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| [ Introduced ] | [ Engrossed ] | [ Senate Amendment 001 ] |
91_SB1326enr SB1326 Enrolled LRB9110268SMdv 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, except as adjusted by 18 subsection (d-1): 19 (1) In the case of an individual, trust or estate, 20 for taxable years ending prior to July 1, 1989, an amount 21 equal to 2 1/2% of the taxpayer's net income for the 22 taxable year. 23 (2) In the case of an individual, trust or estate, 24 for taxable years beginning prior to July 1, 1989 and 25 ending after June 30, 1989, an amount equal to the sum of 26 (i) 2 1/2% of the taxpayer's net income for the period 27 prior to July 1, 1989, as calculated under Section 202.3, 28 and (ii) 3% of the taxpayer's net income for the period 29 after June 30, 1989, as calculated under Section 202.3. 30 (3) In the case of an individual, trust or estate, 31 for taxable years beginning after June 30, 1989, an SB1326 Enrolled -2- LRB9110268SMdv 1 amount equal to 3% of the taxpayer's net income for the 2 taxable year. 3 (4) (Blank). 4 (5) (Blank). 5 (6) In the case of a corporation, for taxable years 6 ending prior to July 1, 1989, an amount equal to 4% of 7 the taxpayer's net income for the taxable year. 8 (7) In the case of a corporation, for taxable years 9 beginning prior to July 1, 1989 and ending after June 30, 10 1989, an amount equal to the sum of (i) 4% of the 11 taxpayer's net income for the period prior to July 1, 12 1989, as calculated under Section 202.3, and (ii) 4.8% of 13 the taxpayer's net income for the period after June 30, 14 1989, as calculated under Section 202.3. 15 (8) In the case of a corporation, for taxable years 16 beginning after June 30, 1989, an amount equal to 4.8% of 17 the taxpayer's net income for the taxable year. 18 (c) Beginning on July 1, 1979 and thereafter, in 19 addition to such income tax, there is also hereby imposed the 20 Personal Property Tax Replacement Income Tax measured by net 21 income on every corporation (including Subchapter S 22 corporations), partnership and trust, for each taxable year 23 ending after June 30, 1979. Such taxes are imposed on the 24 privilege of earning or receiving income in or as a resident 25 of this State. The Personal Property Tax Replacement Income 26 Tax shall be in addition to the income tax imposed by 27 subsections (a) and (b) of this Section and in addition to 28 all other occupation or privilege taxes imposed by this State 29 or by any municipal corporation or political subdivision 30 thereof. 31 (d) Additional Personal Property Tax Replacement Income 32 Tax Rates. The personal property tax replacement income tax 33 imposed by this subsection and subsection (c) of this Section 34 in the case of a corporation, other than a Subchapter S SB1326 Enrolled -3- LRB9110268SMdv 1 corporation and except as adjusted by subsection (d-1), shall 2 be an additional amount equal to 2.85% of such taxpayer's net 3 income for the taxable year, except that beginning on January 4 1, 1981, and thereafter, the rate of 2.85% specified in this 5 subsection shall be reduced to 2.5%, and in the case of a 6 partnership, trust or a Subchapter S corporation shall be an 7 additional amount equal to 1.5% of such taxpayer's net income 8 for the taxable year. 9 (d-1) Rate reduction for certain foreign insurers. In 10 the case of a foreign insurer, as defined by Section 35A-5 of 11 the Illinois Insurance Code, whose state or country of 12 domicile imposes on insurers domiciled in Illinois a 13 retaliatory tax (excluding any insurer whosereinsurance14 premiums from reinsurance assumed are 50% or more of its 15 total insurance premiums as determined under paragraph (2) of 16 subsection (b) of Section 304, except that for purposes of 17 this determinationreinsurancepremiums from reinsurance do 18 not includeassumedpremiums from inter-affiliate reinsurance 19poolingarrangements), beginning with taxable years ending on 20 or after December 31, 1999and ending with taxable years21ending on or before December 31, 2000, the sum of the rates 22 of tax imposed by subsections (b) and (d) shall be reduced 23 (but not increased) to the rate at which the total amount of 24 tax imposed under this Act, net of all credits allowed under 25 this Act, shall equal (i) the total amount of tax that would 26 be imposed on the foreign insurer's net income allocable to 27 Illinois for the taxable year by such foreign insurer's state 28 or country of domicile if that net income were subject to all 29 income taxes and taxes measured by net income imposed by such 30 foreign insurer's state or country of domicile, net of all 31 credits allowed or (ii) a rate of zero if no such tax is 32 imposed on such income by the foreign insurer's state of 33 domicile. For the purposes of this subsection (d-1), an 34 inter-affiliate includes a mutual insurer under common SB1326 Enrolled -4- LRB9110268SMdv 1 management. 