State of Illinois
91st General Assembly
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[ Introduced ][ Engrossed ][ House Amendment 001 ]
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91_SB0338enr

 
SB338 Enrolled                                 LRB9102972JSpr

 1        AN ACT concerning insurance taxes.

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

 4        Section 5.  The State Finance Act is  amended  by  adding
 5    Section 5.490 as follows:

 6        (30 ILCS 105/5.490 new)
 7        Sec. 5.490.  The Insurance Premium Tax Refund Fund.

 8        Section  7.   The  Illinois  Income Tax Act is amended by
 9    changing Section 201 as follows:

10        (35 ILCS 5/201) (from Ch. 120, par. 2-201)
11        Sec. 201.  Tax Imposed.
12        (a)  In general. A tax measured by net income  is  hereby
13    imposed  on  every  individual, corporation, trust and estate
14    for each taxable year ending  after  July  31,  1969  on  the
15    privilege  of earning or receiving income in or as a resident
16    of this State. Such tax shall be in  addition  to  all  other
17    occupation or privilege taxes imposed by this State or by any
18    municipal corporation or political subdivision thereof.
19        (b)  Rates.  The  tax  imposed  by subsection (a) of this
20    Section shall be determined as follows, except as adjusted by
21    subsection (d-1):
22             (1)  In the case of an individual, trust or  estate,
23        for taxable years ending prior to July 1, 1989, an amount
24        equal  to  2  1/2%  of  the taxpayer's net income for the
25        taxable year.
26             (2)  In the case of an individual, trust or  estate,
27        for  taxable  years  beginning  prior to July 1, 1989 and
28        ending after June 30, 1989, an amount equal to the sum of
29        (i) 2 1/2% of the taxpayer's net income  for  the  period
 
SB338 Enrolled             -2-                 LRB9102972JSpr
 1        prior to July 1, 1989, as calculated under Section 202.3,
 2        and  (ii)  3% of the taxpayer's net income for the period
 3        after June 30, 1989, as calculated under Section 202.3.
 4             (3)  In the case of an individual, trust or  estate,
 5        for  taxable  years  beginning  after  June  30, 1989, an
 6        amount equal to 3% of the taxpayer's net income  for  the
 7        taxable year.
 8             (4)  (Blank).
 9             (5)  (Blank).
10             (6)  In the case of a corporation, for taxable years
11        ending  prior  to  July 1, 1989, an amount equal to 4% of
12        the taxpayer's net income for the taxable year.
13             (7)  In the case of a corporation, for taxable years
14        beginning prior to July 1, 1989 and ending after June 30,
15        1989, an amount equal  to  the  sum  of  (i)  4%  of  the
16        taxpayer's  net  income  for  the period prior to July 1,
17        1989, as calculated under Section 202.3, and (ii) 4.8% of
18        the taxpayer's net income for the period after  June  30,
19        1989, as calculated under Section 202.3.
20             (8)  In the case of a corporation, for taxable years
21        beginning after June 30, 1989, an amount equal to 4.8% of
22        the taxpayer's net income for the taxable year.
23        (c)  Beginning   on  July  1,  1979  and  thereafter,  in
24    addition to such income tax, there is also hereby imposed the
25    Personal Property Tax Replacement Income Tax measured by  net
26    income   on   every   corporation   (including  Subchapter  S
27    corporations), partnership and trust, for each  taxable  year
28    ending  after  June  30, 1979.  Such taxes are imposed on the
29    privilege of earning or receiving income in or as a  resident
30    of  this State.  The Personal Property Tax Replacement Income
31    Tax shall be  in  addition  to  the  income  tax  imposed  by
32    subsections  (a)  and  (b) of this Section and in addition to
33    all other occupation or privilege taxes imposed by this State
34    or by any  municipal  corporation  or  political  subdivision
 
SB338 Enrolled             -3-                 LRB9102972JSpr
 1    thereof.
 2        (d)  Additional  Personal Property Tax Replacement Income
 3    Tax Rates.  The personal property tax replacement income  tax
 4    imposed by this subsection and subsection (c) of this Section
 5    in  the  case  of  a  corporation,  other than a Subchapter S
 6    corporation and except as adjusted by subsection (d-1), shall
 7    be an additional amount equal to 2.85% of such taxpayer's net
 8    income for the taxable year, except that beginning on January
 9    1, 1981, and thereafter, the rate of 2.85% specified in  this
10    subsection  shall  be  reduced  to 2.5%, and in the case of a
11    partnership, trust or a Subchapter S corporation shall be  an
12    additional amount equal to 1.5% of such taxpayer's net income
13    for the taxable year.
14        (d-1)  Rate  reduction  for certain foreign insurers.  In
15    the case of a foreign insurer, as defined by Section 35A-5 of
16    the Illinois  Insurance  Code,  whose  state  or  country  of
17    domicile   imposes   on  insurers  domiciled  in  Illinois  a
18    retaliatory tax  (excluding  any  insurer  whose  reinsurance
19    premiums  assumed  are  50%  or  more  of its total insurance
20    premiums as determined under paragraph (2) of subsection  (b)
21    of   Section   304,   except   that   for  purposes  of  this
22    determination reinsurance premiums  do  not  include  assumed
23    premiums    from   inter-affiliate   pooling   arrangements),
24    beginning with taxable years ending on or after December  31,
25    1999  and  ending  with  taxable  years  ending  on or before
26    December 31, 2000, the sum of the rates  of  tax  imposed  by
27    subsections  (b) and (d) shall be reduced (but not increased)
28    to the rate at which the total amount of  tax  imposed  under
29    this  Act,  net  of all credits allowed under this Act, shall
30    equal (i) the total amount of tax that would  be  imposed  on
31    the  foreign  insurer's  net income allocable to Illinois for
32    the taxable year by such foreign insurer's state  or  country
33    of  domicile  if  that  net income were subject to all income
34    taxes and taxes  measured  by  net  income  imposed  by  such
 
