Illinois General Assembly - Full Text of SB1427
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Full Text of SB1427  99th General Assembly



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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 Economic Development for a Growing Economy
5Tax Credit Act is amended by changing Sections 5-5, 5-20, 5-25,
6and 5-50 as follows:
7    (35 ILCS 10/5-5)
8    Sec. 5-5. Definitions. As used in this Act:
9    "Agreement" means the Agreement between a Taxpayer and the
10Department under the provisions of Section 5-50 of this Act.
11    "Applicant" means a Taxpayer that is operating a business
12located or that the Taxpayer plans to locate within the State
13of Illinois and that is engaged in interstate or intrastate
14commerce for the purpose of manufacturing, processing,
15assembling, warehousing, or distributing products, conducting
16research and development, providing tourism services, or
17providing services in interstate commerce, office industries,
18or agricultural processing, but excluding retail, retail food,
19health, or professional services. "Applicant" does not include
20a Taxpayer who closes or substantially reduces an operation at
21one location in the State and relocates substantially the same
22operation to another location in the State. This does not
23prohibit a Taxpayer from expanding its operations at another



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1location in the State, provided that existing operations of a
2similar nature located within the State are not closed or
3substantially reduced. This also does not prohibit a Taxpayer
4from moving its operations from one location in the State to
5another location in the State for the purpose of expanding the
6operation provided that the Department determines that
7expansion cannot reasonably be accommodated within the
8municipality in which the business is located, or in the case
9of a business located in an incorporated area of the county,
10within the county in which the business is located, after
11conferring with the chief elected official of the municipality
12or county and taking into consideration any evidence offered by
13the municipality or county regarding the ability to accommodate
14expansion within the municipality or county.
15    "Committee" means the Illinois Business Investment
16Committee created under Section 5-25 of this Act within the
17Illinois Economic Development Board.
18    "Credit" means the amount agreed to between the Department
19and Applicant under this Act, but not to exceed the Incremental
20Income Tax attributable to the Applicant's project.
21    "Department" means the Department of Commerce and Economic
23    "Director" means the Director of Commerce and Economic
25    "Full-time Employee" means an individual who is employed
26for consideration for at least 35 hours each week or who



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1renders any other standard of service generally accepted by
2industry custom or practice as full-time employment. An
3individual for whom a W-2 is issued by a Professional Employer
4Organization (PEO) is a full-time employee if employed in the
5service of the Applicant for consideration for at least 35
6hours each week or who renders any other standard of service
7generally accepted by industry custom or practice as full-time
8employment to Applicant.
9    "Incremental Income Tax" means the total amount withheld
10during the taxable year from the compensation of New Employees
11under Article 7 of the Illinois Income Tax Act arising from
12employment at a project that is the subject of an Agreement.
13    "New Employee" means:
14        (a) A Full-time Employee first employed by a Taxpayer
15    in the project that is the subject of an Agreement and who
16    is hired after the Taxpayer enters into the tax credit
17    Agreement.
18        (b) The term "New Employee" does not include:
19            (1) an employee of the Taxpayer who performs a job
20        that was previously performed by another employee, if
21        that job existed for at least 6 months before hiring
22        the employee;
23            (2) an employee of the Taxpayer who was previously
24        employed in Illinois by a Related Member of the
25        Taxpayer and whose employment was shifted to the
26        Taxpayer after the Taxpayer entered into the tax credit



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1        Agreement; or
2            (3) a child, grandchild, parent, or spouse, other
3        than a spouse who is legally separated from the
4        individual, of any individual who has a direct or an
5        indirect ownership interest of at least 5% in the
6        profits, capital, or value of the Taxpayer; or .
7            (4) an employee of the Taxpayer who was previously
8        employed in Illinois by the Taxpayer and whose
9        employment was shifted to the project after the
10        Taxpayer entered into the Agreement.
11        (c) Notwithstanding paragraph (1) of subsection (b),
12    an employee may be considered a New Employee under the
13    Agreement if the employee performs a job that was
14    previously performed by an employee who was:
15            (1) treated under the Agreement as a New Employee;
16        and
17            (2) promoted by the Taxpayer to another job.
18        (d) Notwithstanding subsection (a), the Department may
19    award Credit to an Applicant with respect to an employee
20    hired prior to the date of the Agreement if:
21            (1) the Applicant is in receipt of a letter from
22        the Department stating an intent to enter into a credit
23        Agreement;
24            (2) the letter described in paragraph (1) is issued
25        by the Department not later than 15 days after the
26        effective date of this Act; and