2 (1) For the purposes of subsection (d-1), in no 3 event shall the sum of the rates of tax imposed by 4 subsections (b) and (d) be reduced below the rate at 5 which the sum of: 6 (A) the total amount of tax imposed on such 7 foreign insurer under this Act for a taxable year, 8 net of all credits allowed under this Act, plus 9 (B) the privilege tax imposed by Section 409 10 of the Illinois Insurance Code, the fire insurance 11 company tax imposed by Section 12 of the Fire 12 Investigation Act, and the fire department taxes 13 imposed under Section 11-10-1 of the Illinois 14 Municipal Code, 15 equals 1.25% of the net taxable premiums written for the 16 taxable year, as described by subsection (1) of Section 17 409 of the Illinois Insurance Code. This paragraph will 18 in no event increase the rates imposed under subsections 19 (b) and (d). 20 (2) Any reduction in the rates of tax imposed by 21 this subsection shall be applied first against the rates 22 imposed by subsection (b) and only after the tax imposed 23 by subsection (a) net of all credits allowed under this 24 Section other than the credit allowed under subsection 25 (i) has been reduced to zero, against the rates imposed 26 by subsection (d). 27(3) The provisions of this subsection (d-1) are28effective only through December 31, 2000 and cease to be29effective on January 1, 2001; but this does not affect30any claim or obligation based upon the use or application31of this subsection for tax years ending on December 31,322000 or earlier.33 This subsection (d-1) is exempt from the provisions of 34 Section 250. SB1326 Enrolled -5- LRB9110268SMdv 1 (e) Investment credit. A taxpayer shall be allowed a 2 credit against the Personal Property Tax Replacement Income 3 Tax for investment in qualified property. 4 (1) A taxpayer shall be allowed a credit equal to 5 .5% of the basis of qualified property placed in service 6 during the taxable year, provided such property is placed 7 in service on or after July 1, 1984. There shall be 8 allowed an additional credit equal to .5% of the basis of 9 qualified property placed in service during the taxable 10 year, provided such property is placed in service on or 11 after July 1, 1986, and the taxpayer's base employment 12 within Illinois has increased by 1% or more over the 13 preceding year as determined by the taxpayer's employment 14 records filed with the Illinois Department of Employment 15 Security. Taxpayers who are new to Illinois shall be 16 deemed to have met the 1% growth in base employment for 17 the first year in which they file employment records with 18 the Illinois Department of Employment Security. The 19 provisions added to this Section by Public Act 85-1200 20 (and restored by Public Act 87-895) shall be construed as 21 declaratory of existing law and not as a new enactment. 22 If, in any year, the increase in base employment within 23 Illinois over the preceding year is less than 1%, the 24 additional credit shall be limited to that percentage 25 times a fraction, the numerator of which is .5% and the 26 denominator of which is 1%, but shall not exceed .5%. 27 The investment credit shall not be allowed to the extent 28 that it would reduce a taxpayer's liability in any tax 29 year below zero, nor may any credit for qualified 30 property be allowed for any year other than the year in 31 which the property was placed in service in Illinois. For 32 tax years ending on or after December 31, 1987, and on or 33 before December 31, 1988, the credit shall be allowed for 34 the tax year in which the property is placed in service, SB1326 Enrolled -6- LRB9110268SMdv 1 or, if the amount of the credit exceeds the tax liability 2 for that year, whether it exceeds the original liability 3 or the liability as later amended, such excess may be 4 carried forward and applied to the tax liability of the 5 5 taxable years following the excess credit years if the 6 taxpayer (i) makes investments which cause the creation 7 of a minimum of 2,000 full-time equivalent jobs in 8 Illinois, (ii) is located in an enterprise zone 9 established pursuant to the Illinois Enterprise Zone Act 10 and (iii) is certified by the Department of Commerce and 11 Community Affairs as complying with the requirements 12 specified in clause (i) and (ii) by July 1, 1986. The 13 Department of Commerce and Community Affairs shall notify 14 the Department of Revenue of all such certifications 15 immediately. For tax years ending after December 31, 16 1988, the credit shall be allowed for the tax year in 17 which the property is placed in service, or, if the 18 amount of the credit exceeds the tax liability for that 19 year, whether it exceeds the original liability or the 20 liability as later amended, such excess may be carried 21 forward and applied to the tax liability of the 5 taxable 22 years following the excess credit years. The credit shall 23 be applied to the earliest year for which there is a 24 liability. If there is credit from more than one tax year 25 that is available to offset a liability, earlier credit 26 shall be applied first. 