SB338 Enrolled             -4-                 LRB9102972JSpr
 1    foreign  insurer's  state  or country of domicile, net of all
 2    credits allowed or (ii) a rate of zero  if  no  such  tax  is
 3    imposed  on  such  income  by  the foreign insurer's state of
 4    domicile.
 5             (1)  For the purposes of  subsection  (d-1),  in  no
 6        event  shall  the  sum  of  the  rates  of tax imposed by
 7        subsections (b) and (d) be  reduced  below  the  rate  at
 8        which the sum of:
 9                  (A)  the  total  amount  of tax imposed on such
10             foreign insurer under this Act for a  taxable  year,
11             net of all credits allowed under this Act, plus
12                  (B)  the  privilege  tax imposed by Section 409
13             of the Illinois Insurance Code, the  fire  insurance
14             company  tax  imposed  by  Section  12  of  the Fire
15             Investigation Act, and  the  fire  department  taxes
16             imposed   under  Section  11-10-1  of  the  Illinois
17             Municipal Code,
18        equals 1.25% of the net taxable premiums written for  the
19        taxable  year,  as described by subsection (1) of Section
20        409 of the Illinois Insurance Code.  This paragraph  will
21        in  no event increase the rates imposed under subsections
22        (b) and (d).
23             (2)  Any reduction in the rates of  tax  imposed  by
24        this  subsection shall be applied first against the rates
25        imposed by subsection (b) and only after the tax  imposed
26        by  subsection  (a) net of all credits allowed under this
27        Section other than the credit  allowed  under  subsection
28        (i)  has  been reduced to zero, against the rates imposed
29        by subsection (d).
30             (3)  The provisions of  this  subsection  (d-1)  are
31        effective  only through December 31, 2000 and cease to be
32        effective on January 1, 2001; but this  does  not  affect
33        any claim or obligation based upon the use or application
34        of  this  subsection for tax years ending on December 31,
 
SB338 Enrolled             -5-                 LRB9102972JSpr
 1        2000 or earlier.
 2        (e)  Investment credit.  A taxpayer shall  be  allowed  a
 3    credit  against  the Personal Property Tax Replacement Income
 4    Tax for investment in qualified property.
 5             (1)  A taxpayer shall be allowed a credit  equal  to
 6        .5%  of the basis of qualified property placed in service
 7        during the taxable year, provided such property is placed
 8        in service on or after July  1,  1984.   There  shall  be
 9        allowed an additional credit equal to .5% of the basis of
10        qualified  property  placed in service during the taxable
11        year, provided such property is placed in service  on  or
12        after  July  1,  1986, and the taxpayer's base employment
13        within Illinois has increased by  1%  or  more  over  the
14        preceding year as determined by the taxpayer's employment
15        records  filed with the Illinois Department of Employment
16        Security.  Taxpayers who are new  to  Illinois  shall  be
17        deemed  to  have met the 1% growth in base employment for
18        the first year in which they file employment records with
19        the Illinois  Department  of  Employment  Security.   The
20        provisions  added  to  this Section by Public Act 85-1200
21        (and restored by Public Act 87-895) shall be construed as
22        declaratory of existing law and not as a  new  enactment.
23        If,  in  any year, the increase in base employment within
24        Illinois over the preceding year is  less  than  1%,  the
25        additional  credit  shall  be  limited to that percentage
26        times a fraction, the numerator of which is .5%  and  the
27        denominator  of  which  is  1%, but shall not exceed .5%.
28        The investment credit shall not be allowed to the  extent
29        that  it  would  reduce a taxpayer's liability in any tax
30        year  below  zero,  nor  may  any  credit  for  qualified
31        property be allowed for any year other than the  year  in
32        which the property was placed in service in Illinois. For
33        tax years ending on or after December 31, 1987, and on or
34        before December 31, 1988, the credit shall be allowed for
 
SB338 Enrolled             -6-                 LRB9102972JSpr
 1        the  tax year in which the property is placed in service,
 2        or, if the amount of the credit exceeds the tax liability
 3        for that year, whether it exceeds the original  liability
 4        or  the  liability  as  later amended, such excess may be
 5        carried forward and applied to the tax liability of the 5
 6        taxable years following the excess credit  years  if  the
 7        taxpayer  (i)  makes investments which cause the creation
 8        of a  minimum  of  2,000  full-time  equivalent  jobs  in
 9        Illinois,   (ii)   is   located  in  an  enterprise  zone
10        established pursuant to the Illinois Enterprise Zone  Act
11        and  (iii) is certified by the Department of Commerce and
12        Community Affairs  as  complying  with  the  requirements
13        specified  in  clause  (i) and (ii) by July 1, 1986.  The
14        Department of Commerce and Community Affairs shall notify
15        the Department of  Revenue  of  all  such  certifications
16        immediately.  For  tax  years  ending  after December 31,
17        1988, the credit shall be allowed for  the  tax  year  in
18        which  the  property  is  placed  in  service, or, if the
19        amount of the credit exceeds the tax liability  for  that
20        year,  whether  it  exceeds the original liability or the
21        liability as later amended, such excess  may  be  carried
22        forward and applied to the tax liability of the 5 taxable
23        years following the excess credit years. The credit shall
24        be  applied  to  the  earliest  year for which there is a
25        liability. If there is credit from more than one tax year
26        that is available to offset a liability,  earlier  credit
27        shall be applied first.
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 and signs that are real property, but  not
33             including land or improvements to real property that
34             are not a structural component of a building such as
 
