SB3459 99TH GENERAL ASSEMBLY

LRB099 24221 HLH 52021 b

99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
SB3459

Introduced 1/9/2017, by Sen. Pamela J. Althoff - Melinda Bush - Neil Anderson - James F. Clayborne, Jr. - Toi W. Hutchinson, et al.

SYNOPSIS AS INTRODUCED:

New Act
35 ILCS 5/224 new

Creates the Transforming, Helping, and Reviving Illinois' Versatile Economy (THRIVE) Job Creation Tax Credit Act. Provides that the Department of Commerce and Economic Opportunity shall award the credit if the taxpayer meets certain criteria. Contains job creation and capital investment requirements. Provides that the credit may not exceed 50% of the incremental income tax attributable to the applicant's project. Amends the Illinois Income Tax Act to make conforming changes. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Transforming, Helping, and Reviving Illinois' Versatile Economy (THRIVE) Job Creation Tax Credit Act.

Section 5. Definitions.

"Agreement" means the Agreement between a taxpayer and the Department for tax credits under this Act.

"Applicant" means a taxpayer that is operating a business located within, or that the taxpayer plans to locate within, the State and that is engaged in interstate or intrastate commerce for the purpose of manufacturing, processing, assembling, warehousing, or distributing products, conducting research and development, providing tourism services, or providing services in interstate commerce, office industries, or agricultural processing, but excluding retail, retail food, health, or professional services. "Applicant" does not include a taxpayer who closes or substantially reduces an operation at one location in the State and relocates substantially the same operation to another location in the State. This does not prohibit a taxpayer from expanding its operations at another location in the State, provided that existing operations of a similar nature located within the State are not closed or substantially reduced. This also does not prohibit a taxpayer from moving its operations from one location in the State to another location in the State for the purpose of expanding the operation, provided that the Department determines that expansion cannot reasonably be accommodated within the municipality in which the business is located, or, in the case of a business located in an incorporated area of the county, within the county in which the business is located, after conferring with the chief elected official of the municipality or county and taking into consideration any evidence offered by the municipality or county regarding the ability to accommodate expansion within the municipality or county.

"Credit" means the amount agreed to between the Department and applicant under this Act, but not to exceed 50% of the incremental income tax attributable to the applicant's project.

"Department" means the Department of Commerce and Economic Opportunity.

"Full-time employee" means an individual who is employed for consideration for at least 35 hours each week. An individual for whom a W-2 is issued by a Professional Employer Organization (PEO) is a full-time employee if employed in the service of the applicant for consideration for at least 35 hours each week.

"Incremental income tax" means the total amount withheld during the taxable year from the compensation of new employees under Article 7 of the Illinois Income Tax Act arising from employment at a project that is the subject of an agreement.

"New employee" means a full-time employee first employed by a taxpayer in the project that is the subject of an agreement and who is hired after the taxpayer enters into the tax credit agreement. The term "new employee" does not include:

(1) an employee of the taxpayer who performs a job that was previously performed by another employee, if that job existed for at least 6 months before the employee was hired by the taxpayer;

(2) an employee of the taxpayer who was previously employed in Illinois by a related member of the taxpayer and whose employment was shifted to the taxpayer after the taxpayer entered into the agreement; or

(3) a child, grandchild, parent, or spouse, other than a spouse who is legally separated from the individual, of any individual who has a direct or an indirect ownership interest of at least 5% in the profits, capital, or value of the taxpayer.

Notwithstanding paragraph (1) above, an employee may be considered a new employee under the agreement if the employee performs a job that was previously performed by an employee who was:

(1) treated under the agreement as a new employee; and

(2) promoted by the taxpayer to another job.

An employee hired prior to the date of the Agreement who otherwise qualifies as a new employee may be considered a new employee if:

(1) the applicant is in receipt of a letter from the Department stating an intent to enter into a credit agreement;

(2) that letter is issued by the Department not later than 15 days after the effective date of this Act; and

(3) the employee was hired after the date the letter was issued.

"Noncompliance date" means, in the case of a taxpayer that is not complying with the requirements of the agreement or the provisions of this Act, the day following the last date upon which the taxpayer was in compliance with the requirements of the agreement and the provisions of this Act, as determined by the Director.

"Professional Employer Organization" or "PEO" means an employee leasing company, as defined in Section 206.1(A)(2) of the Illinois Unemployment Insurance Act.

