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91_SB0110eng SB110 Engrossed LRB9101029PTpk 1 AN ACT to amend the Illinois Income Tax Act by changing 2 Section 201. 3 Be it enacted by the People of the State of Illinois, 4 represented in the General Assembly: 5 Section 5. The Illinois Income Tax Act is amended by 6 changing Section 201 as follows: 7 (35 ILCS 5/201) (from Ch. 120, par. 2-201) 8 Sec. 201. Tax Imposed. 9 (a) In general. A tax measured by net income is hereby 10 imposed on every individual, corporation, trust and estate 11 for each taxable year ending after July 31, 1969 on the 12 privilege of earning or receiving income in or as a resident 13 of this State. Such tax shall be in addition to all other 14 occupation or privilege taxes imposed by this State or by any 15 municipal corporation or political subdivision thereof. 16 (b) Rates. The tax imposed by subsection (a) of this 17 Section shall be determined as follows: 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 SB110 Engrossed -2- LRB9101029PTpk 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, shall be an additional amount equal to 2.85% of SB110 Engrossed -3- LRB9101029PTpk 1 such taxpayer's net income for the taxable year, except that 2 beginning on January 1, 1981, and thereafter, the rate of 3 2.85% specified in this subsection shall be reduced to 2.5%, 4 and in the case of a partnership, trust or a Subchapter S 5 corporation shall be an additional amount equal to 1.5% of 6 such taxpayer's net income for the taxable year. 7 (e) Investment credit. A taxpayer shall be allowed a 8 credit against the Personal Property Tax Replacement Income 9 Tax for investment in qualified property. 10 (1) A taxpayer shall be allowed a credit equal to 11 .5% of the basis of qualified property placed in service 12 during the taxable year, provided such property is placed 13 in service on or after July 1, 1984. There shall be 14 allowed an additional credit equal to .5% of the basis of 15 qualified property placed in service during the taxable 16 year, provided such property is placed in service on or 17 after July 1, 1986, and the taxpayer's base employment 18 within Illinois has increased by 1% or more over the 19 preceding year as determined by the taxpayer's employment 20 records filed with the Illinois Department of Employment 21 Security. Taxpayers who are new to Illinois shall be 22 deemed to have met the 1% growth in base employment for 23 the first year in which they file employment records with 24 the Illinois Department of Employment Security. The 25 provisions added to this Section by Public Act 85-1200 26 (and restored by Public Act 87-895) shall be construed as 27 declaratory of existing law and not as a new enactment. 28 If, in any year, the increase in base employment within 29 Illinois over the preceding year is less than 1%, the 30 additional credit shall be limited to that percentage 31 times a fraction, the numerator of which is .5% and the 32 denominator of which is 1%, but shall not exceed .5%. 33 The investment credit shall not be allowed to the extent 34 that it would reduce a taxpayer's liability in any tax SB110 Engrossed -4- LRB9101029PTpk 1 year below zero, nor may any credit for qualified 2 property be allowed for any year other than the year in 3 which the property was placed in service in Illinois. For 4 tax years ending on or after December 31, 1987, and on or 5 before December 31, 1988, the credit shall be allowed for 6 the tax year in which the property is placed in service, 7 or, if the amount of the credit exceeds the tax liability 8 for that year, whether it exceeds the original liability 9 or the liability as later amended, such excess may be 10 carried forward and applied to the tax liability of the 5 11 taxable years following the excess credit years if the 12 taxpayer (i) makes investments which cause the creation 13 of a minimum of 2,000 full-time equivalent jobs in 14 Illinois, (ii) is located in an enterprise zone 15 established pursuant to the Illinois Enterprise Zone Act 16 and (iii) is certified by the Department of Commerce and 17 Community Affairs as complying with the requirements 18 specified in clause (i) and (ii) by July 1, 1986. The 19 Department of Commerce and Community Affairs shall notify 20 the Department of Revenue of all such certifications 21 immediately. For tax years ending after December 31, 22 1988, the credit shall be allowed for the tax year in 23 which the property is placed in service, or, if the 24 amount of the credit exceeds the tax liability for that 25 year, whether it exceeds the original liability or the 26 liability as later amended, such excess may be carried 27 forward and applied to the tax liability of the 5 taxable 28 years following the excess credit years. The credit shall 29 be applied to the earliest year for which there is a 30 liability. If there is credit from more than one tax year 31 that is available to offset a liability, earlier credit 32 shall be applied first. 