[ Search ] [ PDF text ] [ Legislation ]
[ Home ] [ Back ] [ Bottom ]
| [ Introduced ] | [ House Amendment 001 ] | [ Senate Amendment 001 ] |
92_SB0729eng SB729 Engrossed LRB9205003SMdv 1 AN ACT concerning taxes. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Illinois Income Tax Act is amended by 5 changing Section 201 as follows: 6 (35 ILCS 5/201) (from Ch. 120, par. 2-201) 7 Sec. 201. Tax Imposed. 8 (a) In general. A tax measured by net income is hereby 9 imposed on every individual, corporation, trust and estate 10 for each taxable year ending after July 31, 1969 on the 11 privilege of earning or receiving income in or as a resident 12 of this State. Such tax shall be in addition to all other 13 occupation or privilege taxes imposed by this State or by any 14 municipal corporation or political subdivision thereof. 15 (b) Rates. The tax imposed by subsection (a) of this 16 Section shall be determined as follows, except as adjusted by 17 subsection (d-1): 18 (1) In the case of an individual, trust or estate, 19 for taxable years ending prior to July 1, 1989, an amount 20 equal to 2 1/2% of the taxpayer's net income for the 21 taxable year. 22 (2) In the case of an individual, trust or estate, 23 for taxable years beginning prior to July 1, 1989 and 24 ending after June 30, 1989, an amount equal to the sum of 25 (i) 2 1/2% of the taxpayer's net income for the period 26 prior to July 1, 1989, as calculated under Section 202.3, 27 and (ii) 3% of the taxpayer's net income for the period 28 after June 30, 1989, as calculated under Section 202.3. 29 (3) In the case of an individual, trust or estate, 30 for taxable years beginning after June 30, 1989, an 31 amount equal to 3% of the taxpayer's net income for the SB729 Engrossed -2- LRB9205003SMdv 1 taxable year. 2 (4) (Blank). 3 (5) (Blank). 4 (6) In the case of a corporation, for taxable years 5 ending prior to July 1, 1989, an amount equal to 4% of 6 the taxpayer's net income for the taxable year. 7 (7) In the case of a corporation, for taxable years 8 beginning prior to July 1, 1989 and ending after June 30, 9 1989, an amount equal to the sum of (i) 4% of the 10 taxpayer's net income for the period prior to July 1, 11 1989, as calculated under Section 202.3, and (ii) 4.8% of 12 the taxpayer's net income for the period after June 30, 13 1989, as calculated under Section 202.3. 14 (8) In the case of a corporation, for taxable years 15 beginning after June 30, 1989, an amount equal to 4.8% of 16 the taxpayer's net income for the taxable year. 17 (c) Beginning on July 1, 1979 and thereafter, in 18 addition to such income tax, there is also hereby imposed the 19 Personal Property Tax Replacement Income Tax measured by net 20 income on every corporation (including Subchapter S 21 corporations), partnership and trust, for each taxable year 22 ending after June 30, 1979. Such taxes are imposed on the 23 privilege of earning or receiving income in or as a resident 24 of this State. The Personal Property Tax Replacement Income 25 Tax shall be in addition to the income tax imposed by 26 subsections (a) and (b) of this Section and in addition to 27 all other occupation or privilege taxes imposed by this State 28 or by any municipal corporation or political subdivision 29 thereof. 30 (d) Additional Personal Property Tax Replacement Income 31 Tax Rates. The personal property tax replacement income tax 32 imposed by this subsection and subsection (c) of this Section 33 in the case of a corporation, other than a Subchapter S 34 corporation and except as adjusted by subsection (d-1), shall SB729 Engrossed -3- LRB9205003SMdv 1 be an additional amount equal to 2.85% of such taxpayer's net 2 income for the taxable year, except that beginning on January 3 1, 1981, and thereafter, the rate of 2.85% specified in this 4 subsection shall be reduced to 2.5%, and in the case of a 5 partnership, trust or a Subchapter S corporation shall be an 6 additional amount equal to 1.5% of such taxpayer's net income 7 for the taxable year. 8 (d-1) Rate reduction for certain foreign insurers. In 9 the case of a foreign insurer, as defined by Section 35A-5 of 10 the Illinois Insurance Code, whose state or country of 11 domicile imposes on insurers domiciled in Illinois a 12 retaliatory tax (excluding any insurer whose premiums from 13 reinsurance assumed