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90_HB1627eng
New Act
35 ILCS 5/211 new
Creates the Business Use Incentives for Large-Scale
Development Act. Provides that an eligible industry that
invests a minimum of $15,000,000, or $10,000,000 for an
office industry, and creates at least 100 new jobs, or at
least 500 jobs for an office industry, in the State may apply
for incentives, including tax credits in an amount not to
exceed 5% of the gross wages paid to the new employees of the
industry, as part of an economic development project through
the Department of Commerce and Community Affairs. Authorizes
the Department to enter into financing agreements with
eligible industries it selects to receive the incentives.
Provides that the Department shall select eligible industries
and award credits based on the positive economic benefits
they will bring to the communities in which they will be
located and the State. Authorizes the Illinois Development
Finance Authority, in cooperation with the Department, to
issue up to $35,000,000 in bonds to finance the economic
development projects. Authorizes the Department to work with
the Department of Revenue in determining the credit received
by the eligible industry. Requires an annual evaluation of
the economic development project. Amends the Illinois Income
Tax Act to create the Business Use Incentives for Large-Scale
Development tax credit. Exempts the credit from the sunset
provisions.
LRB9003972KDks
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1 AN ACT in relation to economic development.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 1. Short title. This Act may be cited as the
5 Economic Development for a Growing Economy Tax Credit Act.
6 Section 5. Definitions. As used in this Act:
7 "Applicant" means a taxpayer that is a business located
8 or which plans to locate within the State of Illinois that is
9 engaged in interstate or intrastate commerce for the purpose
10 of manufacturing, processing, or assembling products,
11 conducting research and development, providing tourism
12 services, or providing services in interstate commerce,
13 office industries, or agricultural processing, but excluding
14 retail, retail food, health, or professional services.
15 "Applicant" does not include a business that closes or
16 substantially reduces its operation at one location in the
17 State and relocates substantially the same operation to
18 another location in the State. This does not prohibit a
19 business from expanding its operations at another location in
20 the State provided that existing operations of a similar
21 nature located within the State are not closed or
22 substantially reduced. This also does not prohibit a business
23 from moving its operations from one location in the State to
24 another location in the State for the purpose of expanding
25 the operation provided that the Department determines that
26 expansion cannot reasonably be accommodated within the
27 municipality in which the business is located, or in the case
28 of a business located in an incorporated area of the county,
29 within the county in which the business is located, after
30 conferring with the chief elected official of the
31 municipality or county and taking into consideration any
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1 evidence offered by the municipality or county regarding the
2 ability to accommodate expansion within the municipality or
3 county.
4 "Department" means the Department of Commerce and
5 Community Affairs.
6 "Credit amount" means the amount agreed to between the
7 Department and applicant under this Act, but not to exceed
8 the new employees' income tax withholdings attributable to
9 the applicant's project.
10 "Director" means the Director of Commerce and Community
11 Affairs.
12 "Full-time employee" means an individual who is employed
13 for consideration for at least 35 hours each week or who
14 renders any other standard of service generally accepted by
15 custom or specified by contract as full-time employment.
16 "New employees' income tax withholdings" means the total
17 amount withheld under Section 701 of the Illinois Income Tax
18 Act by the taxpayer during the taxable year from the
19 compensation of new employees.
20 "New employee" means:
21 (a) A full-time employee first employed by a taxpayer in
22 the project that is the subject of a tax credit agreement and
23 who is employed after the taxpayer enters into the tax credit
24 agreement.
25 (b) The term "new employee" does not include:
26 (1) an employee of the taxpayer who performs a job
27 that was previously performed by another employee, if
28 that job existed for at least 6 months before hiring the
29 new employee;
30 (2) an employee of the taxpayer who was previously
31 employed in Illinois by a related member of the taxpayer
32 and whose employment was shifted to the taxpayer after
33 the taxpayer entered into the tax credit agreement; or
34 (3) a child, grandchild, parent, or spouse, other
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1 than a spouse who is legally separated from the
2 individual, of any individual who is an employee of the
3 taxpayer and who has a direct or an indirect ownership
4 interest of at least 5% in the profits, capital, or value
5 of the taxpayer (an ownership interest shall be
6 determined in accordance with Section 1563 of the
7 Internal Revenue Code and regulations prescribed under
8 that Section).
