State of Illinois
92nd General Assembly
Legislation

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92_HB1010

 
                                               LRB9205198NTsb

 1        AN ACT relating to education.

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

 4        Section  5.   The  Illinois  Income Tax Act is amended by
 5    changing 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
 9    imposed  on  every  individual, corporation, trust and estate
10    for each taxable year ending  after  July  31,  1969  on  the
11    privilege  of earning or receiving income in or as a resident
12    of this State. Such tax shall be in  addition  to  all  other
13    occupation or privilege taxes imposed by this State or by any
14    municipal corporation or political subdivision thereof.
15        (b)  Rates.  The  tax  imposed  by subsection (a) of this
16    Section shall be determined as follows, except as adjusted by
17    subsection (d-1):
18             (1)  In the case of an individual, trust or  estate,
19        for taxable years ending prior to July 1, 1989, an amount
20        equal  to  2  1/2%  of  the taxpayer's net income for the
21        taxable year.
22             (2)  In the case of an individual, trust or  estate,
23        for  taxable  years  beginning  prior to July 1, 1989 and
24        ending after June 30, 1989, an amount equal to the sum of
25        (i) 2 1/2% of the taxpayer's net income  for  the  period
26        prior to July 1, 1989, as calculated under Section 202.3,
27        and  (ii)  3% of the taxpayer's net income for the period
28        after June 30, 1989, as calculated under Section 202.3.
29             (3)  In the case of an individual, trust or  estate,
30        for  taxable  years  beginning  after  June  30, 1989, an
31        amount equal to 3% of the taxpayer's net income  for  the
 
                            -2-                LRB9205198NTsb
 1        taxable year.
 2             (4)  (Blank).
 3             (5)  (Blank).
 4             (6)  In the case of a corporation, for taxable years
 5        ending  prior  to  July 1, 1989, an amount equal to 4% of
 6        the taxpayer's net income for the taxable year.
 7             (7)  In the case of a corporation, for taxable years
 8        beginning prior to July 1, 1989 and ending after June 30,
 9        1989, an amount equal  to  the  sum  of  (i)  4%  of  the
10        taxpayer's  net  income  for  the period prior to July 1,
11        1989, as calculated under Section 202.3, and (ii) 4.8% of
12        the taxpayer's net income for the period after  June  30,
13        1989, as calculated under Section 202.3.
14             (8)  In the case of a corporation, for taxable years
15        beginning after June 30, 1989, an amount equal to 4.8% of
16        the taxpayer's net income for the taxable year.
17        (c)  Beginning   on  July  1,  1979  and  thereafter,  in
18    addition to such income tax, there is also hereby imposed the
19    Personal Property Tax Replacement Income Tax measured by  net
20    income   on   every   corporation   (including  Subchapter  S
21    corporations), partnership and trust, for each  taxable  year
22    ending  after  June  30, 1979.  Such taxes are imposed on the
23    privilege of earning or receiving income in or as a  resident
24    of  this State.  The Personal Property Tax Replacement Income
25    Tax shall be  in  addition  to  the  income  tax  imposed  by
26    subsections  (a)  and  (b) of this Section and in addition to
27    all other occupation or privilege taxes imposed by this State
28    or by any  municipal  corporation  or  political  subdivision
29    thereof.
30        (d)  Additional  Personal Property Tax Replacement Income
31    Tax Rates.  The personal property tax replacement income  tax
32    imposed by this subsection and subsection (c) of this Section
33    in  the  case  of  a  corporation,  other than a Subchapter S
34    corporation and except as adjusted by subsection (d-1), shall
 
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 1    be an additional amount equal to 2.85% of such taxpayer's net
 2    income for the taxable year, except that beginning on January
 3    1, 1981, and thereafter, the rate of 2.85% specified in  this
 4    subsection  shall  be  reduced  to 2.5%, and in the case of a
 5    partnership, trust or a Subchapter S corporation shall be  an
 6    additional amount equal to 1.5% of such taxpayer's net income
 7    for the taxable year.
 8        (d-1)  Rate  reduction  for certain foreign insurers.  In
 9    the case of a foreign insurer, as defined by Section 35A-5 of
10    the Illinois  Insurance  Code,  whose  state  or  country  of
11    domicile   imposes   on  insurers  domiciled  in  Illinois  a
12    retaliatory tax (excluding any insurer  whose  premiums  from
13    reinsurance  assumed  are  50% or more of its total insurance
14    premiums as determined under paragraph (2) of subsection  (b)
15    of   Section   304,   except   that   for  purposes  of  this
16    determination  premiums  from  reinsurance  do  not   include
17    premiums   from  inter-affiliate  reinsurance  arrangements),
18    beginning with taxable years ending on or after December  31,
19    1999,  the sum of the rates of tax imposed by subsections (b)
20    and (d) shall be reduced (but not increased) to the  rate  at
21    which  the total amount of tax imposed under this Act, net of
22    all credits allowed under this Act, shall equal (i) the total
23    amount of tax that would be imposed on the foreign  insurer's
24    net income allocable to Illinois for the taxable year by such
25    foreign  insurer's  state  or country of domicile if that net
26    income were subject to all income taxes and taxes measured by
27    net income imposed by such foreign insurer's state or country
28    of domicile, net of all credits allowed or  (ii)  a  rate  of
29    zero  if no such tax is imposed on such income by the foreign
30    insurer's  state  of  domicile.  For  the  purposes  of  this
31    subsection  (d-1),  an  inter-affiliate  includes  a   mutual
32    insurer under common management.
33             (1)  For  the  purposes  of  subsection (d-1), in no
34        event shall the sum  of  the  rates  of  tax  imposed  by
 
