by subsections (a)
12    and (b) of this Section to below zero. For tax years ending
13    on or after December 31, 1987, the credit shall be allowed
14    for the tax year in which the property is placed in
15    service, or, if the amount of the credit exceeds the tax
16    liability for that year, whether it exceeds the original
17    liability or the liability as later amended, such excess
18    may be carried forward and applied to the tax liability of
19    the 5 taxable years following the excess credit year. The
20    credit shall be applied to the earliest year for which
21    there is a liability. If there is credit from more than one
22    tax year that is available to offset a liability, the
23    credit accruing first in time shall be 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 tax
18    depreciation purposes is increased after it has been placed
19    in service in a federally designated Foreign Trade Zone or
20    Sub-Zone located in Illinois by the taxpayer, the amount of
21    such increase shall be deemed property placed in service on
22    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 under
5    subsections (a) and (b) of this Section for such taxable
6    year shall be increased. Such increase shall be determined
7    by (i) recomputing the investment credit which would have
8    been allowed for the year in which credit for such property
9    was originally allowed by eliminating such property from
10    such computation, and (ii) subtracting such recomputed
11    credit from the amount of credit previously allowed. For
12    the purposes of this paragraph (6), a reduction of the
13    basis of qualified property resulting from a
14    redetermination of the purchase price shall be deemed a
15    disposition of qualified property to the extent of such
16    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 Section
22    18-183 of the Property Tax Code, the tax imposed under
23    subsections (a) and (b) of this Section shall be increased
24    for the taxable year in which the taxpayer relocated its
25    facility by an amount equal to the amount of credit
26    received by the taxpayer under this subsection (h).

 

 

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1    (i) Credit for Personal Property Tax Replacement Income
2Tax. For tax years ending prior to December 31, 2003, a credit
3shall be allowed against the tax imposed by subsections (a) and
4(b) of this Section for the tax imposed by subsections (c) and
5(d) of this Section. This credit shall be computed by
6multiplying the tax imposed by subsections (c) and (d) of this
7Section by a fraction, the numerator of which is base income
8allocable to Illinois and the denominator of which is Illinois
9base income, and further multiplying the product by the tax
10rate imposed by subsections (a) and (b) of this Section.
11    Any credit earned on or after December 31, 1986 under this
12subsection which is unused in the year the credit is computed
13because it exceeds the tax liability imposed by subsections (a)
14and (b) for that year (whether it exceeds the original
15liability or the liability as later amended) may be carried
16forward and applied to the tax liability imposed by subsections
17(a) and (b) of the 5 taxable years following the excess credit
18year, provided that no credit may be carried forward to any
19year ending on or after December 31, 2003. This credit shall be
20applied first to the earliest year for which there is a
21liability. If there is a credit under this subsection from more
22than one tax year that is available to offset a liability the
23earliest credit arising under this subsection shall be applied
24first.
25    If, during any taxable year ending on or after December 31,
261986, the tax imposed by subsections (c) and (d) of this

 

 

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1Section for which a taxpayer has claimed a credit under this
2subsection (i) is reduced, the amount of credit for such tax
3shall also be reduced. Such reduction shall be determined by
4recomputing the credit to take into account the reduced tax
5imposed by subsections (c) and (d). If any portion of the
6reduced amount of credit has been carried to a different
7taxable year, an amended return shall be filed for such taxable
8year to reduce the amount of credit claimed.
9    (j) Training expense credit. Beginning with tax years
10ending on or after December 31, 1986 and prior to December 31,
112003, a taxpayer shall be allowed a credit against the tax
12imposed by subsections (a) and (b) under this Section for all
13amounts paid or accrued, on behalf of all persons employed by
14the taxpayer in Illinois or Illinois residents employed outside
15of Illinois by a taxpayer, for educational or vocational
16training in semi-technical or technical fields or semi-skilled
17or skilled fields, which were deducted from gross income in the
18computation of taxable income. The credit against the tax
19imposed by subsections (a) and (b) shall be 1.6% of such
20training expenses. For partners, shareholders of subchapter S
21corporations, and owners of limited liability companies, if the
22liability company is treated as a partnership for purposes of
23federal and State income taxation, there shall be allowed a
24credit under this subsection (j) to be determined in accordance
25with the determination of income and distributive share of
26income under Sections 702 and 704 and subchapter S of the

 

 

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1Internal Revenue Code.
2    Any credit allowed under this subsection which is unused in
3the year the credit is earned may be carried forward to each of
4the 5 taxable years following the year for which the credit is
5first computed until it is used. This credit shall be applied
6first to the earliest year for which there is a liability. If
7there is a credit under this subsection from more than one tax
8year that is available to offset a liability the earliest
9credit arising under this subsection shall be applied first. No
10carryforward credit may be claimed in any tax year ending on or
11after December 31, 2003.
12    (k) Research and development credit. For tax years ending
13after July 1, 1990 and prior to December 31, 2003, and
14beginning again for tax years ending on or after December 31,
152004, and ending prior to January 1, 2016, a taxpayer shall be
16allowed a credit against the tax imposed by subsections (a) and
17(b) of this Section for increasing research activities in this
18State. The credit allowed against the tax imposed by
19subsections (a) and (b) shall be equal to 6 1/2% of the
20qualifying expenditures for increasing research activities in
21this State. For partners, shareholders of subchapter S
22corporations, and owners of limited liability companies, if the
23liability company is treated as a partnership for purposes of
24federal and State income taxation, there shall be allowed a
25credit under this subsection to be determined in accordance
26with the determination of income and distributive share of