9 (c) Notwithstanding paragraph (1) of subsection (b), if
10 a new employee performs a job that was previously performed
11 by an employee who was:
12 (1) treated under the agreement as a new employee,
13 and
14 (2) promoted by the taxpayer to another job
15 the employee may be considered a new employee under the
16 agreement.
17 (d) Notwithstanding subsection (a), the Department may
18 credit awards to an applicant that met the conditions of this
19 Act at the time of the applicant's location or expansion
20 decision, 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; and
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.
27 "Pass through entity" means an entity that is exempt from
28 the tax under subsection (b) or (c) of Section 205 of the
29 Illinois Income Tax Act.
30 "Related member" means a person that, with respect to the
31 taxpayer during all or any portion of the taxable year, is
32 any one of the following:
33 (1) An individual stockholder, or a member of the
34 stockholder's family enumerated in Section 318 of the
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1 Internal Revenue Code, if the stockholder and the member
2 of the stockholder's family own directly, indirectly,
3 beneficially, or constructively, in the aggregate, at
4 least 50% of the value of the taxpayer's outstanding
5 stock.
6 (2) A stockholder, or a stockholder's partnership,
7 estate, trust, or corporation, if the stockholder and the
8 stockholder's partnership, estate, trust, or corporation
9 owns directly, indirectly, beneficially, or
10 constructively, in the aggregate, at least 50% of the
11 value of the taxpayer's outstanding stock.
12 (3) A corporation, or a party related to the
13 corporation in a manner that would require an attribution
14 of stock from the corporation to the party or from the
15 party to the corporation under the attribution rules of
16 Section 318 of the Internal Revenue Code, if the taxpayer
17 owns directly, indirectly, beneficially, or
18 constructively at least 50% of the value of the
19 corporation's outstanding stock.
20 (4) A component member (as defined in Section
21 1563(b) of the Internal Revenue Code).
22 (5) A person to or from whom there is attribution
23 of stock ownership in accordance with Section 1563(e) of
24 the Internal Revenue Code except, for purposes of
25 determining whether a person is a related member under
26 this paragraph, 20% shall be substituted for 5% wherever
27 5% appears in Section 1563(e) of the Internal Revenue
28 Code.
29 "State tax liability" means a taxpayer's total tax
30 liability that is incurred under the Illinois Income Tax Act.
31 "Taxpayer" means a person, corporation, partnership, or
32 other entity that has any State tax liability.
33 Section 10. Tax credit. Subject to the conditions set
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1 forth in this Act, a taxpayer is entitled to a credit against
2 any State tax liability that may be imposed on the taxpayer
3 for a taxable year after December 31, 1996, if the taxpayer
4 is awarded a credit by the Department under this Act for that
5 taxable year.
6 Section 15. Credit awards.
7 (a) The Department may make credit awards under this Act
8 to foster job creation in Illinois.
9 (b) The credit shall be claimed for the taxable years
10 specified in the taxpayer's tax credit agreement.
11 Section 20. Proposal of project to create new jobs;
12 application. A person that proposes a project to create new
13 jobs in Illinois may apply to the Department to enter into an
14 agreement for a tax credit under this Act. The Director shall
15 prescribe the form of the application.
16 Section 25. Agreement with applicant for credit. After
17 receipt of an application, the Department may enter into an
18 agreement with the applicant for a credit under this Act if
19 the Department determines that all of the following
20 conditions exist:
21 (1) The applicant's project will create a minimum of 100
22 jobs for full-time employees that were not jobs previously
23 performed by employees of the applicant in Illinois.
24 (2) The applicant's project is economically sound and
25 will benefit the people of Illinois by increasing
26 opportunities for employment and strengthening the economy of
27 Illinois.
28 (3) There is at least one other state that the
29 applicant verifies is being considered for the project.
30 (4) A significant disparity is identified, using best
31 available data, in the projected costs for the applicant's
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1 project compared to the costs in the competing state,
2 including the impact of the competing state's incentive
3 programs. The competing state's incentive programs shall
4 include state, local, private, and federal funds available.
5 (5) The political subdivisions affected by the project
6 have committed local incentives with respect to the project.
7 (6) Receiving the tax credit is a major factor in the
8 applicant's decision to go forward with the project and not
9 receiving the tax credit will result in the applicant not
10 creating new jobs in Illinois.