                            -4-                LRB9205198NTsb
 1        subsections  (b)  and  (d)  be  reduced below the rate at
 2        which the sum of:
 3                  (A)  the total amount of tax  imposed  on  such
 4             foreign  insurer  under this Act for a taxable year,
 5             net of all credits allowed under this Act, plus
 6                  (B)  the privilege tax imposed by  Section  409
 7             of  the  Illinois Insurance Code, the fire insurance
 8             company tax  imposed  by  Section  12  of  the  Fire
 9             Investigation  Act,  and  the  fire department taxes
10             imposed  under  Section  11-10-1  of  the   Illinois
11             Municipal Code,
12        equals  1.25% of the net taxable premiums written for the
13        taxable year, as described by subsection (1)  of  Section
14        409  of the Illinois Insurance Code.  This paragraph will
15        in no event increase the rates imposed under  subsections
16        (b) and (d).
17             (2)  Any  reduction  in  the rates of tax imposed by
18        this subsection shall be applied first against the  rates
19        imposed  by subsection (b) and only after the tax imposed
20        by subsection (a) net of all credits allowed  under  this
21        Section  other  than  the credit allowed under subsection
22        (i) has been reduced to zero, against the  rates  imposed
23        by subsection (d).
24        This  subsection  (d-1)  is exempt from the provisions of
25    Section 250.
26        (e)  Investment credit.  A taxpayer shall  be  allowed  a
27    credit  against  the Personal Property Tax Replacement Income
28    Tax for investment in qualified property.
29             (1)  A taxpayer shall be allowed a credit  equal  to
30        .5%  of the basis of qualified property placed in service
31        during the taxable year, provided such property is placed
32        in service on or after July  1,  1984.   There  shall  be
33        allowed an additional credit equal to .5% of the basis of
34        qualified  property  placed in service during the taxable
 
                            -5-                LRB9205198NTsb
 1        year, provided such property is placed in service  on  or
 2        after  July  1,  1986, and the taxpayer's base employment
 3        within Illinois has increased by  1%  or  more  over  the
 4        preceding year as determined by the taxpayer's employment
 5        records  filed with the Illinois Department of Employment
 6        Security.  Taxpayers who are new  to  Illinois  shall  be
 7        deemed  to  have met the 1% growth in base employment for
 8        the first year in which they file employment records with
 9        the Illinois  Department  of  Employment  Security.   The
10        provisions  added  to  this Section by Public Act 85-1200
11        (and restored by Public Act 87-895) shall be construed as
12        declaratory of existing law and not as a  new  enactment.
13        If,  in  any year, the increase in base employment within
14        Illinois over the preceding year is  less  than  1%,  the
15        additional  credit  shall  be  limited to that percentage
16        times a fraction, the numerator of which is .5%  and  the
17        denominator  of  which  is  1%, but shall not exceed .5%.
18        The investment credit shall not be allowed to the  extent
19        that  it  would  reduce a taxpayer's liability in any tax
20        year  below  zero,  nor  may  any  credit  for  qualified
21        property be allowed for any year other than the  year  in
22        which the property was placed in service in Illinois. For
23        tax years ending on or after December 31, 1987, and on or
24        before December 31, 1988, the credit shall be allowed for
25        the  tax year in which the property is placed in service,
26        or, if the amount of the credit exceeds the tax liability
27        for that year, whether it exceeds the original  liability
28        or  the  liability  as  later amended, such excess may be
29        carried forward and applied to the tax liability of the 5
30        taxable years following the excess credit  years  if  the
31        taxpayer  (i)  makes investments which cause the creation
32        of a  minimum  of  2,000  full-time  equivalent  jobs  in
33        Illinois,   (ii)   is   located  in  an  enterprise  zone
34        established pursuant to the Illinois Enterprise Zone  Act
 
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 1        and  (iii) is certified by the Department of Commerce and
 2        Community Affairs  as  complying  with  the  requirements
 3        specified  in  clause  (i) and (ii) by July 1, 1986.  The
 4        Department of Commerce and Community Affairs shall notify
 5        the Department of  Revenue  of  all  such  certifications
 6        immediately.  For  tax  years  ending  after December 31,
 7        1988, the credit shall be allowed for  the  tax  year  in
 8        which  the  property  is  placed  in  service, or, if the
 9        amount of the credit exceeds the tax liability  for  that
10        year,  whether  it  exceeds the original liability or the
11        liability as later amended, such excess  may  be  carried
12        forward and applied to the tax liability of the 5 taxable
13        years following the excess credit years. The credit shall
14        be  applied  to  the  earliest  year for which there is a
15        liability. If there is credit from more than one tax year
16        that is available to offset a liability,  earlier  credit
17        shall be applied first.
18             (2)  The  term  "qualified  property" means property
19        which:
20                  (A)  is  tangible,   whether   new   or   used,
21             including  buildings  and  structural  components of
22             buildings and signs that are real property, but  not
23             including land or improvements to real property that
24             are not a structural component of a building such as
25             landscaping,   sewer   lines,  local  access  roads,
26             fencing, parking lots, and other appurtenances;
27                  (B)  is depreciable pursuant to Section 167  of
28             the  Internal  Revenue  Code,  except  that  "3-year
29             property" as defined in Section 168(c)(2)(A) of that
30             Code is not eligible for the credit provided by this
31             subsection (e);
32                  (C)  is  acquired  by  purchase  as  defined in
33             Section 179(d) of the Internal Revenue Code;
34                  (D)  is used in Illinois by a taxpayer  who  is
 