27 (2) The term "qualified property" means property 28 which: 29 (A) is tangible, whether new or used, 30 including buildings and structural components of 31 buildings and signs that are real property, but not 32 including land or improvements to real property that 33 are not a structural component of a building such as 34 landscaping, sewer lines, local access roads, SB1326 Enrolled -7- LRB9110268SMdv 1 fencing, parking lots, and other appurtenances; 2 (B) is depreciable pursuant to Section 167 of 3 the Internal Revenue Code, except that "3-year 4 property" as defined in Section 168(c)(2)(A) of that 5 Code is not eligible for the credit provided by this 6 subsection (e); 7 (C) is acquired by purchase as defined in 8 Section 179(d) of the Internal Revenue Code; 9 (D) is used in Illinois by a taxpayer who is 10 primarily engaged in manufacturing, or in mining 11 coal or fluorite, or in retailing; and 12 (E) has not previously been used in Illinois 13 in such a manner and by such a person as would 14 qualify for the credit provided by this subsection 15 (e) or subsection (f). 16 (3) For purposes of this subsection (e), 17 "manufacturing" means the material staging and production 18 of tangible personal property by procedures commonly 19 regarded as manufacturing, processing, fabrication, or 20 assembling which changes some existing material into new 21 shapes, new qualities, or new combinations. For purposes 22 of this subsection (e) the term "mining" shall have the 23 same meaning as the term "mining" in Section 613(c) of 24 the Internal Revenue Code. For purposes of this 25 subsection (e), the term "retailing" means the sale of 26 tangible personal property or services rendered in 27 conjunction with the sale of tangible consumer goods or 28 commodities. 29 (4) The basis of qualified property shall be the 30 basis used to compute the depreciation deduction for 31 federal income tax purposes. 32 (5) If the basis of the property for federal income 33 tax depreciation purposes is increased after it has been 34 placed in service in Illinois by the taxpayer, the amount SB1326 Enrolled -8- LRB9110268SMdv 1 of such increase shall be deemed property placed in 2 service on the date of such increase in basis. 3 (6) The term "placed in service" shall have the 4 same meaning as under Section 46 of the Internal Revenue 5 Code. 6 (7) If during any taxable year, any property ceases 7 to be qualified property in the hands of the taxpayer 8 within 48 months after being placed in service, or the 9 situs of any qualified property is moved outside Illinois 10 within 48 months after being placed in service, the 11 Personal Property Tax Replacement Income Tax for such 12 taxable year shall be increased. Such increase shall be 13 determined by (i) recomputing the investment credit which 14 would have been allowed for the year in which credit for 15 such property was originally allowed by eliminating such 16 property from such computation and, (ii) subtracting such 17 recomputed credit from the amount of credit previously 18 allowed. For the purposes of this paragraph (7), a 19 reduction of the basis of qualified property resulting 20 from a redetermination of the purchase price shall be 21 deemed a disposition of qualified property to the extent 22 of such reduction. 23 (8) Unless the investment credit is extended by 24 law, the basis of qualified property shall not include 25 costs incurred after December 31, 2003, except for costs 26 incurred pursuant to a binding contract entered into on 27 or before December 31, 2003. 28 (9) Each taxable year, a partnership may elect to 29 pass through to its partners the credits to which the 30 partnership is entitled under this subsection (e) for the 31 taxable year. A partner may use the credit allocated to 32 him or her under this paragraph only against the tax 33 imposed in subsections (c) and (d) of this Section. If 34 the partnership makes that election, those credits shall SB1326 Enrolled -9- LRB9110268SMdv 1 be allocated among the partners in the partnership in 2 accordance with the rules set forth in Section 704(b) of 3 the Internal Revenue Code, and the rules promulgated 4 under that Section, and the allocated amount of the 5 credits shall be allowed to the partners for that taxable 6 year. The partnership shall make this election on its 7 Personal Property Tax Replacement Income Tax return for 8 that taxable year. The election to pass through the 9 credits shall be irrevocable. 