SB338 Enrolled             -7-                 LRB9102972JSpr
 1             landscaping,   sewer   lines,  local  access  roads,
 2             fencing, parking lots, and other appurtenances;
 3                  (B)  is depreciable pursuant to Section 167  of
 4             the  Internal  Revenue  Code,  except  that  "3-year
 5             property" as defined in Section 168(c)(2)(A) of that
 6             Code is not eligible for the credit provided by this
 7             subsection (e);
 8                  (C)  is  acquired  by  purchase  as  defined in
 9             Section 179(d) of the Internal Revenue Code;
10                  (D)  is used in Illinois by a taxpayer  who  is
11             primarily  engaged  in  manufacturing,  or in mining
12             coal or fluorite, or in retailing; and
13                  (E)  has not previously been used  in  Illinois
14             in  such  a  manner  and  by  such a person as would
15             qualify for the credit provided by  this  subsection
16             (e) or subsection (f).
17             (3)  For    purposes   of   this   subsection   (e),
18        "manufacturing" means the material staging and production
19        of tangible  personal  property  by  procedures  commonly
20        regarded  as  manufacturing,  processing, fabrication, or
21        assembling which changes some existing material into  new
22        shapes, new qualities, or new combinations.  For purposes
23        of  this  subsection (e) the term "mining" shall have the
24        same meaning as the term "mining" in  Section  613(c)  of
25        the   Internal   Revenue  Code.   For  purposes  of  this
26        subsection (e), the term "retailing" means  the  sale  of
27        tangible   personal  property  or  services  rendered  in
28        conjunction with the sale of tangible consumer  goods  or
29        commodities.
30             (4)  The  basis  of  qualified property shall be the
31        basis used to  compute  the  depreciation  deduction  for
32        federal income tax purposes.
33             (5)  If the basis of the property for federal income
34        tax  depreciation purposes is increased after it has been
 
SB338 Enrolled             -8-                 LRB9102972JSpr
 1        placed in service in Illinois by the taxpayer, the amount
 2        of such increase  shall  be  deemed  property  placed  in
 3        service on the date of such increase in basis.
 4             (6)  The  term  "placed  in  service" shall have the
 5        same meaning as under Section 46 of the Internal  Revenue
 6        Code.
 7             (7)  If during any taxable year, any property ceases
 8        to  be  qualified  property  in the hands of the taxpayer
 9        within 48 months after being placed in  service,  or  the
10        situs of any qualified property is moved outside Illinois
11        within  48  months  after  being  placed  in service, the
12        Personal Property Tax Replacement  Income  Tax  for  such
13        taxable  year shall be increased.  Such increase shall be
14        determined by (i) recomputing the investment credit which
15        would have been allowed for the year in which credit  for
16        such  property was originally allowed by eliminating such
17        property from such computation and, (ii) subtracting such
18        recomputed credit from the amount  of  credit  previously
19        allowed.  For  the  purposes  of  this  paragraph  (7), a
20        reduction of the basis of  qualified  property  resulting
21        from  a  redetermination  of  the purchase price shall be
22        deemed a disposition of qualified property to the  extent
23        of such reduction.
24             (8)  Unless  the  investment  credit  is extended by
25        law, the basis of qualified property  shall  not  include
26        costs  incurred after December 31, 2003, except for costs
27        incurred pursuant to a binding contract entered  into  on
28        or before December 31, 2003.
29             (9)  Each  taxable  year, a partnership may elect to
30        pass through to its partners the  credits  to  which  the
31        partnership is entitled under this subsection (e) for the
32        taxable  year.  A partner may use the credit allocated to
33        him or her under this  paragraph  only  against  the  tax
34        imposed  in  subsections (c) and (d) of this Section.  If
 
SB338 Enrolled             -9-                 LRB9102972JSpr
 1        the partnership makes that election, those credits  shall
 2        be  allocated  among  the  partners in the partnership in
 3        accordance with the rules set forth in Section 704(b)  of
 4        the  Internal  Revenue  Code,  and  the rules promulgated
 5        under that Section,  and  the  allocated  amount  of  the
 6        credits shall be allowed to the partners for that taxable
 7        year.   The  partnership  shall make this election on its
 8        Personal Property Tax Replacement Income Tax  return  for
 9        that  taxable  year.  The  election  to  pass through the
10        credits shall be irrevocable.
11        (f)  Investment credit; Enterprise Zone.
12             (1)  A taxpayer shall be allowed  a  credit  against
13        the  tax  imposed  by  subsections  (a)  and  (b) of this
14        Section for investment in  qualified  property  which  is
15        placed  in service in an Enterprise Zone created pursuant
16        to the Illinois Enterprise Zone Act. For partners and for
17        shareholders of Subchapter S corporations, there shall be
18        allowed  a  credit  under  this  subsection  (f)  to   be
19        determined in accordance with the determination of income
20        and  distributive  share of income under Sections 702 and
21        704 and Subchapter S of the Internal  Revenue  Code.  The
22        credit  shall be .5% of the basis for such property.  The
23        credit shall be available only in  the  taxable  year  in
24        which the property is placed in service in the Enterprise
25        Zone and shall not be allowed to the extent that it would
26        reduce  a  taxpayer's  liability  for  the tax imposed by
27        subsections (a) and (b) of this Section  to  below  zero.
28        For  tax  years ending on or after December 31, 1985, the
29        credit shall be allowed for the tax  year  in  which  the
30        property  is  placed in service, or, if the amount of the
31        credit exceeds the tax liability for that  year,  whether
32        it  exceeds  the  original  liability or the liability as
33        later amended, such excess may  be  carried  forward  and
34        applied  to  the  tax  liability  of  the 5 taxable years
 