are 50% or more of its total insurance 14 premiums as determined under paragraph (2) of subsection (b) 15 of Section 304, except that for purposes of this 16 determination premiums from reinsurance do not include 17 premiums from inter-affiliate reinsurance arrangements), 18 beginning with taxable years ending on or after December 31, 19 1999, the sum of the rates of tax imposed by subsections (b) 20 and (d) shall be reduced (but not increased) to the rate at 21 which the total amount of tax imposed under this Act, net of 22 all credits allowed under this Act, shall equal (i) the total 23 amount of tax that would be imposed on the foreign insurer's 24 net income allocable to Illinois for the taxable year by such 25 foreign insurer's state or country of domicile if that net 26 income were subject to all income taxes and taxes measured by 27 net income imposed by such foreign insurer's state or country 28 of domicile, net of all credits allowed or (ii) a rate of 29 zero if no such tax is imposed on such income by the foreign 30 insurer's state of domicile. For the purposes of this 31 subsection (d-1), an inter-affiliate includes a mutual 32 insurer under common management. 33 (1) For the purposes of subsection (d-1), in no 34 event shall the sum of the rates of tax imposed by SB729 Engrossed -4- LRB9205003SMdv 1 subsections (b) and (d) be reduced below the rate at 2 which the sum of: 3 (A) the total amount of tax imposed on such 4 foreign insurer under this Act for a taxable year, 5 net of all credits allowed under this Act, plus 6 (B) the privilege tax imposed by Section 409 7 of the Illinois Insurance Code, the fire insurance 8 company tax imposed by Section 12 of the Fire 9 Investigation Act, and the fire department taxes 10 imposed under Section 11-10-1 of the Illinois 11 Municipal Code, 12 equals 1.25% of the net taxable premiums written for the 13 taxable year, as described by subsection (1) of Section 14 409 of the Illinois Insurance Code. This paragraph will 15 in no event increase the rates imposed under subsections 16 (b) and (d). 17 (2) Any reduction in the rates of tax imposed by 18 this subsection shall be applied first against the rates 19 imposed by subsection (b) and only after the tax imposed 20 by subsection (a) net of all credits allowed under this 21 Section other than the credit allowed under subsection 22 (i) has been reduced to zero, against the rates imposed 23 by subsection (d). 24 This subsection (d-1) is exempt from the provisions of 25 Section 250. 26 (e) Investment credit. A taxpayer shall be allowed a 27 credit against the Personal Property Tax Replacement Income 28 Tax for investment in qualified property. 29 (1) A taxpayer shall be allowed a credit equal to 30 .5% of the basis of qualified property placed in service 31 during the taxable year, provided such property is placed 32 in service on or after July 1, 1984. There shall be 33 allowed an additional credit equal to .5% of the basis of 34 qualified property placed in service during the taxable SB729 Engrossed -5- LRB9205003SMdv 1 year, provided such property is placed in service on or 2 after July 1, 1986, and the taxpayer's base employment 3 within Illinois has increased by 1% or more over the 4 preceding year as determined by the taxpayer's employment 5 records filed with the Illinois Department of Employment 6 Security. Taxpayers who are new to Illinois shall be 7 deemed to have met the 1% growth in base employment for 8 the first year in which they file employment records with 9 the Illinois Department of Employment Security. The 10 provisions added to this Section by Public Act 85-1200 11 (and restored by Public Act 87-895) shall be construed as 12 declaratory of existing law and not as a new enactment. 13 If, in any year, the increase in base employment within 14 Illinois over the preceding year is less than 1%, the 15 additional credit shall be limited to that percentage 16 times a fraction, the numerator of which is .5% and the 17 denominator of which is 1%, but shall not exceed .5%. 