10 (f) Investment credit; Enterprise Zone. 11 (1) A taxpayer shall be allowed a credit against 12 the tax imposed by subsections (a) and (b) of this 13 Section for investment in qualified property which is 14 placed in service in an Enterprise Zone created pursuant 15 to the Illinois Enterprise Zone Act. For partners, 16 shareholders of Subchapter S corporations, and owners of 17 limited liability companies, if the liability company is 18 treated as a partnership for purposes of federal and 19 State income taxation, there shall be allowed a credit 20 under this subsection (f) to be determined in accordance 21 with the determination of income and distributive share 22 of income under Sections 702 and 704 and Subchapter S of 23 the Internal Revenue Code. The credit shall be .5% of the 24 basis for such property. The credit shall be available 25 only in the taxable year in which the property is placed 26 in service in the Enterprise Zone and shall not be 27 allowed to the extent that it would reduce a taxpayer's 28 liability for the tax imposed by subsections (a) and (b) 29 of this Section to below zero. For tax years ending on or 30 after December 31, 1985, the credit shall be allowed for 31 the tax year in which the property is placed in service, 32 or, if the amount of the credit exceeds the tax liability 33 for that year, whether it exceeds the original liability 34 or the liability as later amended, such excess may be SB1326 Enrolled -10- LRB9110268SMdv 1 carried forward and applied to the tax liability of the 5 2 taxable years following the excess credit year. The 3 credit shall be applied to the earliest year for which 4 there is a liability. If there is credit from more than 5 one tax year that is available to offset a liability, the 6 credit accruing first in time shall be applied first. 7 (2) The term qualified property means property 8 which: 9 (A) is tangible, whether new or used, 10 including buildings and structural components of 11 buildings; 12 (B) is depreciable pursuant to Section 167 of 13 the Internal Revenue Code, except that "3-year 14 property" as defined in Section 168(c)(2)(A) of that 15 Code is not eligible for the credit provided by this 16 subsection (f); 17 (C) is acquired by purchase as defined in 18 Section 179(d) of the Internal Revenue Code; 19 (D) is used in the Enterprise Zone by the 20 taxpayer; and 21 (E) has not been previously used in Illinois 22 in such a manner and by such a person as would 23 qualify for the credit provided by this subsection 24 (f) or subsection (e). 25 (3) The basis of qualified property shall be the 26 basis used to compute the depreciation deduction for 27 federal income tax purposes. 28 (4) If the basis of the property for federal income 29 tax depreciation purposes is increased after it has been 30 placed in service in the Enterprise Zone by the taxpayer, 31 the amount of such increase shall be deemed property 32 placed in service on the date of such increase in basis. 33 (5) The term "placed in service" shall have the 34 same meaning as under Section 46 of the Internal Revenue SB1326 Enrolled -11- LRB9110268SMdv 1 Code. 2 (6) If during any taxable year, any property ceases 3 to be qualified property in the hands of the taxpayer 4 within 48 months after being placed in service, or the 5 situs of any qualified property is moved outside the 6 Enterprise Zone within 48 months after being placed in 7 service, the tax imposed under subsections (a) and (b) of 8 this Section for such taxable year shall be increased. 9 Such increase shall be determined by (i) recomputing the 10 investment credit which would have been allowed for the 11 year in which credit for such property was originally 12 allowed by eliminating such property from such 13 computation, and (ii) subtracting such recomputed credit 14 from the amount of credit previously allowed. For the 15 purposes of this paragraph (6), a reduction of the basis 16 of qualified property resulting from a redetermination of 17 the purchase price shall be deemed a disposition of 18 qualified property to the extent of such reduction. 19 (g) Jobs Tax Credit; Enterprise Zone and Foreign Trade 20 Zone or Sub-Zone. 21 (1) A taxpayer conducting a trade or business in an 22 enterprise zone or a High Impact Business designated by 23 the Department of Commerce and Community Affairs 24 conducting a trade or business in a federally designated 25 Foreign Trade Zone or Sub-Zone shall be allowed a credit 26 against the tax imposed by subsections (a) and (b) of 27 this Section in the amount of $500 per eligible employee 28 hired to work in the zone during the taxable year. 29 (2) To qualify for the credit: 30 (A) the taxpayer must hire 5 or more eligible 31 employees to work in an enterprise zone or federally 32 designated Foreign Trade Zone or Sub-Zone during the 33 taxable year; 34 (B) the taxpayer's total employment within the SB1326 Enrolled -12- LRB9110268SMdv 1 enterprise zone or federally designated Foreign 2 Trade Zone or Sub-Zone must increase by 5 or more 3 full-time employees beyond the total employed in 4 that zone at the end of the previous tax year for 5 which a jobs tax credit under this Section was 6 taken, or beyond the total employed by the taxpayer 7 as of December 31, 1985, whichever is later; and 8 (C) the eligible employees must be employed 9 180 consecutive days in order to be deemed hired for 10 purposes of this subsection. 11 (3) An "eligible employee" means an employee who 12 is: 13 (A) Certified by the Department of Commerce 14 and Community Affairs as "eligible for services" 15 pursuant to regulations promulgated in accordance 16 with Title II of the Job Training Partnership Act, 17 Training Services for the Disadvantaged or Title III 18 of the Job Training Partnership Act, Employment and 19 Training Assistance for Dislocated Workers Program. 