SB338 Enrolled             -10-                LRB9102972JSpr
 1        following the excess credit year.  The  credit  shall  be
 2        applied  to  the  earliest  year  for  which  there  is a
 3        liability. If there is credit from more than one tax year
 4        that is available  to  offset  a  liability,  the  credit
 5        accruing first in time shall be applied first.
 6             (2)  The  term  qualified  property  means  property
 7        which:
 8                  (A)  is   tangible,   whether   new   or  used,
 9             including buildings  and  structural  components  of
10             buildings;
11                  (B)  is  depreciable pursuant to Section 167 of
12             the  Internal  Revenue  Code,  except  that  "3-year
13             property" as defined in Section 168(c)(2)(A) of that
14             Code is not eligible for the credit provided by this
15             subsection (f);
16                  (C)  is acquired  by  purchase  as  defined  in
17             Section 179(d) of the Internal Revenue Code;
18                  (D)  is  used  in  the  Enterprise  Zone by the
19             taxpayer; and
20                  (E)  has not been previously used  in  Illinois
21             in  such  a  manner  and  by  such a person as would
22             qualify for the credit provided by  this  subsection
23             (f) or subsection (e).
24             (3)  The  basis  of  qualified property shall be the
25        basis used to  compute  the  depreciation  deduction  for
26        federal income tax purposes.
27             (4)  If the basis of the property for federal income
28        tax  depreciation purposes is increased after it has been
29        placed in service in the Enterprise Zone by the taxpayer,
30        the amount of such  increase  shall  be  deemed  property
31        placed in service on the date of such increase in basis.
32             (5)  The  term  "placed  in  service" shall have the
33        same meaning as under Section 46 of the Internal  Revenue
34        Code.
 
SB338 Enrolled             -11-                LRB9102972JSpr
 1             (6)  If during any taxable year, any property ceases
 2        to  be  qualified  property  in the hands of the taxpayer
 3        within 48 months after being placed in  service,  or  the
 4        situs  of  any  qualified  property  is moved outside the
 5        Enterprise Zone within 48 months after  being  placed  in
 6        service, the tax imposed under subsections (a) and (b) of
 7        this  Section  for  such taxable year shall be increased.
 8        Such increase shall be determined by (i) recomputing  the
 9        investment  credit  which would have been allowed for the
10        year in which credit for  such  property  was  originally
11        allowed   by   eliminating   such   property   from  such
12        computation, and (ii) subtracting such recomputed  credit
13        from  the  amount  of credit previously allowed.  For the
14        purposes of this paragraph (6), a reduction of the  basis
15        of qualified property resulting from a redetermination of
16        the  purchase  price  shall  be  deemed  a disposition of
17        qualified property to the extent of such reduction.
18             (g)  Jobs Tax Credit; Enterprise  Zone  and  Foreign
19    Trade Zone or Sub-Zone.
20             (1)  A taxpayer conducting a trade or business in an
21        enterprise  zone  or a High Impact Business designated by
22        the  Department  of  Commerce   and   Community   Affairs
23        conducting  a trade or business in a federally designated
24        Foreign Trade Zone or Sub-Zone shall be allowed a  credit
25        against  the  tax  imposed  by subsections (a) and (b) of
26        this Section in the amount of $500 per eligible  employee
27        hired to work in the zone during the taxable year.
28             (2)  To qualify for the credit:
29                  (A)  the  taxpayer must hire 5 or more eligible
30             employees to work in an enterprise zone or federally
31             designated Foreign Trade Zone or Sub-Zone during the
32             taxable year;
33                  (B)  the taxpayer's total employment within the
34             enterprise  zone  or  federally  designated  Foreign
 
SB338 Enrolled             -12-                LRB9102972JSpr
 1             Trade Zone or Sub-Zone must increase by  5  or  more
 2             full-time  employees  beyond  the  total employed in
 3             that zone at the end of the previous  tax  year  for
 4             which  a  jobs  tax  credit  under  this Section was
 5             taken, or beyond the total employed by the  taxpayer
 6             as of December 31, 1985, whichever is later; and
 7                  (C)  the  eligible  employees  must be employed
 8             180 consecutive days in order to be deemed hired for
 9             purposes of this subsection.
10             (3)  An "eligible employee" means  an  employee  who
11        is:
12                  (A)  Certified  by  the  Department of Commerce
13             and Community Affairs  as  "eligible  for  services"
14             pursuant  to  regulations  promulgated in accordance
15             with Title II of the Job Training  Partnership  Act,
16             Training Services for the Disadvantaged or Title III
17             of  the Job Training Partnership Act, Employment and
18             Training Assistance for Dislocated Workers Program.
19                  (B)  Hired  after  the   enterprise   zone   or
20             federally  designated Foreign Trade Zone or Sub-Zone
21             was designated or the trade or business was  located
22             in that zone, whichever is later.
23                  (C)  Employed in the enterprise zone or Foreign
24             Trade  Zone  or Sub-Zone. An employee is employed in
25             an enterprise zone or federally  designated  Foreign
26             Trade  Zone or Sub-Zone if his services are rendered
27             there or it  is  the  base  of  operations  for  the
28             services performed.
29                  (D)  A  full-time  employee  working 30 or more
30             hours per week.
31             (4)  For tax years ending on or after  December  31,
32        1985  and prior to December 31, 1988, the credit shall be
33        allowed for the tax year in which the eligible  employees
34        are hired.  For tax years ending on or after December 31,
 