18 The investment credit shall not be allowed to the extent 19 that it would reduce a taxpayer's liability in any tax 20 year below zero, nor may any credit for qualified 21 property be allowed for any year other than the year in 22 which the property was placed in service in Illinois. For 23 tax years ending on or after December 31, 1987, and on or 24 before December 31, 1988, the credit shall be allowed for 25 the tax year in which the property is placed in service, 26 or, if the amount of the credit exceeds the tax liability 27 for that year, whether it exceeds the original liability 28 or the liability as later amended, such excess may be 29 carried forward and applied to the tax liability of the 5 30 taxable years following the excess credit years if the 31 taxpayer (i) makes investments which cause the creation 32 of a minimum of 2,000 full-time equivalent jobs in 33 Illinois, (ii) is located in an enterprise zone 34 established pursuant to the Illinois Enterprise Zone Act SB729 Engrossed -6- LRB9205003SMdv 1 and (iii) is certified by the Department of Commerce and 2 Community Affairs as complying with the requirements 3 specified in clause (i) and (ii) by July 1, 1986. The 4 Department of Commerce and Community Affairs shall notify 5 the Department of Revenue of all such certifications 6 immediately. For tax years ending after December 31, 7 1988, the credit shall be allowed for the tax year in 8 which the property is placed in service, or, if the 9 amount of the credit exceeds the tax liability for that 10 year, whether it exceeds the original liability or the 11 liability as later amended, such excess may be carried 12 forward and applied to the tax liability of the 5 taxable 13 years following the excess credit years. The credit shall 14 be applied to the earliest year for which there is a 15 liability. If there is credit from more than one tax year 16 that is available to offset a liability, earlier credit 17 shall be applied first. 18 (2) The term "qualified property" means property 19 which: 20 (A) is tangible, whether new or used, 21 including buildings and structural components of 22 buildings and signs that are real property, but not 23 including land or improvements to real property that 24 are not a structural component of a building such as 25 landscaping, sewer lines, local access roads, 26 fencing, parking lots, and other appurtenances; 27 (B) is depreciable pursuant to Section 167 of 28 the Internal Revenue Code, except that "3-year 29 property" as defined in Section 168(c)(2)(A) of that 30 Code is not eligible for the credit provided by this 31 subsection (e); 32 (C) is acquired by purchase as defined in 33 Section 179(d) of the Internal Revenue Code; 34 (D) is used in Illinois by a taxpayer who is SB729 Engrossed -7- LRB9205003SMdv 1 primarily engaged in manufacturing, or in mining 2 coal or fluorite, or in retailing; and 3 (E) has not previously been used in Illinois 4 in such a manner and by such a person as would 5 qualify for the credit provided by this subsection 6 (e) or subsection (f). 7 (3) For purposes of this subsection (e), 8 "manufacturing" means the material staging and production 9 of tangible personal property by procedures commonly 10 regarded as manufacturing, processing, fabrication, or 11 assembling which changes some existing material into new 12 shapes, new qualities, or new combinations. For purposes 13 of this subsection (e) the term "mining" shall have the 14 same meaning as the term "mining" in Section 613(c) of 15 the Internal Revenue Code. For purposes of this 16 subsection (e), the term "retailing" means the sale of 17 tangible personal property or services rendered in 18 conjunction with the sale of tangible consumer goods or 19 commodities. 20 (4) The basis of qualified property shall be the 21 basis used to compute the depreciation deduction for 22 federal income tax purposes. 23 (5) If the basis of the property for federal income 24 tax depreciation purposes is increased after it has been 25 placed in service in Illinois by the taxpayer, the amount 26 of such increase shall be deemed property placed in 27 service on the date of such increase in basis. 