20 (B) Hired after the enterprise zone or 21 federally designated Foreign Trade Zone or Sub-Zone 22 was designated or the trade or business was located 23 in that zone, whichever is later. 24 (C) Employed in the enterprise zone or Foreign 25 Trade Zone or Sub-Zone. An employee is employed in 26 an enterprise zone or federally designated Foreign 27 Trade Zone or Sub-Zone if his services are rendered 28 there or it is the base of operations for the 29 services performed. 30 (D) A full-time employee working 30 or more 31 hours per week. 32 (4) For tax years ending on or after December 31, 33 1985 and prior to December 31, 1988, the credit shall be 34 allowed for the tax year in which the eligible employees SB1326 Enrolled -13- LRB9110268SMdv 1 are hired. For tax years ending on or after December 31, 2 1988, the credit shall be allowed for the tax year 3 immediately following the tax year in which the eligible 4 employees are hired. If the amount of the credit exceeds 5 the tax liability for that year, whether it exceeds the 6 original liability or the liability as later amended, 7 such excess may be carried forward and applied to the tax 8 liability of the 5 taxable years following the excess 9 credit year. The credit shall be applied to the earliest 10 year for which there is a liability. If there is credit 11 from more than one tax year that is available to offset a 12 liability, earlier credit shall be applied first. 13 (5) The Department of Revenue shall promulgate such 14 rules and regulations as may be deemed necessary to carry 15 out the purposes of this subsection (g). 16 (6) The credit shall be available for eligible 17 employees hired on or after January 1, 1986. 18 (h) Investment credit; High Impact Business. 19 (1) Subject to subsection (b) of Section 5.5 of the 20 Illinois Enterprise Zone Act, a taxpayer shall be allowed 21 a credit against the tax imposed by subsections (a) and 22 (b) of this Section for investment in qualified property 23 which is placed in service by a Department of Commerce 24 and Community Affairs designated High Impact Business. 25 The credit shall be .5% of the basis for such property. 26 The credit shall not be available until the minimum 27 investments in qualified property set forth in Section 28 5.5 of the Illinois Enterprise Zone Act have been 29 satisfied and shall not be allowed to the extent that it 30 would reduce a taxpayer's liability for the tax imposed 31 by subsections (a) and (b) of this Section to below zero. 32 The credit applicable to such minimum investments shall 33 be taken in the taxable year in which such minimum 34 investments have been completed. The credit for SB1326 Enrolled -14- LRB9110268SMdv 1 additional investments beyond the minimum investment by a 2 designated high impact business shall be available only 3 in the taxable year in which the property is placed in 4 service and shall not be allowed to the extent that it 5 would reduce a taxpayer's liability for the tax imposed 6 by subsections (a) and (b) of this Section to below zero. 7 For tax years ending on or after December 31, 1987, the 8 credit shall be allowed for the tax year in which the 9 property is placed in service, or, if the amount of the 10 credit exceeds the tax liability for that year, whether 11 it exceeds the original liability or the liability as 12 later amended, such excess may be carried forward and 13 applied to the tax liability of the 5 taxable years 14 following the excess credit year. The credit shall be 15 applied to the earliest year for which there is a 16 liability. If there is credit from more than one tax 17 year that is available to offset a liability, the credit 18 accruing first in time shall be applied first. 19 Changes made in this subdivision (h)(1) by Public 20 Act 88-670 restore changes made by Public Act 85-1182 and 21 reflect existing law. 22 (2) The term qualified property means property 23 which: 24 (A) is tangible, whether new or used, 25 including buildings and structural components of 26 buildings; 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 (h); 32 (C) is acquired by purchase as defined in 33 Section 179(d) of the Internal Revenue Code; and 34 (D) is not eligible for the Enterprise Zone SB1326 Enrolled -15- LRB9110268SMdv 1 Investment Credit provided by subsection (f) of this 2 Section. 3 (3) The basis of qualified property shall be the 4 basis used to compute the depreciation deduction for 5 federal income tax purposes. 6 (4) If the basis of the property for federal income 7 tax depreciation purposes is increased after it has been 8 placed in service in a federally designated Foreign Trade 9 Zone or Sub-Zone located in Illinois by the taxpayer, the 10 amount of such increase shall be deemed property placed 11 in service on the date of such increase in basis. 