11 (7) Awarding the tax credit will result in an overall
12 positive fiscal impact to the State, as certified by the
13 Bureau of the Budget using the best available data.
14 (8) The credit is not prohibited by Section 35 of this
15 Act.
16 Section 30. Use of the credits. An applicant must use
17 the credit awards provided under this Act for one or more of
18 the following purposes:
19 (1) capital investment, including, but not limited to,
20 equipment, buildings, or land;
21 (2) infrastructure development;
22 (3) debt service;
23 (4) research and development;
24 (5) job training and education;
25 (6) lease costs; or
26 (7) relocation costs.
27 Section 35. Relocation of jobs in Illinois. A person is
28 not entitled to claim the credit provided by this Act for any
29 jobs that the person relocates from one site in Illinois to
30 another site in Illinois. Determinations under this Section
31 shall be made by the Department.
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1 Section 40. Determination of credit amount. In
2 determining the credit amount that should be awarded, the
3 Department shall take into consideration the following
4 factors:
5 (1) The economy of the county where the projected
6 investment is to occur.
7 (2) The potential impact on the economy of Illinois.
8 (3) The magnitude of the cost differential between
9 Illinois and the competing state.
10 (4) The incremental payroll attributable to the project.
11 (5) The capital investment attributable to the project.
12 (6) The amount of the average wage paid by the
13 applicant.
14 (7) The costs to Illinois and the affected political
15 subdivisions with respect to the project.
16 (8) The financial assistance that is otherwise provided
17 by Illinois and the affected political subdivisions.
18 Section 45. Amount and duration of tax credit. The
19 Department shall determine the amount and duration of a tax
20 credit awarded under this Act. The duration of the credit may
21 not exceed 15 taxable years. The credit may be stated as a
22 percentage of the new employees' income tax withholdings
23 attributable to the applicant's project and may include a
24 fixed dollar limitation. The credit amount may not exceed the
25 new employees' income tax withholdings. However, the credit
26 amount claimed for a taxable year may exceed the taxpayer's
27 State tax liability for the taxable year, in which case the
28 excess shall be refunded to the taxpayer.
29 Section 50. Contents of agreement with applicant. The
30 Department shall enter into an agreement with an applicant
31 that is awarded a credit under this Act. The agreement must
32 include all of the following:
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1 (1) A detailed description of the project that is the
2 subject of the agreement.
3 (2) The duration of the tax credit and the first taxable
4 year for which the credit may be claimed.
5 (3) The credit amount that will be allowed for each
6 taxable year.
7 (4) A requirement that the taxpayer shall maintain
8 operations at the project location for at least the number of
9 years of the term of the tax credit.
10 (5) A specific method for determining the number of new
11 employees employed during a taxable year who are performing
12 jobs not previously performed by an employee.
13 (6) A requirement that the taxpayer shall annually
14 report to the Department the number of new employees who are
15 performing jobs not previously performed by an employee, the
16 new income tax revenue withheld in connection with the new
17 employees, and any other information the Director needs to
18 perform the Director's duties under this Act.
19 (7) A requirement that the Director is authorized to
20 verify with the appropriate State agencies the amounts
21 reported under paragraph (6), and after doing so shall issue
22 a certificate to the taxpayer stating that the amounts have
23 been verified.
24 (8) A requirement that the taxpayer shall provide
25 written notification to the Director not more than 30 days
26 after the taxpayer makes or receives a proposal that would
27 transfer the taxpayer's State tax liability obligations to a
28 successor taxpayer.
29 (9) Any other performance conditions that the Director
30 determines are appropriate.
31 Section 55. Certificate of verification; submission to
32 the Department of Revenue. A taxpayer claiming a credit
33 under this Act shall submit to the Department of Revenue a
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1 copy of the Director's certificate of verification under this
2 Act for the taxable year. However, failure to submit a copy
3 of the certificate does not invalidate a claim for a credit.
4 Section 60. Pass through entity with no State tax
5 liability.
6 (a) If a pass through entity does not have State income
7 tax liability against which the tax credit may be applied, a
8 shareholder or partner of the pass through entity is entitled
9 to a tax credit equal to:
10 (1) the tax credit determined for the pass through
11 entity for the taxable year; multiplied by
12 (2) the percentage of the pass through entity's
13 distributive income to which the shareholder or partner
14 is entitled.