SB338 Enrolled             -13-                LRB9102972JSpr
 1        1988,  the  credit  shall  be  allowed  for  the tax year
 2        immediately following the tax year in which the  eligible
 3        employees are hired.  If the amount of the credit exceeds
 4        the  tax  liability for that year, whether it exceeds the
 5        original liability or the  liability  as  later  amended,
 6        such excess may be carried forward and applied to the tax
 7        liability  of  the  5  taxable years following the excess
 8        credit year.  The credit shall be applied to the earliest
 9        year for which there is a liability. If there  is  credit
10        from more than one tax year that is available to offset a
11        liability, earlier credit shall be applied first.
12             (5)  The Department of Revenue shall promulgate such
13        rules and regulations as may be deemed necessary to carry
14        out the purposes of this subsection (g).
15             (6)  The  credit  shall  be  available  for eligible
16        employees hired on or after January 1, 1986.
17             (h)  Investment credit; High Impact Business.
18             (1)  Subject to subsection (b) of Section 5.5 of the
19        Illinois Enterprise Zone Act, a taxpayer shall be allowed
20        a credit against the tax imposed by subsections  (a)  and
21        (b)  of this Section for investment in qualified property
22        which is placed in service by a  Department  of  Commerce
23        and  Community  Affairs  designated High Impact Business.
24        The credit shall be .5% of the basis for  such  property.
25        The  credit  shall  not  be  available  until the minimum
26        investments in qualified property set  forth  in  Section
27        5.5  of  the  Illinois  Enterprise  Zone  Act  have  been
28        satisfied  and shall not be allowed to the extent that it
29        would reduce a taxpayer's liability for the  tax  imposed
30        by subsections (a) and (b) of this Section to below zero.
31        The  credit  applicable to such minimum investments shall
32        be taken in  the  taxable  year  in  which  such  minimum
33        investments   have   been   completed.   The  credit  for
34        additional investments beyond the minimum investment by a
 
SB338 Enrolled             -14-                LRB9102972JSpr
 1        designated high impact business shall be  available  only
 2        in  the  taxable  year in which the property is placed in
 3        service and shall not be allowed to the  extent  that  it
 4        would  reduce  a taxpayer's liability for the tax imposed
 5        by subsections (a) and (b) of this Section to below zero.
 6        For tax years ending on or after December 31,  1987,  the
 7        credit  shall  be  allowed  for the tax year in which the
 8        property is placed in service, or, if the amount  of  the
 9        credit  exceeds  the tax liability for that year, whether
10        it exceeds the original liability  or  the  liability  as
11        later  amended,  such  excess  may be carried forward and
12        applied to the tax  liability  of  the  5  taxable  years
13        following  the  excess  credit year.  The credit shall be
14        applied to  the  earliest  year  for  which  there  is  a
15        liability.   If  there  is  credit from more than one tax
16        year that is available to offset a liability, the  credit
17        accruing first in time shall be applied first.
18             Changes  made  in  this subdivision (h)(1) by Public
19        Act 88-670 restore changes made by Public Act 85-1182 and
20        reflect existing law.
21             (2)  The  term  qualified  property  means  property
22        which:
23                  (A)  is  tangible,   whether   new   or   used,
24             including  buildings  and  structural  components of
25             buildings;
26                  (B)  is depreciable pursuant to Section 167  of
27             the  Internal  Revenue  Code,  except  that  "3-year
28             property" as defined in Section 168(c)(2)(A) of that
29             Code is not eligible for the credit provided by this
30             subsection (h);
31                  (C)  is  acquired  by  purchase  as  defined in
32             Section 179(d) of the Internal Revenue Code; and
33                  (D)  is not eligible for  the  Enterprise  Zone
34             Investment Credit provided by subsection (f) of this
 
SB338 Enrolled             -15-                LRB9102972JSpr
 1             Section.
 2             (3)  The  basis  of  qualified property shall be the
 3        basis used to  compute  the  depreciation  deduction  for
 4        federal income tax purposes.
 5             (4)  If the basis of the property for federal income
 6        tax  depreciation purposes is increased after it has been
 7        placed in service in a federally designated Foreign Trade
 8        Zone or Sub-Zone located in Illinois by the taxpayer, the
 9        amount of such increase shall be deemed  property  placed
10        in service on the date of such increase in basis.
11             (5)  The  term  "placed  in  service" shall have the
12        same meaning as under Section 46 of the Internal  Revenue
13        Code.
14             (6)  If  during any taxable year ending on or before
15        December 31, 1996, any property ceases  to  be  qualified
16        property  in  the  hands of the taxpayer within 48 months
17        after being placed  in  service,  or  the  situs  of  any
18        qualified  property  is  moved outside Illinois within 48
19        months after being placed in  service,  the  tax  imposed
20        under  subsections  (a)  and (b) of this Section for such
21        taxable year shall be increased.  Such increase shall  be
22        determined by (i) recomputing the investment credit which
23        would  have been allowed for the year in which credit for
24        such property was originally allowed by eliminating  such
25        property from such computation, and (ii) subtracting such
26        recomputed  credit  from  the amount of credit previously
27        allowed.  For the  purposes  of  this  paragraph  (6),  a
28        reduction  of  the  basis of qualified property resulting
29        from a redetermination of the  purchase  price  shall  be
30        deemed  a disposition of qualified property to the extent
31        of such reduction.
32             (7)  Beginning with tax years ending after  December
33        31,  1996,  if  a taxpayer qualifies for the credit under
34        this  subsection  (h)  and  thereby  is  granted  a   tax
 
SB338 Enrolled             -16-                LRB9102972JSpr
 1        abatement  and the taxpayer relocates its entire facility
 2        in violation of the explicit  terms  and  length  of  the
 3        contract  under  Section 18-183 of the Property Tax Code,
 4        the tax imposed under subsections (a)  and  (b)  of  this
 5        Section  shall be increased for the taxable year in which
 6        the taxpayer relocated its facility by an amount equal to
 7        the amount of credit received by the taxpayer under  this
 8        subsection (h).
 9        (i)  A credit shall be allowed against the tax imposed by
10    subsections  (a)  and (b) of this Section for the tax imposed
11    by subsections (c) and (d)  of  this  Section.   This  credit
12    shall   be   computed  by  multiplying  the  tax  imposed  by
13    subsections (c) and (d) of this Section by  a  fraction,  the
14    numerator  of  which is base income allocable to Illinois and
15    the denominator of which is Illinois base income, and further
16    multiplying  the  product  by  the  tax   rate   imposed   by
17    subsections (a) and (b) of this Section.
18        Any  credit  earned  on  or after December 31, 1986 under
19    this subsection which is unused in the  year  the  credit  is
20    computed  because  it  exceeds  the  tax liability imposed by
21    subsections (a) and (b) for that year (whether it exceeds the
22    original liability or the liability as later amended) may  be
23    carried  forward  and applied to the tax liability imposed by
24    subsections (a) and (b) of the 5 taxable years following  the
25    excess  credit  year.   This credit shall be applied first to
26    the earliest year for which there is a liability.   If  there
27    is a credit under this subsection from more than one tax year
28    that  is  available to offset a liability the earliest credit
29    arising under this subsection shall be applied first.
30        If, during any taxable year ending on or  after  December
31    31,  1986, the tax imposed by subsections (c) and (d) of this
32    Section for which a taxpayer has claimed a credit under  this
33    subsection  (i) is reduced, the amount of credit for such tax
34    shall also be reduced.  Such reduction shall be determined by
 