"Related member" means a person that, with respect to the taxpayer during any portion of the taxable year, is any one of the following:

(1) an individual stockholder, if the stockholder and the members of the stockholder's family (as defined in Section 318 of the Internal Revenue Code) own directly, indirectly, beneficially, or constructively, in the aggregate, at least 50% of the value of the taxpayer's outstanding stock;

(2) a partnership, estate, or trust and any partner or beneficiary, if the partnership, estate, or trust, and its partners or beneficiaries own directly, indirectly, beneficially, or constructively, in the aggregate, at least 50% of the profits, capital, stock, or value of the taxpayer;

(3) a corporation, and any party related to the corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under the attribution rules of Section 318 of the Internal Revenue Code, if the taxpayer owns directly, indirectly, beneficially, or constructively at least 50% of the value of the corporation's outstanding stock;

(4) a corporation and any party related to that corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under the attribution rules of Section 318 of the Internal Revenue Code, if the corporation and all such related parties own in the aggregate at least 50% of the profits, capital, stock, or value of the taxpayer; and

(5) a person to or from whom there is attribution of stock ownership in accordance with Section 1563(e) of the Internal Revenue Code, except, for purposes of determining whether a person is a related member under this paragraph, 20% shall be substituted for 5% wherever 5% appears in Section 1563(e) of the Internal Revenue Code.

"Taxpayer" means an individual, corporation, partnership, or other entity that has any Illinois income tax liability.

Section 10. Powers of the Department. The Department, in addition to those powers granted under the Civil Administrative Code of Illinois, is granted and shall have all the powers necessary or convenient to carry out and effectuate the purposes and provisions of this Act, including, but not limited to, power and authority to:

(1) Promulgate procedures or regulations deemed necessary and appropriate for the administration of the programs; establish forms for applications, notifications, contracts, or any other agreements; and accept applications at any time during the year.

(2) Provide and assist taxpayers pursuant to the provisions of this Act, and cooperate with taxpayers that are parties to agreements to promote, foster, and support economic development, capital investment, and job creation within the State.

(3) Enter into agreements and memoranda of understanding for participation of and engage in cooperation with agencies of the federal government, units of local government, universities, research foundations or institutions, regional economic development corporations, or other organizations for the purposes of this Act.

(4) Gather information and conduct inquiries, in the manner and by the methods as it deems desirable, including without limitation, gathering information with respect to applicants for the purpose of making any designations or certifications necessary or desirable in the furtherance of the purposes of this Act.

(5) Establish, negotiate, and effectuate any term, agreement or other document with any person, necessary or appropriate to accomplish the purposes of this Act; and to consent, subject to the provisions of any agreement with another party, to the modification or restructuring of any agreement to which the Department is a party.

(6) Fix, determine, charge, and collect any premiums, fees, charges, costs, and expenses from Applicants, including, without limitation, any application fees, commitment fees, program fees, financing charges, or publication fees as deemed appropriate to pay expenses necessary or incident to the administration, staffing, or operation in connection with the Department's activities under this Act, or for preparation, implementation, and enforcement of the terms of the agreement, or for consultation, advisory and legal fees, and other costs; however, all fees and expenses incident thereto shall be the responsibility of the applicant.

(7) Provide for sufficient personnel to permit administration, staffing, operation, and related support required to adequately discharge its duties and responsibilities described in this Act from funds made available through charges to applicants or from funds as may be appropriated by the General Assembly for the administration of this Act.

(8) Require applicants, upon written request, to issue any necessary authorization to the appropriate federal, State, or local authority for the release of information concerning a project being considered under the provisions of this Act, with the information requested to include, but not be limited to, financial reports, returns, or records relating to the taxpayer or its project.

(9) Require that a taxpayer shall at all times keep proper books of record and account in accordance with generally accepted accounting principles consistently applied, with the books, records, or papers related to the agreement in the custody or control of the taxpayer open for reasonable Department inspection and audits, and including, without limitation, the making of copies of the books, records, or papers, and the inspection or appraisal of any of the taxpayer or project assets.

(10) Take whatever actions are necessary or appropriate to protect the State's interest in the event of bankruptcy, default, foreclosure, or noncompliance with the terms and conditions of financial assistance or participation required under this Act, including the power to sell, dispose, lease, or rent, upon terms and conditions determined by the Director to be appropriate, real or personal property that the Department may receive as a result of these actions.