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 1             primarily  engaged  in  manufacturing,  or in mining
 2             coal or fluorite, or in retailing; and
 3                  (E)  has not previously been used  in  Illinois
 4             in  such  a  manner  and  by  such a person as would
 5             qualify for the credit provided by  this  subsection
 6             (e) or subsection (f).
 7             (3)  For    purposes   of   this   subsection   (e),
 8        "manufacturing" means the material staging and production
 9        of tangible  personal  property  by  procedures  commonly
10        regarded  as  manufacturing,  processing, fabrication, or
11        assembling which changes some existing material into  new
12        shapes, new qualities, or new combinations.  For purposes
13        of  this  subsection (e) the term "mining" shall have the
14        same meaning as the term "mining" in  Section  613(c)  of
15        the   Internal   Revenue  Code.   For  purposes  of  this
16        subsection (e), the term "retailing" means  the  sale  of
17        tangible   personal  property  or  services  rendered  in
18        conjunction with the sale of tangible consumer  goods  or
19        commodities.
20             (4)  The  basis  of  qualified property shall be the
21        basis used to  compute  the  depreciation  deduction  for
22        federal income tax purposes.
23             (5)  If the basis of the property for federal income
24        tax  depreciation purposes is increased after it has been
25        placed in service in Illinois by the taxpayer, the amount
26        of such increase  shall  be  deemed  property  placed  in
27        service on the date of such increase in basis.
28             (6)  The  term  "placed  in  service" shall have the
29        same meaning as under Section 46 of the Internal  Revenue
30        Code.
31             (7)  If during any taxable year, any property ceases
32        to  be  qualified  property  in the hands of the taxpayer
33        within 48 months after being placed in  service,  or  the
34        situs of any qualified property is moved outside Illinois
 
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 1        within  48  months  after  being  placed  in service, the
 2        Personal Property Tax Replacement  Income  Tax  for  such
 3        taxable  year shall be increased.  Such increase shall be
 4        determined by (i) recomputing the investment credit which
 5        would have been allowed for the year in which credit  for
 6        such  property was originally allowed by eliminating such
 7        property from such computation and, (ii) subtracting such
 8        recomputed credit from the amount  of  credit  previously
 9        allowed.  For  the  purposes  of  this  paragraph  (7), a
10        reduction of the basis of  qualified  property  resulting
11        from  a  redetermination  of  the purchase price shall be
12        deemed a disposition of qualified property to the  extent
13        of such reduction.
14             (8)  Unless  the  investment  credit  is extended by
15        law, the basis of qualified property  shall  not  include
16        costs  incurred after December 31, 2003, except for costs
17        incurred pursuant to a binding contract entered  into  on
18        or before December 31, 2003.
19             (9)  Each  taxable  year  ending before December 31,
20        2000, a partnership may elect  to  pass  through  to  its
21        partners the credits to which the partnership is entitled
22        under  this  subsection  (e)  for  the  taxable  year.  A
23        partner may use the credit allocated to him or her  under
24        this   paragraph   only   against   the  tax  imposed  in
25        subsections  (c)  and  (d)  of  this  Section.   If   the
26        partnership  makes  that election, those credits shall be
27        allocated  among  the  partners  in  the  partnership  in
28        accordance with the rules set forth in Section 704(b)  of
29        the  Internal  Revenue  Code,  and  the rules promulgated
30        under that Section,  and  the  allocated  amount  of  the
31        credits shall be allowed to the partners for that taxable
32        year.   The  partnership  shall make this election on its
33        Personal Property Tax Replacement Income Tax  return  for
34        that  taxable  year.  The  election  to  pass through the
 
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 1        credits shall be irrevocable.
 2             For taxable years ending on or  after  December  31,
 3        2000,  a  partner  that  qualifies  its partnership for a
 4        subtraction under subparagraph (I) of  paragraph  (2)  of
 5        subsection  (d)  of  Section  203  or  a shareholder that
 6        qualifies a Subchapter S corporation  for  a  subtraction
 7        under subparagraph (S) of paragraph (2) of subsection (b)
 8        of  Section  203  shall  be  allowed  a credit under this
 9        subsection (e) equal to its share of  the  credit  earned
10        under  this subsection (e) during the taxable year by the
11        partnership or Subchapter S  corporation,  determined  in
12        accordance   with   the   determination   of  income  and
13        distributive share of income under Sections 702  and  704
14        and  Subchapter  S  of  the  Internal Revenue Code.  This
15        paragraph is exempt from the provisions of Section 250.
16          (f)  Investment credit; Enterprise Zone.
17             (1)  A taxpayer shall be allowed  a  credit  against
18        the  tax  imposed  by  subsections  (a)  and  (b) of this
19        Section for investment in  qualified  property  which  is
20        placed  in service in an Enterprise Zone created pursuant
21        to  the  Illinois  Enterprise  Zone  Act.  For  partners,
22        shareholders of Subchapter S corporations, and owners  of
23        limited  liability companies, if the liability company is
24        treated as a partnership  for  purposes  of  federal  and
25        State  income  taxation,  there shall be allowed a credit
26        under this subsection (f) to be determined in  accordance
27        with  the  determination of income and distributive share
28        of income under Sections 702 and 704 and Subchapter S  of
29        the Internal Revenue Code. The credit shall be .5% of the
30        basis  for  such property.  The credit shall be available
31        only in the taxable year in which the property is  placed
32        in  service  in  the  Enterprise  Zone  and  shall not be
33        allowed to the extent that it would reduce  a  taxpayer's
34        liability  for the tax imposed by subsections (a) and (b)
 