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1            (3) the employee was hired after the date the
2        letter described in paragraph (1) was issued.
3    "Noncompliance Date" means, in the case of a Taxpayer that
4is not complying with the requirements of the Agreement or the
5provisions of this Act, the day following the last date upon
6which the Taxpayer was in compliance with the requirements of
7the Agreement and the provisions of this Act, as determined by
8the Director, pursuant to Section 5-65.
9    "Pass Through Entity" means an entity that is exempt from
10the tax under subsection (b) or (c) of Section 205 of the
11Illinois Income Tax Act.
12    "Project" means a for-profit economic development activity
13or activities at a single site, or of one or more taxpayers at
14multiple sites if the economic activities are vertically
16    "Professional Employer Organization" (PEO) means an
17employee leasing company, as defined in Section 206.1(A)(2) of
18the Illinois Unemployment Insurance Act.
19    "Related Member" means a person that, with respect to the
20Taxpayer during any portion of the taxable year, is any one of
21the following:
22        (1) An individual stockholder, if the stockholder and
23    the members of the stockholder's family (as defined in
24    Section 318 of the Internal Revenue Code) own directly,
25    indirectly, beneficially, or constructively, in the
26    aggregate, at least 50% of the value of the Taxpayer's



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1    outstanding stock.
2        (2) A partnership, estate, or trust and any partner or
3    beneficiary, if the partnership, estate, or trust, and its
4    partners or beneficiaries own directly, indirectly,
5    beneficially, or constructively, in the aggregate, at
6    least 50% of the profits, capital, stock, or value of the
7    Taxpayer.
8        (3) A corporation, and any party related to the
9    corporation in a manner that would require an attribution
10    of stock from the corporation to the party or from the
11    party to the corporation under the attribution rules of
12    Section 318 of the Internal Revenue Code, if the Taxpayer
13    owns directly, indirectly, beneficially, or constructively
14    at least 50% of the value of the corporation's outstanding
15    stock.
16        (4) A corporation and any party related to that
17    corporation in a manner that would require an attribution
18    of stock from the corporation to the party or from the
19    party to the corporation under the attribution rules of
20    Section 318 of the Internal Revenue Code, if the
21    corporation and all such related parties own in the
22    aggregate at least 50% of the profits, capital, stock, or
23    value of the Taxpayer.
24        (5) A person to or from whom there is attribution of
25    stock ownership in accordance with Section 1563(e) of the
26    Internal Revenue Code, except, for purposes of determining



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1    whether a person is a Related Member under this paragraph,
2    20% shall be substituted for 5% wherever 5% appears in
3    Section 1563(e) of the Internal Revenue Code.
4    "Retained Employee" means a full-time employee employed by
5a taxpayer during the term of the Agreement whose job duties
6are directly and substantially related to the project. The term
7"Retained Employee" does not include a child, grandchild,
8parent, or spouse, other than a spouse who is legally separated
9from the individual, of any individual who has direct or
10indirect ownership interest of at least 5% in the profits,
11capital, or value of the taxpayer. For purposes of this
12definition, "directly and substantially related to the
13project" means at least two-thirds of the employee's job duties
14must be directly related to the project and the employee must
15devote at least two-thirds of his or her time to the project.
16    "Taxpayer" means an individual, corporation, partnership,
17or other entity that has any Illinois Income Tax liability.
18(Source: P.A. 94-793, eff. 5-19-06; 95-375, eff. 8-23-07.)
19    (35 ILCS 10/5-20)
20    Sec. 5-20. Application for a project to create and retain
21new jobs.
22    (a) Any Taxpayer proposing a project located or planned to
23be located in Illinois may request consideration for
24designation of its project, by formal written letter of request
25or by formal application to the Department, in which the