28 (6) The term "placed in service" shall have the 29 same meaning as under Section 46 of the Internal Revenue 30 Code. 31 (7) If during any taxable year, any property ceases 32 to be qualified property in the hands of the taxpayer 33 within 48 months after being placed in service, or the 34 situs of any qualified property is moved outside Illinois SB729 Engrossed -8- LRB9205003SMdv 1 within 48 months after being placed in service, the 2 Personal Property Tax Replacement Income Tax for such 3 taxable year shall be increased. Such increase shall be 4 determined by (i) recomputing the investment credit which 5 would have been allowed for the year in which credit for 6 such property was originally allowed by eliminating such 7 property from such computation and, (ii) subtracting such 8 recomputed credit from the amount of credit previously 9 allowed. For the purposes of this paragraph (7), a 10 reduction of the basis of qualified property resulting 11 from a redetermination of the purchase price shall be 12 deemed a disposition of qualified property to the extent 13 of such reduction. 14 (8) Unless the investment credit is extended by 15 law, the basis of qualified property shall not include 16 costs incurred after December 31, 2003, except for costs 17 incurred pursuant to a binding contract entered into on 18 or before December 31, 2003. 19 (9) Each taxable year ending before December 31, 20 2000, a partnership may elect to pass through to its 21 partners the credits to which the partnership is entitled 22 under this subsection (e) for the taxable year. A 23 partner may use the credit allocated to him or her under 24 this paragraph only against the tax imposed in 25 subsections (c) and (d) of this Section. If the 26 partnership makes that election, those credits shall be 27 allocated among the partners in the partnership in 28 accordance with the rules set forth in Section 704(b) of 29 the Internal Revenue Code, and the rules promulgated 30 under that Section, and the allocated amount of the 31 credits shall be allowed to the partners for that taxable 32 year. The partnership shall make this election on its 33 Personal Property Tax Replacement Income Tax return for 34 that taxable year. The election to pass through the SB729 Engrossed -9- LRB9205003SMdv 1 credits shall be irrevocable. 2 For taxable years ending on or after December 31, 3 2000, a partner that qualifies its partnership for a 4 subtraction under subparagraph (I) of paragraph (2) of 5 subsection (d) of Section 203 or a shareholder that 6 qualifies a Subchapter S corporation for a subtraction 7 under subparagraph (S) of paragraph (2) of subsection (b) 8 of Section 203 shall be allowed a credit under this 9 subsection (e) equal to its share of the credit earned 10 under this subsection (e) during the taxable year by the 11 partnership or Subchapter S corporation, determined in 12 accordance with the determination of income and 13 distributive share of income under Sections 702 and 704 14 and Subchapter S of the Internal Revenue Code. This 15 paragraph is exempt from the provisions of Section 250. 16 (f) Investment credit; Enterprise Zone. 17 (1) A taxpayer shall be allowed a credit against 18 the tax imposed by subsections (a) and (b) of this 19 Section for investment in qualified property which is 20 placed in service in an Enterprise Zone created pursuant 21 to the Illinois Enterprise Zone Act. For partners, 22 shareholders of Subchapter S corporations, and owners of 23 limited liability companies, if the liability company is 24 treated as a partnership for purposes of federal and 25 State income taxation, there shall be allowed a credit 26 under this subsection (f) to be determined in accordance 27 with the determination of income and distributive share 28 of income under Sections 702 and 704 and Subchapter S of 29 the Internal Revenue Code. The credit shall be .5% of the 30 basis for such property. The credit shall be available 31 only in the taxable year in which the property is placed 32 in service in the Enterprise Zone and shall not be 33 allowed to the extent that it would reduce a taxpayer's 34 liability for the tax imposed by subsections (a) and (b) SB729 Engrossed -10- LRB9205003SMdv 1 of this Section to below zero. For tax years ending on or 2 after December 31, 1985, the credit shall be allowed for 3 the tax year in which the property is placed in service, 4 or, if the amount of the credit exceeds the tax liability 5 for that year, whether it exceeds the original liability 6 or the liability as later amended, such excess may be 7 carried forward and applied to the tax liability of the 5 8 taxable years following the excess credit year. The 9 credit shall be applied to the earliest year for which 10 there is a liability. If there is credit from more than 11 one tax year that is available to offset a liability, the 12 credit accruing first in time shall be applied first. 