12 (5) The term "placed in service" shall have the 13 same meaning as under Section 46 of the Internal Revenue 14 Code. 15 (6) If during any taxable year ending on or before 16 December 31, 1996, any property ceases to be qualified 17 property in the hands of the taxpayer within 48 months 18 after being placed in service, or the situs of any 19 qualified property is moved outside Illinois within 48 20 months after being placed in service, the tax imposed 21 under subsections (a) and (b) of this Section for such 22 taxable year shall be increased. Such increase shall be 23 determined by (i) recomputing the investment credit which 24 would have been allowed for the year in which credit for 25 such property was originally allowed by eliminating such 26 property from such computation, and (ii) subtracting such 27 recomputed credit from the amount of credit previously 28 allowed. For the purposes of this paragraph (6), a 29 reduction of the basis of qualified property resulting 30 from a redetermination of the purchase price shall be 31 deemed a disposition of qualified property to the extent 32 of such reduction. 33 (7) Beginning with tax years ending after December 34 31, 1996, if a taxpayer qualifies for the credit under SB1326 Enrolled -16- LRB9110268SMdv 1 this subsection (h) and thereby is granted a tax 2 abatement and the taxpayer relocates its entire facility 3 in violation of the explicit terms and length of the 4 contract under Section 18-183 of the Property Tax Code, 5 the tax imposed under subsections (a) and (b) of this 6 Section shall be increased for the taxable year in which 7 the taxpayer relocated its facility by an amount equal to 8 the amount of credit received by the taxpayer under this 9 subsection (h). 10 (i) A credit shall be allowed against the tax imposed by 11 subsections (a) and (b) of this Section for the tax imposed 12 by subsections (c) and (d) of this Section. This credit 13 shall be computed by multiplying the tax imposed by 14 subsections (c) and (d) of this Section by a fraction, the 15 numerator of which is base income allocable to Illinois and 16 the denominator of which is Illinois base income, and further 17 multiplying the product by the tax rate imposed by 18 subsections (a) and (b) of this Section. 19 Any credit earned on or after December 31, 1986 under 20 this subsection which is unused in the year the credit is 21 computed because it exceeds the tax liability imposed by 22 subsections (a) and (b) for that year (whether it exceeds the 23 original liability or the liability as later amended) may be 24 carried forward and applied to the tax liability imposed by 25 subsections (a) and (b) of the 5 taxable years following the 26 excess credit year. This credit shall be applied first to 27 the earliest year for which there is a liability. If there 28 is a credit under this subsection from more than one tax year 29 that is available to offset a liability the earliest credit 30 arising under this subsection shall be applied first. 31 If, during any taxable year ending on or after December 32 31, 1986, the tax imposed by subsections (c) and (d) of this 33 Section for which a taxpayer has claimed a credit under this 34 subsection (i) is reduced, the amount of credit for such tax SB1326 Enrolled -17- LRB9110268SMdv 1 shall also be reduced. Such reduction shall be determined by 2 recomputing the credit to take into account the reduced tax 3 imposed by subsection (c) and (d). If any portion of the 4 reduced amount of credit has been carried to a different 5 taxable year, an amended return shall be filed for such 6 taxable year to reduce the amount of credit claimed. 7 (j) Training expense credit. Beginning with tax years 8 ending on or after December 31, 1986, a taxpayer shall be 9 allowed a credit against the tax imposed by subsection (a) 10 and (b) under this Section for all amounts paid or accrued, 11 on behalf of all persons employed by the taxpayer in Illinois 12 or Illinois residents employed outside of Illinois by a 13 taxpayer, for educational or vocational training in 14 semi-technical or technical fields or semi-skilled or skilled 15 fields, which were deducted from gross income in the 16 computation of taxable income. The credit against the tax 17 imposed by subsections (a) and (b) shall be 1.6% of such 18 training expenses. For partners, shareholders of subchapter 19 S corporations, and owners of limited liability companies, if 20 the liability company is treated as a partnership for 21 purposes of federal and State income taxation, there shall be 22 allowed a credit under this subsection (j) to be determined 23 in accordance with the determination of income and 24 distributive share of income under Sections 702 and 704 and 25 subchapter S of the Internal Revenue Code. 26 Any credit allowed under this subsection which is unused 27 in the year the credit is earned may be carried forward to 28 each of the 5 taxable years following the year for which the 29 credit is first computed until it is used. This credit shall 30 be applied first to the earliest year for which there is a 31 liability. If there is a credit under this subsection from 32 more than one tax year that is available to offset a 33 liability the earliest credit arising under this subsection 34 shall be applied first. SB1326 Enrolled -18- LRB9110268SMdv 1 (k) Research and development credit. 