SB338 Enrolled             -17-                LRB9102972JSpr
 1    recomputing the credit to take into account the  reduced  tax
 2    imposed  by  subsection  (c)  and (d).  If any portion of the
 3    reduced amount of credit has  been  carried  to  a  different
 4    taxable  year,  an  amended  return  shall  be filed for such
 5    taxable year to reduce the amount of credit claimed.
 6        (j)  Training expense credit.  Beginning with  tax  years
 7    ending  on  or  after  December 31, 1986, a taxpayer shall be
 8    allowed a credit against the tax imposed  by  subsection  (a)
 9    and  (b)  under this Section for all amounts paid or accrued,
10    on behalf of all persons employed by the taxpayer in Illinois
11    or Illinois residents  employed  outside  of  Illinois  by  a
12    taxpayer,   for   educational   or   vocational  training  in
13    semi-technical or technical fields or semi-skilled or skilled
14    fields,  which  were  deducted  from  gross  income  in   the
15    computation  of  taxable  income.  The credit against the tax
16    imposed by subsections (a) and (b)  shall  be  1.6%  of  such
17    training  expenses.   For  partners  and  for shareholders of
18    subchapter S corporations, there shall be  allowed  a  credit
19    under this subsection (j) to be determined in accordance with
20    the  determination of income and distributive share of income
21    under Sections 702 and 704 and subchapter S of  the  Internal
22    Revenue Code.
23        Any  credit allowed under this subsection which is unused
24    in the year the credit is earned may be  carried  forward  to
25    each  of the 5 taxable years following the year for which the
26    credit is first computed until it is used.  This credit shall
27    be applied first to the earliest year for which  there  is  a
28    liability.   If  there is a credit under this subsection from
29    more than  one  tax  year  that  is  available  to  offset  a
30    liability  the  earliest credit arising under this subsection
31    shall be applied first.
32        (k)  Research and development credit.
33        Beginning with tax years ending after  July  1,  1990,  a
34    taxpayer shall be allowed a credit against the tax imposed by
 
SB338 Enrolled             -18-                LRB9102972JSpr
 1    subsections  (a)  and  (b)  of  this  Section  for increasing
 2    research  activities  in  this  State.   The  credit  allowed
 3    against the tax imposed by subsections (a) and (b)  shall  be
 4    equal to 6 1/2% of the qualifying expenditures for increasing
 5    research activities in this State.
 6        For    purposes    of    this   subsection,   "qualifying
 7    expenditures" means the qualifying  expenditures  as  defined
 8    for  the  federal  credit  for increasing research activities
 9    which would be allowable under Section  41  of  the  Internal
10    Revenue   Code   and  which  are  conducted  in  this  State,
11    "qualifying expenditures for increasing  research  activities
12    in  this  State"  means the excess of qualifying expenditures
13    for the  taxable  year  in  which  incurred  over  qualifying
14    expenditures  for  the  base period, "qualifying expenditures
15    for the base period" means  the  average  of  the  qualifying
16    expenditures  for  each  year  in  the base period, and "base
17    period" means the 3 taxable years immediately  preceding  the
18    taxable year for which the determination is being made.
19        Any credit in excess of the tax liability for the taxable
20    year may be carried forward. A taxpayer may elect to have the
21    unused  credit  shown  on  its final completed return carried
22    over as a credit against the tax liability for the  following
23    5  taxable  years  or until it has been fully used, whichever
24    occurs first.
25        If an unused credit is carried forward to  a  given  year
26    from  2  or  more  earlier  years, that credit arising in the
27    earliest year will be applied first against the tax liability
28    for the given year.  If a tax liability for  the  given  year
29    still  remains,  the  credit from the next earliest year will
30    then be applied, and so on, until all credits have been  used
31    or  no  tax  liability  for  the  given  year  remains.   Any
32    remaining  unused  credit  or  credits  then  will be carried
33    forward to the next following year in which a  tax  liability
34    is  incurred, except that no credit can be carried forward to
 
SB338 Enrolled             -19-                LRB9102972JSpr
 1    a year which is more than 5 years after the year in which the
 2    expense for which the credit is given was incurred.
 3        Unless extended by law,  the  credit  shall  not  include
 4    costs  incurred  after  December  31,  2004, except for costs
 5    incurred pursuant to a binding contract entered  into  on  or
 6    before December 31, 2004.
 7        (l)  Environmental Remediation Tax Credit.
 8             (i)  For  tax   years ending after December 31, 1997
 9        and on or before December 31, 2001, a taxpayer  shall  be
10        allowed  a  credit against the tax imposed by subsections
11        (a) and (b) of this Section for certain amounts paid  for
12        unreimbursed  eligible remediation costs, as specified in
13        this  subsection.   For   purposes   of   this   Section,
14        "unreimbursed  eligible  remediation  costs"  means costs
15        approved by the Illinois Environmental Protection  Agency
16        ("Agency")  under  Section  58.14  of  the  Environmental
17        Protection Act that were paid in performing environmental
18        remediation  at a site for which a No Further Remediation
19        Letter was  issued  by  the  Agency  and  recorded  under
20        Section  58.10  of the Environmental Protection Act.  The
21        credit must be claimed for  the  taxable  year  in  which
22        Agency  approval  of  the  eligible  remediation costs is
23        granted.  The credit is not available to any taxpayer  if
24        the  taxpayer  or any related party caused or contributed
25        to, in any  material  respect,  a  release  of  regulated
26        substances  on, in, or under the site that was identified
27        and addressed by the remedial action pursuant to the Site
28        Remediation Program of the Environmental Protection  Act.
29        After  the  Pollution  Control  Board  rules  are adopted
30        pursuant to the Illinois Administrative Procedure Act for
31        the administration and enforcement of Section 58.9 of the
32        Environmental Protection Act, determinations as to credit
33        availability for purposes of this Section shall  be  made
34        consistent  with  those  rules.   For  purposes  of  this
 