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1Applicant states its intent to make at least a specified level
2of investment and intends to hire or retain a specified number
3of full-time employees at a designated location in Illinois. As
4circumstances require, the Department may require a formal
5application from an Applicant and a formal letter of request
6for assistance.
7    (b) In order to qualify for Credits under this Act, an
8Applicant's project must:
9        (1) involve an investment of at least $5,000,000 in
10    capital improvements to be placed in service and to employ
11    at least 25 New Employees within the State as a direct
12    result of the project;
13        (2) involve an investment in capital improvements to be
14    placed in service in the State at a level of at least an
15    amount (to be expressly specified by the Department and the
16    Committee) in capital improvements to be placed in service
17    and will employ at least an amount (to be expressly
18    specified by the Department and the Committee) of New
19    Employees or Retained Employees within the State as
20    specified by the Department, provided that the Department
21    has and the Committee have determined that the project will
22    provide a substantial economic benefit to the State; or
23        (3) if the applicant has 100 or fewer employees,
24    involve an investment of at least $1,000,000 in capital
25    improvements to be placed in service and to employ at least
26    5 New Employees within the State as a direct result of the



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1    project.
2    The Director may approve projects that do not meet the
3specified minimum job creation and investment thresholds set
4forth in this subsection (b) for an applicant meeting all other
5requirements of this Act provided that one or more of the
6following conditions are met:
7        (A) approval would support a business with potential to
8    generate additional growth by attracting companion
9    businesses; or
10        (B) approval would avert loss of one of the area's
11    major sources of employment.
12    (c) After receipt of an application, the Department may
13enter into an Agreement with the Applicant if the application
14is accepted in accordance with Section 5-25.
15(Source: P.A. 93-882, eff. 1-1-05.)
16    (35 ILCS 10/5-25)
17    Sec. 5-25. Review of Application.
18    (a) In addition to those duties granted under the Illinois
19Economic Development Board Act, the Illinois Economic
20Development Board shall form a Business Investment Committee
21for the purpose of making recommendations for applications. At
22the request of the Board, the Director of Commerce and Economic
23Opportunity or his or her designee, the Director of the
24Governor's Office of Management and Budget or his or her
25designee, the Director of Revenue or his or her designee, the



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1Director of Employment Security or his or her designee, and an
2elected official of the affected locality, such as the chair of
3the county board or the mayor, may serve as members of the
4Committee to assist with its analysis and deliberations.
5    (b) At the Department's request, the Committee shall
6convene, make inquiries, and conduct studies in the manner and
7by the methods as it deems desirable, review information with
8respect to Applicants, and make recommendations for projects to
9benefit the State. In making its recommendation that an
10Applicant's application for Credit should or should not be
11accepted, which shall occur within a reasonable time frame as
12determined by the nature of the application, the Committee
13shall determine that all the following conditions exist:
14        (1) The Applicant's project intends, as required by
15    subsection (b) of Section 5-20 to make the required
16    investment in the State and intends to hire or retain the
17    required number of New Employees or Retained Employees in
18    Illinois as a result of that project.
19        (2) The Applicant's project is economically sound and
20    will benefit the people of the State of Illinois by
21    increasing opportunities for employment and strengthen the
22    economy of Illinois.
23        (3) That, if not for the Credit, the project would not
24    occur in Illinois, which may be demonstrated by any means
25    including, but not limited to, evidence the Applicant has
26    multi-state location options and could reasonably and