Section 15. Tax credit awards. Subject to the conditions set forth in this Act, a taxpayer is entitled to a credit against the taxes imposed pursuant to subsections (a) and (b) of Section 201 of the Illinois Income Tax Act if the Taxpayer is awarded a Credit by the Department under this Act for that taxable year.

The Department shall make credit awards under this Act to foster job creation in Illinois.

A person that proposes a project to create new jobs in Illinois must enter into an agreement with the Department for the credit under this Act.

The credit shall be claimed for the taxable years specified in the agreement.

The credit shall not exceed 50% of the incremental income tax attributable to the project that is the subject of the agreement.

Nothing herein shall prohibit a tax credit award to an applicant that uses a PEO if all other award criteria are satisfied.

Credits awarded under this Act are transferable through the Department at the discretion of the Director within 2 years after the credit is awarded. Credits may be transferred only to a single taxpayer or to common entities within a single ownership structure and may not be transferred more than once. The Department shall maintain an online information portal where entities anticipating the purchase or sale of credits shall register their intent to do so. The Department may retain up to 5% of the transferred credit amount, and that amount shall be invested consistent with the clawback provisions set forth in Section 43 of this Act.

For partners, shareholders of Subchapter S corporations, and owners of limited liability companies, if the liability company is treated as a partnership for purposes of federal and State income taxation, the credit under this Act shall be determined in accordance with the determination of income and distributive share of income under Sections 702 and 704 and Subchapter S of the Internal Revenue Code or as allowed under the agreement with the Department.

An applicant may not receive more than one credit award for the same location.

Section 20. Application for a project to create new jobs.

(a) Any taxpayer proposing a project located or planned to be located in Illinois may request consideration for designation of its project, by formal application to the Department in which the applicant states its intent to meet the criteria set forth in this Section.

(b) The applicant's project must: (1) employ a number of new employees equal to the lesser of (A) 10% of the number of employees employed by the applicant on the date the application is filed with the Department or (B) 50 new employees; and (2) involve a capital investment of at least $2,500,000 at a project location in the State, except that, if the applicant employs fewer than 100 employees on the date the application is filed with the Department, then the applicant's capital investment may be less than $500,000 if the capital investment is approved by the Department at the time of the application.

(c) The Department may enter into an agreement with the applicant if the application is accepted.

Section 25. Relocation of jobs within Illinois; baseline employment. A taxpayer is not entitled to claim the credit provided by this Act with respect to any jobs that the taxpayer relocates from one site in Illinois to another site in Illinois. In addition, a taxpayer is not entitled to claim a credit under this Act for a taxable year if the average number of full-time employees employed by the taxpayer in this State during that taxable year is less than the average number of full-time employees employed by the taxpayer in this State in the taxable year prior to taxable year in which the credit was first awarded. If the project is a qualifying project certified under the Corporate Headquarters Relocation Act, however, then the taxpayer is not subject to the requirements of this Section but is nevertheless considered an applicant for purposes of this Act. Moreover, any full-time employee of an eligible business relocated to Illinois in connection with that qualifying project is deemed to be a new employee for purposes of this Act. Determinations under this Section shall be made by the Department and at the Department's discretion.

Section 30. Determination of amount of the credit. In determining the amount of the credit that should be awarded, the Department may take into consideration, the following factors:

(1) The number and location of jobs created in relation to the economy of the county where the projected investment is to occur.

(2) The potential impact on the economy of Illinois.

(3) The magnitude of the cost differential between Illinois and the competing state.

(4) The incremental payroll attributable to the project.

(5) The capital investment attributable to the project.

(6) The amount of the average wage and benefits paid by the applicant in relation to the wage and benefits of the area of the project.

(7) The costs to Illinois and the affected political subdivisions with respect to the project.

(8) The financial assistance that is otherwise provided by Illinois and the affected political subdivisions.