SB338 Enrolled             -20-                LRB9102972JSpr
 1        Section,   "taxpayer"   includes   a   person  whose  tax
 2        attributes the taxpayer has succeeded  to  under  Section
 3        381  of  the  Internal  Revenue  Code and "related party"
 4        includes the persons disallowed a deduction for losses by
 5        paragraphs (b), (c), and (f)(1) of  Section  267  of  the
 6        Internal  Revenue  Code  by  virtue  of  being  a related
 7        taxpayer, as well as any of  its  partners.   The  credit
 8        allowed  against  the  tax imposed by subsections (a) and
 9        (b) shall be equal to 25% of  the  unreimbursed  eligible
10        remediation  costs in excess of $100,000 per site, except
11        that the $100,000 threshold shall not apply to  any  site
12        contained  in  an  enterprise  zone  as determined by the
13        Department of Commerce and Community Affairs.  The  total
14        credit  allowed  shall not exceed $40,000 per year with a
15        maximum total of $150,000 per  site.   For  partners  and
16        shareholders of subchapter S corporations, there shall be
17        allowed  a  credit under this subsection to be determined
18        in  accordance  with  the  determination  of  income  and
19        distributive share of income under Sections 702  and  704
20        of subchapter S of the Internal Revenue Code.
21             (ii)  A credit allowed under this subsection that is
22        unused  in  the  year the credit is earned may be carried
23        forward to each of the 5 taxable years following the year
24        for which the credit is first earned until  it  is  used.
25        The  term "unused credit" does not include any amounts of
26        unreimbursed eligible remediation costs in excess of  the
27        maximum  credit  per site authorized under paragraph (i).
28        This credit shall be applied first to the  earliest  year
29        for  which  there  is  a liability.  If there is a credit
30        under this subsection from more than one tax year that is
31        available to offset  a  liability,  the  earliest  credit
32        arising  under this subsection shall be applied first.  A
33        credit allowed under this subsection may  be  sold  to  a
34        buyer as part of a sale of all or part of the remediation
 
SB338 Enrolled             -21-                LRB9102972JSpr
 1        site  for which the credit was granted.  The purchaser of
 2        a remediation site and the tax credit  shall  succeed  to
 3        the  unused  credit and remaining carry-forward period of
 4        the seller.  To perfect the transfer, the assignor  shall
 5        record  the  transfer  in the chain of title for the site
 6        and  provide  written  notice  to  the  Director  of  the
 7        Illinois Department of Revenue of the  assignor's  intent
 8        to  sell  the  remediation site and the amount of the tax
 9        credit to be transferred as a portion of the sale.  In no
10        event may a credit be transferred to any taxpayer if  the
11        taxpayer  or  a related party would not be eligible under
12        the provisions of subsection (i).
13             (iii)  For purposes of this Section, the term "site"
14        shall have the same meaning as under Section 58.2 of  the
15        Environmental Protection Act.
16    (Source:  P.A.  89-235,  eff.  8-4-95;  89-519, eff. 7-18-96;
17    89-591, eff.  8-1-96;  90-123,  eff.  7-21-97;  90-458,  eff.
18    8-17-97;  90-605, eff. 6-30-98; 90-655, eff. 7-30-98; 90-717,
19    eff. 8-7-98; 90-792, eff. 1-1-99; revised 9-16-98.)

20        Section 10.  The Illinois Insurance Code  is  amended  by
21    changing Section 412 as follows:

22        (215 ILCS 5/412) (from Ch. 73, par. 1024)
23        Sec. 412. Refunds; penalties; collection.
24        (1) (a)  Whenever  it  appears to the satisfaction of the
25    Director that because of  some  mistake  of  fact,  error  in
26    calculation, or erroneous interpretation of a statute of this
27    or  any  other state, any authorized company has paid to him,
28    pursuant to any provision  of  law,  taxes,  fees,  or  other
29    charges  in  excess  of the amount legally chargeable against
30    it, during  the  6  year  period  immediately  preceding  the
31    discovery  of such overpayment, he shall have power to refund
32    to such company the amount  of  the  excess  or  excesses  by
 