33 (2) The term "qualified property" means property 34 which: SB110 Engrossed -5- LRB9101029PTpk 1 (A) is tangible, whether new or used, 2 including buildings and structural components of 3 buildings and signs that are real property, but not 4 including land or improvements to real property that 5 are not a structural component of a building such as 6 landscaping, sewer lines, local access roads, 7 fencing, parking lots, and other appurtenances; 8 (B) is depreciable pursuant to Section 167 of 9 the Internal Revenue Code, except that "3-year 10 property" as defined in Section 168(c)(2)(A) of that 11 Code is not eligible for the credit provided by this 12 subsection (e); 13 (C) is acquired by purchase as defined in 14 Section 179(d) of the Internal Revenue Code; 15 (D) is used in Illinois by a taxpayer who is 16 primarily engaged in manufacturing, or in mining 17 coal or fluorite, or in retailing; and 18 (E) has not previously been used in Illinois 19 in such a manner and by such a person as would 20 qualify for the credit provided by this subsection 21 (e) or subsection (f). 22 (3) For purposes of this subsection (e), 23 "manufacturing" means the material staging and production 24 of tangible personal property by procedures commonly 25 regarded as manufacturing, processing, fabrication, or 26 assembling which changes some existing material into new 27 shapes, new qualities, or new combinations. For purposes 28 of this subsection (e) the term "mining" shall have the 29 same meaning as the term "mining" in Section 613(c) of 30 the Internal Revenue Code. For purposes of this 31 subsection (e), the term "retailing" means the sale of 32 tangible personal property or services rendered in 33 conjunction with the sale of tangible consumer goods or 34 commodities. SB110 Engrossed -6- LRB9101029PTpk 1 (4) The basis of qualified property shall be the 2 basis used to compute the depreciation deduction for 3 federal income tax purposes. 4 (5) If the basis of the property for federal income 5 tax depreciation purposes is increased after it has been 6 placed in service in Illinois by the taxpayer, the amount 7 of such increase shall be deemed property placed in 8 service on the date of such increase in basis. 9 (6) The term "placed in service" shall have the 10 same meaning as under Section 46 of the Internal Revenue 11 Code. 12 (7) If during any taxable year, any property ceases 13 to be qualified property in the hands of the taxpayer 14 within 48 months after being placed in service, or the 15 situs of any qualified property is moved outside Illinois 16 within 48 months after being placed in service, the 17 Personal Property Tax Replacement Income Tax for such 18 taxable year shall be increased. Such increase shall be 19 determined by (i) recomputing the investment credit which 20 would have been allowed for the year in which credit for 21 such property was originally allowed by eliminating such 22 property from such computation and, (ii) subtracting such 23 recomputed credit from the amount of credit previously 24 allowed. For the purposes of this paragraph (7), a 25 reduction of the basis of qualified property resulting 26 from a redetermination of the purchase price shall be 27 deemed a disposition of qualified property to the extent 28 of such reduction. 29 (8) Unless the investment credit is extended by 30 law, the basis of qualified property shall not include 31 costs incurred after December 31, 2003, except for costs 32 incurred pursuant to a binding contract entered into on 33 or before December 31, 2003. 34 (9) Each taxable year, a partnership may elect to SB110 Engrossed -7- LRB9101029PTpk 1 pass through to its partners the credits to which the 2 partnership is entitled under this subsection (e) for the 3 taxable year. A partner may use the credit allocated to 4 him or her under this paragraph only against the tax 5 imposed in subsections (c) and (d) of this Section. If 6 the partnership makes that election, those credits shall 7 be allocated among the partners in the partnership in 8 accordance with the rules set forth in Section 704(b) of 9 the Internal Revenue Code, and the rules promulgated 10 under that Section, and the allocated amount of the 11 credits shall be allowed to the partners for that taxable 12 year. The partnership shall make this election on its 13 Personal Property Tax Replacement Income Tax return for 14 that taxable year. The election to pass through the 15 credits shall be irrevocable. 