2 Beginning with tax years ending after July 1, 1990, a 3 taxpayer shall be allowed a credit against the tax imposed by 4 subsections (a) and (b) of this Section for increasing 5 research activities in this State. The credit allowed 6 against the tax imposed by subsections (a) and (b) shall be 7 equal to 6 1/2% of the qualifying expenditures for increasing 8 research activities in this State. For partners, shareholders 9 of subchapter S corporations, and owners of limited liability 10 companies, if the liability company is treated as a 11 partnership for purposes of federal and State income 12 taxation, there shall be allowed a credit under this 13 subsection to be determined in accordance with the 14 determination of income and distributive share of income 15 under Sections 702 and 704 and subchapter S of the Internal 16 Revenue Code. 17 For purposes of this subsection, "qualifying 18 expenditures" means the qualifying expenditures as defined 19 for the federal credit for increasing research activities 20 which would be allowable under Section 41 of the Internal 21 Revenue Code and which are conducted in this State, 22 "qualifying expenditures for increasing research activities 23 in this State" means the excess of qualifying expenditures 24 for the taxable year in which incurred over qualifying 25 expenditures for the base period, "qualifying expenditures 26 for the base period" means the average of the qualifying 27 expenditures for each year in the base period, and "base 28 period" means the 3 taxable years immediately preceding the 29 taxable year for which the determination is being made. 30 Any credit in excess of the tax liability for the taxable 31 year may be carried forward. A taxpayer may elect to have the 32 unused credit shown on its final completed return carried 33 over as a credit against the tax liability for the following 34 5 taxable years or until it has been fully used, whichever SB1326 Enrolled -19- LRB9110268SMdv 1 occurs first. 2 If an unused credit is carried forward to a given year 3 from 2 or more earlier years, that credit arising in the 4 earliest year will be applied first against the tax liability 5 for the given year. If a tax liability for the given year 6 still remains, the credit from the next earliest year will 7 then be applied, and so on, until all credits have been used 8 or no tax liability for the given year remains. Any 9 remaining unused credit or credits then will be carried 10 forward to the next following year in which a tax liability 11 is incurred, except that no credit can be carried forward to 12 a year which is more than 5 years after the year in which the 13 expense for which the credit is given was incurred. 14 Unless extended by law, the credit shall not include 15 costs incurred after December 31, 2004, except for costs 16 incurred pursuant to a binding contract entered into on or 17 before December 31, 2004. 18 No inference shall be drawn from this amendatory Act of 19 the 91st General Assembly in construing this Section for 20 taxable years beginning before January 1, 1999. 21 (l) Environmental Remediation Tax Credit. 22 (i) For tax years ending after December 31, 1997 23 and on or before December 31, 2001, a taxpayer shall be 24 allowed a credit against the tax imposed by subsections 25 (a) and (b) of this Section for certain amounts paid for 26 unreimbursed eligible remediation costs, as specified in 27 this subsection. For purposes of this Section, 28 "unreimbursed eligible remediation costs" means costs 29 approved by the Illinois Environmental Protection Agency 30 ("Agency") under Section 58.14 of the Environmental 31 Protection Act that were paid in performing environmental 32 remediation at a site for which a No Further Remediation 33 Letter was issued by the Agency and recorded under 34 Section 58.10 of the Environmental Protection Act. The SB1326 Enrolled -20- LRB9110268SMdv 1 credit must be claimed for the taxable year in which 2 Agency approval of the eligible remediation costs is 3 granted. The credit is not available to any taxpayer if 4 the taxpayer or any related party caused or contributed 5 to, in any material respect, a release of regulated 6 substances on, in, or under the site that was identified 7 and addressed by the remedial action pursuant to the Site 8 Remediation Program of the Environmental Protection Act. 9 After the Pollution Control Board rules are adopted 10 pursuant to the Illinois Administrative Procedure Act for 11 the administration and enforcement of Section 58.9 of the 12 Environmental Protection Act, determinations as to credit 13 availability for purposes of this Section shall be made 14 consistent with those rules. For purposes of this 15 Section, "taxpayer" includes a person whose tax 16 attributes the taxpayer has succeeded to under Section 17 381 of the Internal Revenue Code