                            -10-               LRB9205198NTsb
 1        of this Section to below zero. For tax years ending on or
 2        after December 31, 1985, the credit shall be allowed  for
 3        the  tax year in which the property is placed in service,
 4        or, if the amount of the credit exceeds the tax liability
 5        for that year, whether it exceeds the original  liability
 6        or  the  liability  as  later amended, such excess may be
 7        carried forward and applied to the tax liability of the 5
 8        taxable years  following  the  excess  credit  year.  The
 9        credit  shall  be  applied to the earliest year for which
10        there is a liability. If there is credit from  more  than
11        one tax year that is available to offset a liability, the
12        credit accruing first in time shall be applied first.
13             (2)  The  term  qualified  property  means  property
14        which:
15                  (A)  is   tangible,   whether   new   or  used,
16             including buildings  and  structural  components  of
17             buildings;
18                  (B)  is  depreciable pursuant to Section 167 of
19             the  Internal  Revenue  Code,  except  that  "3-year
20             property" as defined in Section 168(c)(2)(A) of that
21             Code is not eligible for the credit provided by this
22             subsection (f);
23                  (C)  is acquired  by  purchase  as  defined  in
24             Section 179(d) of the Internal Revenue Code;
25                  (D)  is  used  in  the  Enterprise  Zone by the
26             taxpayer; and
27                  (E)  has not been previously used  in  Illinois
28             in  such  a  manner  and  by  such a person as would
29             qualify for the credit provided by  this  subsection
30             (f) or subsection (e).
31             (3)  The  basis  of  qualified property shall be the
32        basis used to  compute  the  depreciation  deduction  for
33        federal income tax purposes.
34             (4)  If the basis of the property for federal income
 
                            -11-               LRB9205198NTsb
 1        tax  depreciation purposes is increased after it has been
 2        placed in service in the Enterprise Zone by the taxpayer,
 3        the amount of such  increase  shall  be  deemed  property
 4        placed in service on the date of such increase in basis.
 5             (5)  The  term  "placed  in  service" shall have the
 6        same meaning as under Section 46 of the Internal  Revenue
 7        Code.
 8             (6)  If during any taxable year, any property ceases
 9        to  be  qualified  property  in the hands of the taxpayer
10        within 48 months after being placed in  service,  or  the
11        situs  of  any  qualified  property  is moved outside the
12        Enterprise Zone within 48 months after  being  placed  in
13        service, the tax imposed under subsections (a) and (b) of
14        this  Section  for  such taxable year shall be increased.
15        Such increase shall be determined by (i) recomputing  the
16        investment  credit  which would have been allowed for the
17        year in which credit for  such  property  was  originally
18        allowed   by   eliminating   such   property   from  such
19        computation, and (ii) subtracting such recomputed  credit
20        from  the  amount  of credit previously allowed.  For the
21        purposes of this paragraph (6), a reduction of the  basis
22        of qualified property resulting from a redetermination of
23        the  purchase  price  shall  be  deemed  a disposition of
24        qualified property to the extent of such reduction.
25          (g)  Jobs Tax Credit; Enterprise Zone and Foreign Trade
26    Zone or Sub-Zone.
27             (1)  A taxpayer conducting a trade or business in an
28        enterprise zone or a High Impact Business  designated  by
29        the   Department   of   Commerce  and  Community  Affairs
30        conducting a trade or business in a federally  designated
31        Foreign  Trade Zone or Sub-Zone shall be allowed a credit
32        against the tax imposed by subsections  (a)  and  (b)  of
33        this  Section in the amount of $500 per eligible employee
34        hired to work in the zone during the taxable year.
 
                            -12-               LRB9205198NTsb
 1             (2)  To qualify for the credit:
 2                  (A)  the taxpayer must hire 5 or more  eligible
 3             employees to work in an enterprise zone or federally
 4             designated Foreign Trade Zone or Sub-Zone during the
 5             taxable year;
 6                  (B)  the taxpayer's total employment within the
 7             enterprise  zone  or  federally  designated  Foreign
 8             Trade  Zone  or  Sub-Zone must increase by 5 or more
 9             full-time employees beyond  the  total  employed  in
10             that  zone  at  the end of the previous tax year for
11             which a jobs  tax  credit  under  this  Section  was
12             taken,  or beyond the total employed by the taxpayer
13             as of December 31, 1985, whichever is later; and
14                  (C)  the eligible employees  must  be  employed
15             180 consecutive days in order to be deemed hired for
16             purposes of this subsection.
17             (3)  An  "eligible  employee"  means an employee who
18        is:
19                  (A)  Certified by the  Department  of  Commerce
20             and  Community  Affairs  as  "eligible for services"
21             pursuant to regulations  promulgated  in  accordance
22             with  Title  II of the Job Training Partnership Act,
23             Training Services for the Disadvantaged or Title III
24             of the Job Training Partnership Act, Employment  and
25             Training Assistance for Dislocated Workers Program.
26                  (B)  Hired   after   the   enterprise  zone  or
27             federally designated Foreign Trade Zone or  Sub-Zone
28             was  designated or the trade or business was located
29             in that zone, whichever is later.
30                  (C)  Employed in the enterprise zone or Foreign
31             Trade Zone or Sub-Zone. An employee is  employed  in
32             an  enterprise  zone or federally designated Foreign
33             Trade Zone or Sub-Zone if his services are  rendered
34             there  or  it  is  the  base  of  operations for the
 