 

 

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

 

 

HB0689 Engrossed- 28 -LRB099 04511 HLH 24539 b

1given year. If a tax liability for the given year still
2remains, the credit from the next earliest year will then be
3applied, and so on, until all credits have been used or no tax
4liability for the given year remains. Any remaining unused
5credit or credits then will be carried forward to the next
6following year in which a tax liability is incurred, except
7that no credit can be carried forward to a year which is more
8than 5 years after the year in which the expense for which the
9credit is given was incurred.
10    No inference shall be drawn from this amendatory Act of the
1191st General Assembly in construing this Section for taxable
12years beginning before January 1, 1999.
13    (l) Environmental Remediation Tax Credit.
14        (i) For tax years ending after December 31, 1997 and on
15    or before December 31, 2001, a taxpayer shall be allowed a
16    credit against the tax imposed by subsections (a) and (b)
17    of this Section for certain amounts paid for unreimbursed
18    eligible remediation costs, as specified in this
19    subsection. For purposes of this Section, "unreimbursed
20    eligible remediation costs" means costs approved by the
21    Illinois Environmental Protection Agency ("Agency") under
22    Section 58.14 of the Environmental Protection Act that were
23    paid in performing environmental remediation at a site for
24    which a No Further Remediation Letter was issued by the
25    Agency and recorded under Section 58.10 of the
26    Environmental Protection Act. The credit must be claimed

 

 

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

 

 

HB0689 Engrossed- 30 -LRB099 04511 HLH 24539 b

1    Department of Commerce and Economic Opportunity). The
2    total credit allowed shall not exceed $40,000 per year with
3    a maximum total of $150,000 per site. For partners and
4    shareholders of subchapter S corporations, there shall be
5    allowed a credit under this subsection to be determined in
6    accordance with the determination of income and
7    distributive share of income under Sections 702 and 704 and
8    subchapter S of the Internal Revenue Code.
9        (ii) A credit allowed under this subsection that is
10    unused in the year the credit is earned may be carried
11    forward to each of the 5 taxable years following the year
12    for which the credit is first earned until it is used. The
13    term "unused credit" does not include any amounts of
14    unreimbursed eligible remediation costs in excess of the
15    maximum credit per site authorized under paragraph (i).
16    This credit shall be applied first to the earliest year for
17    which there is a liability. If there is a credit under this
18    subsection from more than one tax year that is available to
19    offset a liability, the earliest credit arising under this
20    subsection shall be applied first. A credit allowed under
21    this subsection may be sold to a buyer as part of a sale of
22    all or part of the remediation site for which the credit
23    was granted. The purchaser of a remediation site and the
24    tax credit shall succeed to the unused credit and remaining
25    carry-forward period of the seller. To perfect the
26    transfer, the assignor shall record the transfer in the

 

 

HB0689 Engrossed- 31 -LRB099 04511 HLH 24539 b

1    chain of title for the site and provide written notice to
2    the Director of the Illinois Department of Revenue of the
3    assignor's intent to sell the remediation site and the
4    amount of the tax credit to be transferred as a portion of
5    the sale. In no event may a credit be transferred to any
6    taxpayer if the taxpayer or a related party would not be
7    eligible under the provisions of subsection (i).
8        (iii) For purposes of this Section, the term "site"
9    shall have the same meaning as under Section 58.2 of the
10    Environmental Protection Act.
11    (m) Education expense credit. Beginning with tax years
12ending after December 31, 1999, a taxpayer who is the custodian
13of one or more qualifying pupils shall be allowed a credit
14against the tax imposed by subsections (a) and (b) of this
15Section for qualified education expenses incurred on behalf of
16the qualifying pupils. The credit shall be equal to 25% of
17qualified education expenses, but in no event may the total
18credit under this subsection claimed by a family that is the
19custodian of qualifying pupils exceed $500. In no event shall a
20credit under this subsection reduce the taxpayer's liability
21under this Act to less than zero. This subsection is exempt
22from the provisions of Section 250 of this Act.
23    For purposes of this subsection:
24    "Qualifying pupils" means individuals who (i) are
25residents of the State of Illinois, (ii) are under the age of
2621 at the close of the school year for which a credit is

 

 

HB0689 Engrossed- 32 -LRB099 04511 HLH 24539 b

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

 

 