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,and22forshareholders of Subchapter S corporations, and owners 23 of limited liability companies, if the liability company 24 is 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) SB110 Engrossed -8- LRB9101029PTpk 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 SB110 Engrossed -9- LRB9101029PTpk 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 26 Trade 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. SB110 Engrossed -10- LRB9101029PTpk 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 SB110 Engrossed -11- LRB9101029PTpk 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 SB110 Engrossed -12- LRB9101029PTpk 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 SB110 Engrossed -13- LRB9101029PTpk 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 SB110 Engrossed -14- LRB9101029PTpk 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 SB110 Engrossed -15- LRB9101029PTpk 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,and forshareholders of 25 subchapter S corporations, and owners of limited liability 26 companies, if the liability company is treated as a 27 partnership for purposes of federal and State income 28 taxation, there shall be allowed a credit under this 29 subsection (j) to be determined in accordance with the 30 determination of income and distributive share of income 31 under Sections 702 and 704 and subchapter S of the Internal 32 Revenue Code. 33 Any credit allowed under this subsection which is unused 34 in the year the credit is earned may be carried forward to SB110 Engrossed -16- LRB9101029PTpk 1 each of the 5 taxable years following the year for which the 2 credit is first computed until it is used. This credit shall 3 be applied first to the earliest year for which there is a 4 liability. If there is a credit under this subsection from 5 more than one tax year that is available to offset a 6 liability the earliest credit arising under this subsection 7 shall be applied first. 8 (k) Research and development credit. 9 Beginning with tax years ending after July 1, 1990, a 10 taxpayer shall be allowed a credit against the tax imposed by 11 subsections (a) and (b) of this Section for increasing 12 research activities in this State. The credit allowed 13 against the tax imposed by subsections (a) and (b) shall be 14 equal to 6 1/2% of the qualifying expenditures for increasing 15 research activities in this State. For partners, shareholders 16 of subchapter S corporations, and owners of limited liability 17 companies, if the liability company is treated as a 18 partnership for purposes of federal and State income 19 taxation, there shall be allowed a credit under this 20 subsection to be determined in accordance with the 21 determination of income and distributive share of income 22 under Sections 702 and 704 and subchapter S of the Internal 23 Revenue Code. 24 For purposes of this subsection, "qualifying 25 expenditures" means the qualifying expenditures as defined 26 for the federal credit for increasing research activities 27 which would be allowable under Section 41 of the Internal 28 Revenue Code and which are conducted in this State, 29 "qualifying expenditures for increasing research activities 30 in this State" means the excess of qualifying expenditures 31 for the taxable year in which incurred over qualifying 32 expenditures for the base period, "qualifying expenditures 33 for the base period" means the average of the qualifying 34 expenditures for each year in the base period, and "base SB110 Engrossed -17- LRB9101029PTpk 1 period" means the 3 taxable years immediately preceding the 2 taxable year for which the determination is being made. 3 Any credit in excess of the tax liability for the taxable 4 year may be carried forward. A taxpayer may elect to have the 5 unused credit shown on its final completed return carried 6 over as a credit against the tax liability for the following 7 5 taxable years or until it has been fully used, whichever 8 occurs first. 9 If an unused credit is carried forward to a given year 10 from 2 or more earlier years, that credit arising in the 11 earliest year will be applied first against the tax liability 12 for the given year. If a tax liability for the given year 13 still remains, the credit from the next earliest year will 14 then be applied, and so on, until all credits have been used 15 or no tax liability for the given year remains. Any 16 remaining unused credit or credits then will be carried 17 forward to the next following year in which a tax liability 18 is incurred, except that no credit can be carried forward to 19 a year which is more than 5 years after the year in which the 20 expense for which the credit is given was incurred. 21 Unless extended by law, the credit shall not include 22 costs incurred after December 31, 2004, except for costs 23 incurred pursuant to a binding contract entered into on or 24 before December 31, 2004. 