                            -13-               LRB9205198NTsb
 1             services performed.
 2                  (D)  A full-time employee working  30  or  more
 3             hours per week.
 4             (4)  For  tax  years ending on or after December 31,
 5        1985 and prior to December 31, 1988, the credit shall  be
 6        allowed  for the tax year in which the eligible employees
 7        are hired.  For tax years ending on or after December 31,
 8        1988, the credit  shall  be  allowed  for  the  tax  year
 9        immediately  following the tax year in which the eligible
10        employees are hired.  If the amount of the credit exceeds
11        the tax liability for that year, whether it  exceeds  the
12        original  liability  or  the  liability as later amended,
13        such excess may be carried forward and applied to the tax
14        liability of the 5 taxable  years  following  the  excess
15        credit year.  The credit shall be applied to the earliest
16        year  for  which there is a liability. If there is credit
17        from more than one tax year that is available to offset a
18        liability, earlier credit shall be applied first.
19             (5)  The Department of Revenue shall promulgate such
20        rules and regulations as may be deemed necessary to carry
21        out the purposes of this subsection (g).
22             (6)  The credit  shall  be  available  for  eligible
23        employees hired on or after January 1, 1986.
24             (h)  Investment credit; High Impact Business.
25             (1)  Subject to subsection (b) of Section 5.5 of the
26        Illinois Enterprise Zone Act, a taxpayer shall be allowed
27        a  credit  against the tax imposed by subsections (a) and
28        (b) of this Section for investment in qualified  property
29        which  is  placed  in service by a Department of Commerce
30        and Community Affairs designated  High  Impact  Business.
31        The  credit  shall be .5% of the basis for such property.
32        The credit shall  not  be  available  until  the  minimum
33        investments  in  qualified  property set forth in Section
34        5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
 
                            -14-               LRB9205198NTsb
 1        satisfied and shall not be allowed to the extent that  it
 2        would  reduce  a taxpayer's liability for the tax imposed
 3        by subsections (a) and (b) of this Section to below zero.
 4        The credit applicable to such minimum  investments  shall
 5        be  taken  in  the  taxable  year  in  which such minimum
 6        investments  have  been  completed.    The   credit   for
 7        additional investments beyond the minimum investment by a
 8        designated  high  impact business shall be available only
 9        in the taxable year in which the property  is  placed  in
10        service  and  shall  not be allowed to the extent that it
11        would reduce a taxpayer's liability for the  tax  imposed
12        by subsections (a) and (b) of this Section to below zero.
13        For  tax  years ending on or after December 31, 1987, the
14        credit shall be allowed for the tax  year  in  which  the
15        property  is  placed in service, or, if the amount of the
16        credit exceeds the tax liability for that  year,  whether
17        it  exceeds  the  original  liability or the liability as
18        later amended, such excess may  be  carried  forward  and
19        applied  to  the  tax  liability  of  the 5 taxable years
20        following the excess credit year.  The  credit  shall  be
21        applied  to  the  earliest  year  for  which  there  is a
22        liability.  If there is credit from  more  than  one  tax
23        year  that is available to offset a liability, the credit
24        accruing first in time shall be applied first.
25             Changes made in this subdivision  (h)(1)  by  Public
26        Act 88-670 restore changes made by Public Act 85-1182 and
27        reflect existing law.
28             (2)  The  term  qualified  property  means  property
29        which:
30                  (A)  is   tangible,   whether   new   or  used,
31             including buildings  and  structural  components  of
32             buildings;
33                  (B)  is  depreciable pursuant to Section 167 of
34             the  Internal  Revenue  Code,  except  that  "3-year
 
                            -15-               LRB9205198NTsb
 1             property" as defined in Section 168(c)(2)(A) of that
 2             Code is not eligible for the credit provided by this
 3             subsection (h);
 4                  (C)  is acquired  by  purchase  as  defined  in
 5             Section 179(d) of the Internal Revenue Code; and
 6                  (D)  is  not  eligible  for the Enterprise Zone
 7             Investment Credit provided by subsection (f) of this
 8             Section.
 9             (3)  The basis of qualified property  shall  be  the
10        basis  used  to  compute  the  depreciation deduction for
11        federal income tax purposes.
12             (4)  If the basis of the property for federal income
13        tax depreciation purposes is increased after it has  been
14        placed in service in a federally designated Foreign Trade
15        Zone or Sub-Zone located in Illinois by the taxpayer, the
16        amount  of  such increase shall be deemed property placed
17        in service on the date of such increase in basis.
18             (5)  The term "placed in  service"  shall  have  the
19        same  meaning as under Section 46 of the Internal Revenue
20        Code.
21             (6)  If during any taxable year ending on or  before
22        December  31,  1996,  any property ceases to be qualified
23        property in the hands of the taxpayer  within  48  months
24        after  being  placed  in  service,  or  the  situs of any
25        qualified property is moved outside  Illinois  within  48
26        months  after  being  placed  in service, the tax imposed
27        under subsections (a) and (b) of this  Section  for  such
28        taxable  year shall be increased.  Such increase shall be
29        determined by (i) recomputing the investment credit which
30        would have been allowed for the year in which credit  for
31        such  property was originally allowed by eliminating such
32        property from such computation, and (ii) subtracting such
33        recomputed credit from the amount  of  credit  previously
34        allowed.   For  the  purposes  of  this  paragraph (6), a
 