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1    efficiently locate outside of the State, or demonstration
2    that at least one other state is being considered for the
3    project, or evidence the receipt of the Credit is a major
4    factor in the Applicant's decision and that without the
5    Credit, the Applicant likely would not create new jobs in
6    Illinois, or demonstration that receiving the Credit is
7    essential to the Applicant's decision to create or retain
8    new jobs in the State.
9        (4) A cost differential is identified, using best
10    available data, in the projected costs for the Applicant's
11    project compared to the costs in the competing state,
12    including the impact of the competing state's incentive
13    programs. The competing state's incentive programs shall
14    include state, local, private, and federal funds
15    available.
16        (5) The political subdivisions affected by the project
17    have committed local incentives with respect to the
18    project, considering local ability to assist.
19        (6) Awarding the Credit will result in an overall
20    positive fiscal impact to the State, as certified by the
21    Committee using the best available data.
22        (7) The Credit is not prohibited by Section 5-35 of
23    this Act.
24(Source: P.A. 94-793, eff. 5-19-06.)
25    (35 ILCS 10/5-50)



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1    Sec. 5-50. Contents of Agreements with Applicants. The
2Department shall enter into an Agreement with an Applicant that
3is awarded a Credit under this Act. The Agreement must include
4all of the following:
5        (1) A detailed description of the project that is the
6    subject of the Agreement, including the location and amount
7    of the investment and jobs created or retained.
8        (2) The duration of the Credit and the first taxable
9    year for which the Credit may be claimed.
10        (3) The Credit amount that will be allowed for each
11    taxable year.
12        (4) A requirement that the Taxpayer shall maintain
13    operations at the project location that shall be stated as
14    a minimum number of years not to exceed 10.
15        (5) A specific method for determining the number of New
16    Employees employed during a taxable year.
17        (6) A requirement that the Taxpayer shall annually
18    report to the Department the number of New Employees and
19    Retained Employees, the Incremental Income Tax withheld in
20    connection with the New Employees and Retained Employees,
21    and any other information the Director needs to perform the
22    Director's duties under this Act.
23        (7) A requirement that the Director is authorized to
24    verify with the appropriate State agencies the amounts
25    reported under paragraph (6), and after doing so shall
26    issue a certificate to the Taxpayer stating that the



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1    amounts have been verified.
2        (8) A requirement that the Taxpayer shall provide
3    written notification to the Director not more than 30 days
4    after the Taxpayer makes or receives a proposal that would
5    transfer the Taxpayer's State tax liability obligations to
6    a successor Taxpayer.
7        (9) A detailed description of the number of New
8    Employees to be hired, Retained Employees to be retained,
9    and the occupation and payroll of the full-time jobs to be
10    created or retained as a result of the project.
11        (10) The minimum investment the business enterprise
12    will make in capital improvements, the time period for
13    placing the property in service, and the designated
14    location in Illinois for the investment.
15        (11) A requirement that the Taxpayer shall provide
16    written notification to the Director and the Committee not
17    more than 30 days after the Taxpayer determines that the
18    minimum job creation or retention, employment payroll, or
19    investment no longer is being or will be achieved or
20    maintained as set forth in the terms and conditions of the
21    Agreement.
22        (12) A provision that, if the total number of New
23    Employees or Retained Employees falls below a specified
24    level, the allowance of Credit shall be suspended until the
25    number of New Employees and Retained Employees equals or
26    exceeds the Agreement amount.



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1        (13) A detailed description of the items for which the
2    costs incurred by the Taxpayer will be included in the
3    limitation on the Credit provided in Section 5-30.
4        (13.5) A provision that, if the Taxpayer never meets
5    either the investment or job creation and retention
6    requirements specified in the Agreement during the entire
7    5-year period beginning on the first day of the first
8    taxable year in which the Agreement is executed and ending
9    on the last day of the fifth taxable year after the
10    Agreement is executed, then the Agreement is automatically
11    terminated on the last day of the fifth taxable year after
12    the Agreement is executed and the Taxpayer is not entitled
13    to the award of any credits for any of that 5-year period.
14        (14) Any other performance conditions or contract
15    provisions as the Department determines are appropriate.
16    The Department shall post on its website the terms of each
17Agreement entered into under this Act on or after the effective
18date of this amendatory Act of the 97th General Assembly.
19(Source: P.A. 97-2, eff. 5-6-11; 97-749, eff. 7-6-12.)
20    Section 99. Effective date. This Act takes effect upon
21becoming law.