25 (l) Environmental Remediation Tax Credit. 26 (i) For tax years ending after December 31, 1997 27 and on or before December 31, 2001, a taxpayer shall be 28 allowed a credit against the tax imposed by subsections 29 (a) and (b) of this Section for certain amounts paid for 30 unreimbursed eligible remediation costs, as specified in 31 this subsection. For purposes of this Section, 32 "unreimbursed eligible remediation costs" means costs 33 approved by the Illinois Environmental Protection Agency 34 ("Agency") under Section 58.14 of the Environmental SB110 Engrossed -18- LRB9101029PTpk 1 Protection Act that were paid in performing environmental 2 remediation at a site for which a No Further Remediation 3 Letter was issued by the Agency and recorded under 4 Section 58.10 of the Environmental Protection Act. The 5 credit must be claimed for the taxable year in which 6 Agency approval of the eligible remediation costs is 7 granted. The credit is not available to any taxpayer if 8 the taxpayer or any related party caused or contributed 9 to, in any material respect, a release of regulated 10 substances on, in, or under the site that was identified 11 and addressed by the remedial action pursuant to the Site 12 Remediation Program of the Environmental Protection Act. 13 After the Pollution Control Board rules are adopted 14 pursuant to the Illinois Administrative Procedure Act for 15 the administration and enforcement of Section 58.9 of the 16 Environmental Protection Act, determinations as to credit 17 availability for purposes of this Section shall be made 18 consistent with those rules. For purposes of this 19 Section, "taxpayer" includes a person whose tax 20 attributes the taxpayer has succeeded to under Section 21 381 of the Internal Revenue Code and "related party" 22 includes the persons disallowed a deduction for losses by 23 paragraphs (b), (c), and (f)(1) of Section 267 of the 24 Internal Revenue Code by virtue of being a related 25 taxpayer, as well as any of its partners. The credit 26 allowed against the tax imposed by subsections (a) and 27 (b) shall be equal to 25% of the unreimbursed eligible 28 remediation costs in excess of $100,000 per site, except 29 that the $100,000 threshold shall not apply to any site 30 contained in an enterprise zone as determined by the 31 Department of Commerce and Community Affairs. The total 32 credit allowed shall not exceed $40,000 per year with a 33 maximum total of $150,000 per site. For partners and 34 shareholders of subchapter S corporations, there shall be SB110 Engrossed -19- LRB9101029PTpk 1 allowed a credit under this subsection to be determined 2 in accordance with the determination of income and 3 distributive share of income under Sections 702 and 704 4 of subchapter S of the Internal Revenue Code. 5 (ii) A credit allowed under this subsection that is 6 unused in the year the credit is earned may be carried 7 forward to each of the 5 taxable years following the year 8 for which the credit is first earned until it is used. 9 The term "unused credit" does not include any amounts of 10 unreimbursed eligible remediation costs in excess of the 11 maximum credit per site authorized under paragraph (i). 12 This credit shall be applied first to the earliest year 13 for which there is a liability. If there is a credit 14 under this subsection from more than one tax year that is 15 available to offset a liability, the earliest credit 16 arising under this subsection shall be applied first. A 17 credit allowed under this subsection may be sold to a 18 buyer as part of a sale of all or part of the remediation 19 site for which the credit was granted. The purchaser of 20 a remediation site and the tax credit shall succeed to 21 the unused credit and remaining carry-forward period of 22 the seller. To perfect the transfer, the assignor shall 23 record the transfer in the chain of title for the site 24 and provide written notice to the Director of the 25 Illinois Department of Revenue of the assignor's intent 26 to sell the remediation site and the amount of the tax 27 credit to be transferred as a portion of the sale. In no 28 event may a credit be transferred to any taxpayer if the 29 taxpayer or a related party would not be eligible under 30 the provisions of subsection (i). 31 (iii) For purposes of this Section, the term "site" 32 shall have the same meaning as under Section 58.2 of the 33 Environmental Protection Act. 34 (Source: P.A. 89-235, eff. 8-4-95; 89-519, eff. 7-18-96; SB110 Engrossed -20- LRB9101029PTpk 1 89-591, eff. 8-1-96; 90-123, eff. 7-21-97; 90-458, eff. 2 8-17-97; 90-605, eff. 6-30-98; 90-655, eff. 7-30-98; 90-717, 3 eff. 8-7-98; 90-792, eff. 1-1-99; revised 9-16-98.) 4 Section 99. Effective date. This Act takes effect upon 5 becoming law.