                            -16-               LRB9205198NTsb
 1        reduction of the basis of  qualified  property  resulting
 2        from  a  redetermination  of  the purchase price shall be
 3        deemed a disposition of qualified property to the  extent
 4        of such reduction.
 5             (7)  Beginning  with tax years ending after December
 6        31, 1996, if a taxpayer qualifies for  the  credit  under
 7        this   subsection  (h)  and  thereby  is  granted  a  tax
 8        abatement and the taxpayer relocates its entire  facility
 9        in  violation  of  the  explicit  terms and length of the
10        contract under Section 18-183 of the Property  Tax  Code,
11        the  tax  imposed  under  subsections (a) and (b) of this
12        Section shall be increased for the taxable year in  which
13        the taxpayer relocated its facility by an amount equal to
14        the  amount of credit received by the taxpayer under this
15        subsection (h).
16        (i)  A credit shall be allowed against the tax imposed by
17    subsections (a) and (b) of this Section for the  tax  imposed
18    by  subsections  (c)  and  (d)  of this Section.  This credit
19    shall  be  computed  by  multiplying  the  tax   imposed   by
20    subsections  (c)  and  (d) of this Section by a fraction, the
21    numerator of which is base income allocable to  Illinois  and
22    the denominator of which is Illinois base income, and further
23    multiplying   the   product   by  the  tax  rate  imposed  by
24    subsections (a) and (b) of this Section.
25        Any credit earned on or after  December  31,  1986  under
26    this  subsection  which  is  unused in the year the credit is
27    computed because it exceeds  the  tax  liability  imposed  by
28    subsections (a) and (b) for that year (whether it exceeds the
29    original  liability or the liability as later amended) may be
30    carried forward and applied to the tax liability  imposed  by
31    subsections  (a) and (b) of the 5 taxable years following the
32    excess credit year.  This credit shall be  applied  first  to
33    the  earliest  year for which there is a liability.  If there
34    is a credit under this subsection from more than one tax year
 
                            -17-               LRB9205198NTsb
 1    that is available to offset a liability the  earliest  credit
 2    arising under this subsection shall be applied first.
 3        If,  during  any taxable year ending on or after December
 4    31, 1986, the tax imposed by subsections (c) and (d) of  this
 5    Section  for which a taxpayer has claimed a credit under this
 6    subsection (i) is reduced, the amount of credit for such  tax
 7    shall also be reduced.  Such reduction shall be determined by
 8    recomputing  the  credit to take into account the reduced tax
 9    imposed by subsection (c) and (d).  If  any  portion  of  the
10    reduced  amount  of  credit  has  been carried to a different
11    taxable year, an amended  return  shall  be  filed  for  such
12    taxable year to reduce the amount of credit claimed.
13        (j)  Training  expense  credit.  Beginning with tax years
14    ending on or after December 31, 1986,  a  taxpayer  shall  be
15    allowed  a  credit  against the tax imposed by subsection (a)
16    and (b) under this Section for all amounts paid  or  accrued,
17    on behalf of all persons employed by the taxpayer in Illinois
18    or  Illinois  residents  employed  outside  of  Illinois by a
19    taxpayer,  for  educational   or   vocational   training   in
20    semi-technical or technical fields or semi-skilled or skilled
21    fields,   which  were  deducted  from  gross  income  in  the
22    computation of taxable income.  The credit  against  the  tax
23    imposed  by  subsections  (a)  and  (b) shall be 1.6% of such
24    training expenses.  For partners, shareholders of  subchapter
25    S corporations, and owners of limited liability companies, if
26    the  liability  company  is  treated  as  a  partnership  for
27    purposes of federal and State income taxation, there shall be
28    allowed  a  credit under this subsection (j) to be determined
29    in  accordance  with  the   determination   of   income   and
30    distributive  share  of income under Sections 702 and 704 and
31    subchapter S of the Internal Revenue Code.
32        Any credit allowed under this subsection which is  unused
33    in  the  year  the credit is earned may be carried forward to
34    each of the 5 taxable years following the year for which  the
 