15 (b) The credit provided under subsection (a) is in
16 addition to a tax credit to which a shareholder or partner of
17 a pass through entity is otherwise entitled under a separate
18 agreement under this Act. A pass through entity and a
19 shareholder or partner of the pass through entity may not
20 claim more than one credit under the same agreement.
21 Section 65. Noncompliance; notice; assessment. If the
22 Director determines that a taxpayer who has received a credit
23 under this Act is not complying with the requirements of the
24 tax credit agreement or all of the provisions of this Act,
25 the Director shall provide notice to the taxpayer of the
26 alleged noncompliance, and allow the taxpayer a reasonable
27 opportunity to provide an explanation. If, after affording
28 the taxpayer an opportunity to provide an explanation, the
29 Director still determines that a noncompliance exists, the
30 Director shall instruct the Department of Revenue to issue a
31 notice of deficiency under Section 904 of the Illinois Income
32 Tax Act to the taxpayer for an amount not greater than that
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1 stated in the Director's notice. The amount of the
2 assessment may not exceed the amount of any previously
3 allowed credits under this Act.
4 Section 70. Annual report. On or before March 31 each
5 year, the Director shall submit a report to the Department on
6 the tax credit program under this Act to the Governor and the
7 General Assembly. The report shall include information on the
8 number of agreements that were entered into under this Act
9 during the preceding calendar year, a description of the
10 project that is the subject of each agreement, an update on
11 the status of projects under agreements entered into before
12 the preceding calendar year, and the sum of the credits
13 awarded under this Act. A copy of the report shall be
14 delivered to the Governor and to each member of the General
15 Assembly.
16 Section 75. Evaluation of tax credit program. On a
17 biennial basis, the Department shall evaluate the tax credit
18 program. The evaluation shall include an assessment of the
19 effectiveness of the program in creating new jobs in Illinois
20 and of the revenue impact of the program, and may include a
21 review of the practices and experiences of other states with
22 similar programs. The Director shall submit a report on the
23 evaluation to the Governor and the General Assembly after
24 June 30 and before November 1 in each odd-numbered year.
25 Section 80. Adoption of rules. The Department may
26 adopt rules necessary to implement this Act. The rules may
27 provide for recipients of tax credits under this Act to be
28 charged fees to cover administrative costs of the tax credit
29 program. Fees collected shall be deposited into the Economic
30 Development for a Growing Economy Fund.
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1 Section 85. The Economic Development for a Growing
2 Economy Fund.
3 (a) The Economic Development for a Growing Economy Fund
4 is established to be used exclusively for the purposes of
5 this Act, including paying for the costs of administering
6 this Act. The Fund shall be administered by the Department.
7 (b) The Fund consists of collected fees, appropriations
8 from the General Assembly, and gifts and grants to the Fund.
9 (c) The State Treasurer shall invest the money in the
10 Fund not currently needed to meet the obligations of the Fund
11 in the same manner as other public funds may be invested.
12 Interest that accrues from these investments shall be
13 deposited into the Fund.
14 (d) The money in the Fund at the end of a State fiscal
15 year remains in the Fund to be used exclusively for the
16 purposes of this Act. Expenditures from the Fund are subject
17 to appropriation by the General Assembly.
18 Section 100. The State Finance Act is amended by adding
19 Section 5.449 as follows:
20 (30 ILCS 105/5.449 new)
21 Sec. 5.449. The Economic Development for a Growing
22 Economy Fund.
23 Section 105. The Illinois Income Tax Act is amended by
24 adding Section 211 as follows:
25 (35 ILCS 5/211 new)
26 Sec. 211. Economic Development for a Growing Economy Tax
27 Credit. For tax years beginning on or after January 1, 1997,
28 a taxpayer participating in an economic development project
29 under the Economic Development for a Growing Economy Act is
30 entitled to a tax credit against the taxes imposed under this
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1 Act in an amount to be determined in the agreement required
2 under the Economic Development for Growing Economy Act. The
3 Department, in cooperation with the Department of Commerce
4 and Community Affairs, shall prescribe rules to enforce and
5 administer the provisions of this Section. This Section is
6 exempt from the provisions of Section 250 of this Act.