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1    means costs approved by the Illinois Environmental
2    Protection Agency ("Agency") under Section 58.14a of the
3    Environmental Protection Act that were paid in performing
4    environmental remediation at a site within a River Edge
5    Redevelopment Zone for which a No Further Remediation
6    Letter was issued by the Agency and recorded under Section
7    58.10 of the Environmental Protection Act. The credit must
8    be claimed for the taxable year in which Agency approval of
9    the eligible remediation costs is granted. The credit is
10    not available to any taxpayer if the taxpayer or any
11    related party caused or contributed to, in any material
12    respect, a release of regulated substances on, in, or under
13    the site that was identified and addressed by the remedial
14    action pursuant to the Site Remediation Program of the
15    Environmental Protection Act. Determinations as to credit
16    availability for purposes of this Section shall be made
17    consistent with rules adopted by the Pollution Control
18    Board pursuant to the Illinois Administrative Procedure
19    Act for the administration and enforcement of Section 58.9
20    of the Environmental Protection Act. For purposes of this
21    Section, "taxpayer" includes a person whose tax attributes
22    the taxpayer has succeeded to under Section 381 of the
23    Internal Revenue Code and "related party" includes the
24    persons disallowed a deduction for losses by paragraphs
25    (b), (c), and (f)(1) of Section 267 of the Internal Revenue
26    Code by virtue of being a related taxpayer, as well as any

 

 

HB0689 Engrossed- 34 -LRB099 04511 HLH 24539 b

1    of its partners. The credit allowed against the tax imposed
2    by subsections (a) and (b) shall be equal to 25% of the
3    unreimbursed eligible remediation costs in excess of
4    $100,000 per site.
5        (ii) A credit allowed under this subsection that is
6    unused in the year the credit is earned may be carried
7    forward to each of the 5 taxable years following the year
8    for which the credit is first earned until it is used. This
9    credit shall be applied first to the earliest year for
10    which there is a liability. If there is a credit under this
11    subsection from more than one tax year that is available to
12    offset a liability, the earliest credit arising under this
13    subsection shall be applied first. A credit allowed under
14    this subsection may be sold to a buyer as part of a sale of
15    all or part of the remediation site for which the credit
16    was granted. The purchaser of a remediation site and the
17    tax credit shall succeed to the unused credit and remaining
18    carry-forward period of the seller. To perfect the
19    transfer, the assignor shall record the transfer in the
20    chain of title for the site and provide written notice to
21    the Director of the Illinois Department of Revenue of the
22    assignor's intent to sell the remediation site and the
23    amount of the tax credit to be transferred as a portion of
24    the sale. In no event may a credit be transferred to any
25    taxpayer if the taxpayer or a related party would not be
26    eligible under the provisions of subsection (i).

 

 

HB0689 Engrossed- 35 -LRB099 04511 HLH 24539 b

1        (iii) For purposes of this Section, the term "site"
2    shall have the same meaning as under Section 58.2 of the
3    Environmental Protection Act.
4    (o) For each of taxable years during the Compassionate Use
5of Medical Cannabis Pilot Program, a surcharge is imposed on
6all taxpayers on income arising from the sale or exchange of
7capital assets, depreciable business property, real property
8used in the trade or business, and Section 197 intangibles of
9an organization registrant under the Compassionate Use of
10Medical Cannabis Pilot Program Act. The amount of the surcharge
11is equal to the amount of federal income tax liability for the
12taxable year attributable to those sales and exchanges. The
13surcharge imposed does not apply if:
14        (1) the medical cannabis cultivation center
15    registration, medical cannabis dispensary registration, or
16    the property of a registration is transferred as a result
17    of any of the following:
18            (A) bankruptcy, a receivership, or a debt
19        adjustment initiated by or against the initial
20        registration or the substantial owners of the initial
21        registration;
22            (B) cancellation, revocation, or termination of
23        any registration by the Illinois Department of Public
24        Health;
25            (C) a determination by the Illinois Department of
26        Public Health that transfer of the registration is in

 

 

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1        the best interests of Illinois qualifying patients as
2        defined by the Compassionate Use of Medical Cannabis
3        Pilot Program Act;
4            (D) the death of an owner of the equity interest in
5        a registrant;
6            (E) the acquisition of a controlling interest in
7        the stock or substantially all of the assets of a
8        publicly traded company;
9            (F) a transfer by a parent company to a wholly
10        owned subsidiary; or
11            (G) the transfer or sale to or by one person to
12        another person where both persons were initial owners
13        of the registration when the registration was issued;
14        or
15        (2) the cannabis cultivation center registration,
16    medical cannabis dispensary registration, or the
17    controlling interest in a registrant's property is
18    transferred in a transaction to lineal descendants in which
19    no gain or loss is recognized or as a result of a
20    transaction in accordance with Section 351 of the Internal
21    Revenue Code in which no gain or loss is recognized.
22(Source: P.A. 97-2, eff. 5-6-11; 97-636, eff. 6-1-12; 97-905,
23eff. 8-7-12; 98-109, eff. 7-25-13; 98-122, eff. 1-1-14; 98-756,
24eff. 7-16-14.)
 
25    Section 99. Effective date. This Act takes effect upon
26becoming law.