                            -18-               LRB9205198NTsb
 1    credit is first computed until it is used.  This credit shall
 2    be  applied  first  to the earliest year for which there is a
 3    liability.  If there is a credit under this  subsection  from
 4    more  than  one  tax  year  that  is  available  to  offset a
 5    liability the earliest credit arising under  this  subsection
 6    shall be applied first.
 7        (k)  Research and development credit.
 8        Beginning  with  tax  years  ending after July 1, 1990, a
 9    taxpayer shall be allowed a credit against the tax imposed by
10    subsections (a)  and  (b)  of  this  Section  for  increasing
11    research  activities  in  this  State.   The  credit  allowed
12    against  the  tax imposed by subsections (a) and (b) shall be
13    equal to 6 1/2% of the qualifying expenditures for increasing
14    research activities in this State. For partners, shareholders
15    of subchapter S corporations, and owners of limited liability
16    companies,  if  the  liability  company  is  treated   as   a
17    partnership   for   purposes  of  federal  and  State  income
18    taxation,  there  shall  be  allowed  a  credit  under   this
19    subsection   to   be   determined   in  accordance  with  the
20    determination of income  and  distributive  share  of  income
21    under  Sections  702 and 704 and subchapter S of the Internal
22    Revenue Code.
23        For   purposes   of    this    subsection,    "qualifying
24    expenditures"  means  the  qualifying expenditures as defined
25    for the federal credit  for  increasing  research  activities
26    which  would  be  allowable  under Section 41 of the Internal
27    Revenue  Code  and  which  are  conducted  in   this   State,
28    "qualifying  expenditures  for increasing research activities
29    in this State" means the excess  of  qualifying  expenditures
30    for  the  taxable  year  in  which  incurred  over qualifying
31    expenditures for the base  period,  "qualifying  expenditures
32    for  the  base  period"  means  the average of the qualifying
33    expenditures for each year in  the  base  period,  and  "base
34    period"  means  the 3 taxable years immediately preceding the
 
                            -19-               LRB9205198NTsb
 1    taxable year for which the determination is being made.
 2        Any credit in excess of the tax liability for the taxable
 3    year may be carried forward. A taxpayer may elect to have the
 4    unused credit shown on its  final  completed  return  carried
 5    over  as a credit against the tax liability for the following
 6    5 taxable years or until it has been  fully  used,  whichever
 7    occurs first.
 8        If  an  unused  credit is carried forward to a given year
 9    from 2 or more earlier years,  that  credit  arising  in  the
10    earliest year will be applied first against the tax liability
11    for  the  given  year.  If a tax liability for the given year
12    still remains, the credit from the next  earliest  year  will
13    then  be applied, and so on, until all credits have been used
14    or  no  tax  liability  for  the  given  year  remains.   Any
15    remaining unused credit  or  credits  then  will  be  carried
16    forward  to  the next following year in which a tax liability
17    is incurred, except that no credit can be carried forward  to
18    a year which is more than 5 years after the year in which the
19    expense for which the credit is given was incurred.
20        Unless  extended  by  law,  the  credit shall not include
21    costs incurred after December  31,  2004,  except  for  costs
22    incurred  pursuant  to  a binding contract entered into on or
23    before December 31, 2004.
24        No inference shall be drawn from this amendatory  Act  of
25    the  91st  General  Assembly  in  construing this Section for
26    taxable years beginning before January 1, 1999.
27        (l)  Environmental Remediation Tax Credit.
28             (i)  For tax  years ending after December  31,  1997
29        and  on  or before December 31, 2001, a taxpayer shall be
30        allowed a credit against the tax imposed  by  subsections
31        (a)  and (b) of this Section for certain amounts paid for
32        unreimbursed eligible remediation costs, as specified  in
33        this   subsection.    For   purposes   of  this  Section,
34        "unreimbursed eligible  remediation  costs"  means  costs
 
                            -20-               LRB9205198NTsb
 1        approved  by the Illinois Environmental Protection Agency
 2        ("Agency")  under  Section  58.14  of  the  Environmental
 3        Protection Act that were paid in performing environmental
 4        remediation at a site for which a No Further  Remediation
 5        Letter  was  issued  by  the  Agency  and  recorded under
 6        Section 58.10 of the Environmental Protection Act.    The
 7        credit  must  be  claimed  for  the taxable year in which
 8        Agency approval of  the  eligible  remediation  costs  is
 9        granted.   The credit is not available to any taxpayer if
10        the taxpayer or any related party caused  or  contributed
11        to,  in  any  material  respect,  a  release of regulated
12        substances on, in, or under the site that was  identified
13        and addressed by the remedial action pursuant to the Site
14        Remediation  Program of the Environmental Protection Act.
15        After the  Pollution  Control  Board  rules  are  adopted
16        pursuant to the Illinois Administrative Procedure Act for
17        the administration and enforcement of Section 58.9 of the
18        Environmental Protection Act, determinations as to credit
19        availability  for  purposes of this Section shall be made
20        consistent  with  those  rules.   For  purposes  of  this
21        Section,  "taxpayer"  includes   a   person   whose   tax
22        attributes  the  taxpayer  has succeeded to under Section
23        381 of the Internal  Revenue  Code  and  "related  party"
24        includes the persons disallowed a deduction for losses by
25        paragraphs  (b),  (c),  and  (f)(1) of Section 267 of the
26        Internal Revenue  Code  by  virtue  of  being  a  related
27        taxpayer,  as  well  as  any of its partners.  The credit
28        allowed against the tax imposed by  subsections  (a)  and
29        (b)  shall  be  equal to 25% of the unreimbursed eligible
30        remediation costs in excess of $100,000 per site,  except
31        that  the  $100,000 threshold shall not apply to any site
32        contained in an enterprise  zone  as  determined  by  the
33        Department  of Commerce and Community Affairs.  The total
34        credit allowed shall not exceed $40,000 per year  with  a
 