and "related party" 18 includes the persons disallowed a deduction for losses by 19 paragraphs (b), (c), and (f)(1) of Section 267 of the 20 Internal Revenue Code by virtue of being a related 21 taxpayer, as well as any of its partners. The credit 22 allowed against the tax imposed by subsections (a) and 23 (b) shall be equal to 25% of the unreimbursed eligible 24 remediation costs in excess of $100,000 per site, except 25 that the $100,000 threshold shall not apply to any site 26 contained in an enterprise zone as determined by the 27 Department of Commerce and Community Affairs. The total 28 credit allowed shall not exceed $40,000 per year with a 29 maximum total of $150,000 per site. For partners and 30 shareholders of subchapter S corporations, there shall be 31 allowed a credit under this subsection to be determined 32 in accordance with the determination of income and 33 distributive share of income under Sections 702 and 704 34 of subchapter S of the Internal Revenue Code. SB1326 Enrolled -21- LRB9110268SMdv 1 (ii) A credit allowed under this subsection that is 2 unused in the year the credit is earned may be carried 3 forward to each of the 5 taxable years following the year 4 for which the credit is first earned until it is used. 5 The term "unused credit" does not include any amounts of 6 unreimbursed eligible remediation costs in excess of the 7 maximum credit per site authorized under paragraph (i). 8 This credit shall be applied first to the earliest year 9 for which there is a liability. If there is a credit 10 under this subsection from more than one tax year that is 11 available to offset a liability, the earliest credit 12 arising under this subsection shall be applied first. A 13 credit allowed under this subsection may be sold to a 14 buyer as part of a sale of all or part of the remediation 15 site for which the credit was granted. The purchaser of 16 a remediation site and the tax credit shall succeed to 17 the unused credit and remaining carry-forward period of 18 the seller. To perfect the transfer, the assignor shall 19 record the transfer in the chain of title for the site 20 and provide written notice to the Director of the 21 Illinois Department of Revenue of the assignor's intent 22 to sell the remediation site and the amount of the tax 23 credit to be transferred as a portion of the sale. In no 24 event may a credit be transferred to any taxpayer if the 25 taxpayer or a related party would not be eligible under 26 the provisions of subsection (i). 27 (iii) For purposes of this Section, the term "site" 28 shall have the same meaning as under Section 58.2 of the 29 Environmental Protection Act. 30 (m) Education expense credit. 31 Beginning with tax years ending after December 31, 1999, 32 a taxpayer who is the custodian of one or more qualifying 33 pupils shall be allowed a credit against the tax imposed by 34 subsections (a) and (b) of this Section for qualified SB1326 Enrolled -22- LRB9110268SMdv 1 education expenses incurred on behalf of the qualifying 2 pupils. The credit shall be equal to 25% of qualified 3 education expenses, but in no event may the total credit 4 under this Section claimed by a family that is the custodian 5 of qualifying pupils exceed $500. In no event shall a credit 6 under this subsection reduce the taxpayer's liability under 7 this Act to less than zero. This subsection is exempt from 8 the provisions of Section 250 of this Act. 9 For purposes of this subsection; 10 "Qualifying pupils" means individuals who (i) are 11 residents of the State of Illinois, (ii) are under the age of 12 21 at the close of the school year for which a credit is 13 sought, and (iii) during the school year for which a credit 14 is sought were full-time pupils enrolled in a kindergarten 15 through twelfth grade education program at any school, as 16 defined in this subsection. 17 "Qualified education expense" means the amount incurred 18 on behalf of a qualifying pupil in excess of $250 for 19 tuition, book fees, and lab fees at the school in which the 20 pupil is enrolled during the regular school year. 21 "School" means any public or nonpublic elementary or 22 secondary school in Illinois that is in compliance with Title 23 VI of the Civil Rights Act of 1964 and attendance at which 24 satisfies the requirements of Section 26-1 of the School 25 Code, except that nothing shall be construed to require a 26 child to attend any particular public or nonpublic school to 27 qualify for the credit under this Section. 28 "Custodian" means, with respect to qualifying pupils, an 29 Illinois resident who is a parent, the parents, a legal 30 guardian, or the legal guardians of the qualifying pupils. 31 (Source: P.A. 90-123, eff. 7-21-97; 90-458, eff. 8-17-97; 32 90-605, eff. 6-30-98; 90-655, eff. 7-30-98; 90-717, eff. 33 8-7-98; 90-792, eff. 1-1-99; 91-9, eff. 1-1-00; 91-357, eff. 34 7-29-99; 91-643, eff. 8-20-99; 91-644, eff. 8-20-99; revised SB1326 Enrolled -23- LRB9110268SMdv 1 8-27-99.) 2 Section 99. Effective date. This Act takes effect upon 3 becoming law.