SB338 Enrolled             -22-                LRB9102972JSpr
 1    applying  the amount or amounts thereof toward the payment of
 2    taxes, fees, or other  charges  already  due,  or  which  may
 3    thereafter  become due from that company until such excess or
 4    excesses have been fully refunded, or upon a written  request
 5    from  the  authorized  company, the Director shall provide at
 6    his discretion, to make a cash refund within 120  days  after
 7    receipt  of  the written request if all necessary information
 8    has been filed with the Department in order for it to perform
 9    an audit of the annual return  for  the  year  in  which  the
10    overpayment  occurred  or  within 120 days after the date the
11    Department receives all the necessary information to  perform
12    such  audit.  The Director shall not provide a cash refund if
13    there are insufficient funds in  the  Insurance  Premium  Tax
14    Refund  Fund  to  provide a cash refund, if the amount of the
15    overpayment is less than  $100,  or  if  the  amount  of  the
16    overpayment  can  be  fully  offset  against  the  taxpayer's
17    estimated  liability  for  the year following the year of the
18    cash refund request.  Any cash refund shall be paid from  the
19    Insurance  Premium  Tax  Refund  Fund,  a special fund hereby
20    created in the State treasury.
21        (b)  Beginning  January  1,  2000  and  thereafter,   the
22    Department   shall   deposit  a  percentage  of  the  amounts
23    collected under Sections 409, 444, and  444.1  of  this  Code
24    into  the  Insurance Premium Tax Refund Fund.  The percentage
25    deposited into the Insurance Premium Tax Refund Fund shall be
26    the  annual  percentage.   The  annual  percentage  shall  be
27    calculated as a fraction, the numerator of which shall be the
28    amount of cash refunds approved by the Director  for  payment
29    and  paid  during  the preceding calendar year as a result of
30    overpayment of tax liability under  Sections  409,  444,  and
31    444.1  of this Code and the denominator of which shall be the
32    amounts collected pursuant to Sections 409, 444, and 444.1 of
33    this Code during the preceding calendar  year.   However,  if
34    there were no cash refunds paid in a preceding calendar year,
 
SB338 Enrolled             -23-                LRB9102972JSpr
 1    the  Department  shall  deposit 5% of the amount collected in
 2    that preceding calendar year pursuant to Sections  409,  444,
 3    and  444.1 of this Code into the Insurance Premium Tax Refund
 4    Fund instead of an amount  calculated  by  using  the  annual
 5    percentage.
 6        (c)  Beginning  July  1,  1999,  moneys  in the Insurance
 7    Premium Tax Refund Fund shall be expended exclusively for the
 8    purpose of paying cash refunds resulting from overpayment  of
 9    tax liability under Sections 409, 444, and 444.1 of this Code
10    as  determined by the Director pursuant to subsection 1(a) of
11    this Section.  Cash refunds  made  in  accordance  with  this
12    Section  may  be  made  from the Insurance Premium Tax Refund
13    Fund only to the extent that amounts have been deposited  and
14    retained in the Insurance Premium Tax Refund Fund.
15        (d)  This  Section  shall  constitute  an irrevocable and
16    continuing  appropriation  from  the  Insurance  Premium  Tax
17    Refund Fund for the purpose of paying cash  refunds  pursuant
18    to the provisions of this Section.
19        (2)  When  any  insurance  company  or  any  surplus line
20    producer fails to file any tax return required under Sections
21    408.1, 409, 444, 444.1 and 445 of this Code or Section 12  of
22    the Fire Investigation Act  on the date prescribed, including
23    any  extensions, there shall be added as a penalty $200 or 5%
24    of the amount of such tax, whichever  is  greater,  for  each
25    month  or  part  of  a  month  of failure to file, the entire
26    penalty not to exceed $1,000 or 25% of the tax due, whichever
27    is greater.
28        (3) (a)  When any insurance company or any  surplus  line
29    producer   fails  to  pay  the  full  amount  due  under  the
30    provisions of this Section, Sections 408.1, 409,  444,  444.1
31    or  445 of this Code, or Section 12 of the Fire Investigation
32    Act, there shall be added to the amount due as a  penalty  an
33    amount equal to 5% of the deficiency.
34        (b)  If such failure to pay is determined by the Director
 
SB338 Enrolled             -24-                LRB9102972JSpr
 1    to  be  wilful,  after  a hearing under Sections 402 and 403,
 2    there shall be added to the tax as a penalty an amount  equal
 3    to  the  greater of 25% of the deficiency or 5% of the amount
 4    due and unpaid for each month or part of  a  month  that  the
 5    deficiency  remains  unpaid commencing with the date that the
 6    amount becomes due. Such amount  shall  be  in  lieu  of  any
 7    determined under paragraph (a).
 8        (4)  Any  insurance  company or any surplus line producer
 9    which fails to pay the full amount due under this Section  or
10    Sections  408.1,  409,  444,  444.1  or  445 of this Code, or
11    Section 12 of the  Fire  Investigation  Act   is  liable,  in
12    addition  to  the tax and any penalties, for interest on such
13    deficiency at the rate of 12% per annum, or  at  such  higher
14    adjusted  rates as are or may be established under subsection
15    (b) of Section 6621 of the Internal Revenue  Code,  from  the
16    date that payment of any such tax was due, determined without
17    regard  to  any  extensions,  to  the date of payment of such
18    amount.
19        (5)  The Director,  through  the  Attorney  General,  may
20    institute an action in the name of the People of the State of
21    Illinois,  in  any  court  of competent jurisdiction, for the
22    recovery of the amount of such  taxes,  fees,  and  penalties
23    due,  and prosecute the same to final judgment, and take such
24    steps as are necessary to collect the same.
25        (6)  In the event that the certificate of authority of  a
26    foreign  or  alien  company  is  revoked for any cause or the
27    company withdraws from this State prior to the  renewal  date
28    of  the  certificate of authority as provided in Section 114,
29    the company may recover the amount of any such  tax  paid  in
30    advance. Except as provided in this subsection, no revocation
31    or  withdrawal  excuses payment of or constitutes grounds for
32    the recovery of any taxes or penalties imposed by this Code.
33        (7)  When an insurance  company  or  domestic  affiliated
34    group fails to pay the full amount of any fee of $100 or more
 
SB338 Enrolled             -25-                LRB9102972JSpr
 1    due  under  Section 408 of this Code, there shall be added to
 2    the amount due as a penalty the greater of $50 or  an  amount
 3    equal  to  5%  of  the deficiency for each month or part of a
 4    month that the deficiency remains unpaid.
 5    (Source: P.A. 87-108.)

 6        Section 99.  Effective date.  This Act takes effect  upon
 7    becoming law.

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