                            -21-               LRB9205198NTsb
 1        maximum  total  of  $150,000  per site.  For partners and
 2        shareholders of subchapter S corporations, there shall be
 3        allowed a credit under this subsection to  be  determined
 4        in  accordance  with  the  determination  of  income  and
 5        distributive  share  of income under Sections 702 and 704
 6        and of subchapter S of the Internal Revenue Code.
 7             (ii)  A credit allowed under this subsection that is
 8        unused in the year the credit is earned  may  be  carried
 9        forward to each of the 5 taxable years following the year
10        for  which  the  credit is first earned until it is used.
11        The term "unused credit" does not include any amounts  of
12        unreimbursed  eligible remediation costs in excess of the
13        maximum credit per site authorized under  paragraph  (i).
14        This  credit  shall be applied first to the earliest year
15        for which there is a liability.  If  there  is  a  credit
16        under this subsection from more than one tax year that is
17        available  to  offset  a  liability,  the earliest credit
18        arising under this subsection shall be applied first.   A
19        credit  allowed  under  this  subsection may be sold to a
20        buyer as part of a sale of all or part of the remediation
21        site for which the credit was granted.  The purchaser  of
22        a  remediation  site  and the tax credit shall succeed to
23        the unused credit and remaining carry-forward  period  of
24        the  seller.  To perfect the transfer, the assignor shall
25        record the transfer in the chain of title  for  the  site
26        and  provide  written  notice  to  the  Director  of  the
27        Illinois  Department  of Revenue of the assignor's intent
28        to sell the remediation site and the amount  of  the  tax
29        credit to be transferred as a portion of the sale.  In no
30        event  may a credit be transferred to any taxpayer if the
31        taxpayer or a related party would not be  eligible  under
32        the provisions of subsection (i).
33             (iii)  For purposes of this Section, the term "site"
34        shall  have the same meaning as under Section 58.2 of the
 
                            -22-               LRB9205198NTsb
 1        Environmental Protection Act.
 2        (m)  Education expense credit.
 3        Beginning with tax years ending after December 31,  1999,
 4    a  taxpayer  who  is  the custodian of one or more qualifying
 5    pupils shall be allowed a credit against the tax  imposed  by
 6    subsections  (a)  and  (b)  of  this  Section  for  qualified
 7    education  expenses  incurred  on  behalf  of  the qualifying
 8    pupils.  The credit  shall  be  equal  to  25%  of  qualified
 9    education  expenses,  but  in  no  event may the total credit
10    under this Section claimed by a family that is the  custodian
11    of  qualifying pupils exceed $500. In no event shall a credit
12    under this subsection reduce the taxpayer's  liability  under
13    this  Act  to  less than zero. This subsection is exempt from
14    the provisions of Section 250 of this Act.
15        The Department must include on the income tax return form
16    an entry blank for the taxpayer to  state  the  name  of  the
17    school  for  which  the education expenses for the tax credit
18    are  claimed.   If  the  credit  is  claimed  for   nonpublic
19    qualified  education  expenses, then that nonpublic school is
20    subject to the requirements established by the  school  board
21    of the district within which the nonpublic school is located,
22    including,  but  not  limited  to,  provisions concerning (i)
23    academic  standards,  examination  requirements,  examination
24    results  reporting,   and   graduation   requirements;   (ii)
25    suspensions   and   expulsions;   (iii)   student  enrollment
26    requirements; and (iv) compensation and expense reimbursement
27    of employees.
28        For purposes of this subsection:;
29        "Qualifying  pupils"  means  individuals  who   (i)   are
30    residents of the State of Illinois, (ii) are under the age of
31    21  at  the  close  of  the school year for which a credit is
32    sought, and (iii) during the school year for which  a  credit
33    is  sought  were  full-time pupils enrolled in a kindergarten
34    through twelfth grade education program  at  any  school,  as
 
                            -23-               LRB9205198NTsb
 1    defined in this subsection.
 2        "Qualified  education  expense" means the amount incurred
 3    on behalf of  a  qualifying  pupil  in  excess  of  $250  for
 4    tuition,  book  fees, and lab fees at the school in which the
 5    pupil is enrolled during the regular school year.
 6        "School" means any  public  or  nonpublic  elementary  or
 7    secondary school in Illinois that is in compliance with Title
 8    VI  of  the  Civil Rights Act of 1964 and attendance at which
 9    satisfies the requirements of  Section  26-1  of  the  School
10    Code,  except  that  nothing  shall be construed to require a
11    child to attend any particular public or nonpublic school  to
12    qualify for the credit under this Section.
13        "Custodian"  means, with respect to qualifying pupils, an
14    Illinois resident who is  a  parent,  the  parents,  a  legal
15    guardian, or the legal guardians of the qualifying pupils.
16    (Source:  P.A.  90-123,  eff.  7-21-97; 90-458, eff. 8-17-97;
17    90-605, eff. 6-30-98;  90-655,  eff.  7-30-98;  90-717,  eff.
18    8-7-98;  90-792, eff. 1-1-99; 91-9, eff. 1-1-00; 91-357, eff.
19    7-29-99; 91-643, eff. 8-20-99; 91-644, eff. 8-20-99;  91-860,
20    eff. 6-22-00; 91-913, eff. 1-1-01; revised 10-24-00.)

21        Section  99.   Effective  date.  This Act takes effect on
22    July 1, 2001.

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