Section 35. Duration of the credit. The duration of the credit may not exceed 10 taxable years, except that, if the project is located in a census tract with an unemployment rate that is greater than 150% of the State unemployment rate at the time the application is filed with the Department, then the duration of the credit may not exceed 15 taxable years. The credit may not exceed the amount of taxes imposed pursuant to subsections (a) and (b) of Section 201 of the Illinois Income Tax Act. Any credit that is unused in the year the credit is computed may be carried forward and applied to the tax liability of the 5 taxable years following the excess credit year. The credit shall be applied to the earliest year for which there is a tax liability. If there are credits from more than one tax year that are available to offset a liability, the earlier credit shall be applied first.

Section 40. Contents of agreements with applicants. The Department shall enter into an agreement with an applicant that is awarded a credit under this Act. The agreement must include all of the following:

(1) A detailed description of the project that is the subject of the agreement, including the location and amount of the investment and jobs created.

(2) The duration of the credit and the first taxable year for which the credit may be claimed.

(3) The credit amount that will be allowed for each taxable year.

(4) A requirement that the taxpayer shall maintain operations at the project location that shall be stated as a minimum number of years not to exceed 10.

(5) A requirement that the Department is authorized to verify with the appropriate State agencies the amounts reported under paragraph (5), and after doing so shall issue a certificate to the taxpayer stating that the amounts have been verified.

(6) A requirement that the taxpayer shall provide written notification to the Department not more than 30 days after the taxpayer makes or receives a proposal that would transfer the taxpayer's State tax liability obligations to a successor taxpayer.

(7) A detailed description of the number of new employees to be hired, and the occupation and payroll of the full-time jobs to be created as a result of the project.

(8) The minimum investment the business enterprise will make in capital improvements, the time period for placing the property in service, and the designated location in Illinois for the investment.

(9) A requirement that the taxpayer shall provide written notification to the Department not more than 30 days after the taxpayer determines that the minimum job creation, employment payroll, or investment no longer is being or will be achieved or maintained as set forth in the terms and conditions of the agreement.

(10) A provision specifying that, if the taxpayer ceases principal operations with the intent to shut down the project in the State permanently, then the entire credit amount awarded to the taxpayer prior to the date the taxpayer ceases principal operations shall be returned to the Department and shall be reallocated to the local workforce investment area in which the project was located as provided in Section 43.

(11) Any other performance conditions or contract provisions as the Department determines are appropriate.

Section 43. Taxpayer ceases principal operations. If the taxpayer ceases principal operations at the project location during the term of the agreement with the intent to shut down the project in the State permanently, then the entire credit amount awarded to the taxpayer prior to the date the taxpayer ceases principal operations shall be returned to the Department and shall be reallocated to the local workforce investment area in which the project was located for the purposes of workforce development, expanded opportunities for unemployed persons, and expanded opportunities for women and minorities in the workforce.

Section 45. Certificate of verification; submission to the Department of Revenue. A taxpayer claiming a credit under this Act shall submit to the Department of Revenue a copy of the certificate of verification under this Act for the taxable year. However, failure to submit a copy of the certificate with the taxpayer's tax return shall not invalidate a claim for a credit.

For a taxpayer to be eligible for a certificate of verification, the taxpayer shall provide proof as required by the Department prior to the end of each calendar year, including, but not limited to, attestation by the Taxpayer that the project continues to meet the terms of the agreement.

Section 50. Noncompliance; notice; assessment. If the Department determines that a taxpayer who has received a credit under this Act is not complying with the requirements of the agreement or all of the provisions of this Act, the Department shall provide notice to the taxpayer of the alleged noncompliance, and allow the taxpayer a hearing under the provisions of the Illinois Administrative Procedure Act. If, after such notice and any hearing, the Department determines that a noncompliance exists, the Department shall issue to the Department of Revenue notice to that effect, stating the noncompliance date.

Section 55. Rules. The Department may adopt rules under the Illinois Administrative Procedure Act necessary to implement this Act.

Section 800. The Illinois Income Tax Act is amended by adding Section 224 as follows:

(35 ILCS 5/224 new)

Sec. 224. Transforming, Helping, and Reviving Illinois' Versatile Economy (THRIVE) Job Creation Tax Credit. For taxable years beginning on on after January 1, 2017, a taxpayer who has been granted a credit under the Transforming, Helping, and Reviving Illinois' Versatile Economy (THRIVE) Job Creation Tax Credit Act is entitled to a credit against the taxes imposed under subsections (a) and (b) of Section 201 as provided in that Act.

Section 999. Effective date. This Act takes effect upon becoming law.