13 (2) The term qualified property means property 14 which: 15 (A) is tangible, whether new or used, 16 including buildings and structural components of 17 buildings; 18 (B) is depreciable pursuant to Section 167 of 19 the Internal Revenue Code, except that "3-year 20 property" as defined in Section 168(c)(2)(A) of that 21 Code is not eligible for the credit provided by this 22 subsection (f); 23 (C) is acquired by purchase as defined in 24 Section 179(d) of the Internal Revenue Code; 25 (D) is used in the Enterprise Zone by the 26 taxpayer; and 27 (E) has not been previously used in Illinois 28 in such a manner and by such a person as would 29 qualify for the credit provided by this subsection 30 (f) or subsection (e). 31 (3) The basis of qualified property shall be the 32 basis used to compute the depreciation deduction for 33 federal income tax purposes. 34 (4) If the basis of the property for federal income SB729 Engrossed -11- LRB9205003SMdv 1 tax depreciation purposes is increased after it has been 2 placed in service in the Enterprise Zone by the taxpayer, 3 the amount of such increase shall be deemed property 4 placed in service on the date of such increase in basis. 5 (5) The term "placed in service" shall have the 6 same meaning as under Section 46 of the Internal Revenue 7 Code. 8 (6) If during any taxable year, any property ceases 9 to be qualified property in the hands of the taxpayer 10 within 48 months after being placed in service, or the 11 situs of any qualified property is moved outside the 12 Enterprise Zone within 48 months after being placed in 13 service, the tax imposed under subsections (a) and (b) of 14 this Section for such taxable year shall be increased. 15 Such increase shall be determined by (i) recomputing the 16 investment credit which would have been allowed for the 17 year in which credit for such property was originally 18 allowed by eliminating such property from such 19 computation, and (ii) subtracting such recomputed credit 20 from the amount of credit previously allowed. For the 21 purposes of this paragraph (6), a reduction of the basis 22 of qualified property resulting from a redetermination of 23 the purchase price shall be deemed a disposition of 24 qualified property to the extent of such reduction. 25 (g) Jobs Tax Credit; Enterprise Zone and Foreign Trade 26 Zone or Sub-Zone. 27 (1) A taxpayer conducting a trade or business in an 28 enterprise zone or a High Impact Business designated by 29 the Department of Commerce and Community Affairs 30 conducting a trade or business in a federally designated 31 Foreign Trade Zone or Sub-Zone shall be allowed a credit 32 against the tax imposed by subsections (a) and (b) of 33 this Section in the amount of $500 per eligible employee 34 hired to work in the zone during the taxable year. SB729 Engrossed -12- LRB9205003SMdv 1 (2) To qualify for the credit: 2 (A) the taxpayer must hire 5 or more eligible 3 employees to work in an enterprise zone or federally 4 designated Foreign Trade Zone or Sub-Zone during the 5 taxable year; 6 (B) the taxpayer's total employment within the 7 enterprise zone or federally designated Foreign 8 Trade Zone or Sub-Zone must increase by 5 or more 9 full-time employees beyond the total employed in 10 that zone at the end of the previous tax year for 11 which a jobs tax credit under this Section was 12 taken, or beyond the total employed by the taxpayer 13 as of December 31, 1985, whichever is later; and 14 (C) the eligible employees must be employed 15 180 consecutive days in order to be deemed hired for 16 purposes of this subsection. 17 (3) An "eligible employee" means an employee who 18 is: 19 (A) Certified by the Department of Commerce 20 and Community Affairs as "eligible for services" 21 pursuant to regulations promulgated in accordance 22 with Title II of the Job Training Partnership Act, 23 Training Services for the Disadvantaged or Title III 24 of the Job Training Partnership Act, Employment and 25 Training Assistance for Dislocated Workers Program. 26 (B) Hired after the enterprise zone or 27 federally designated Foreign Trade Zone or Sub-Zone 28 was designated or the trade or business was located 29 in that zone, whichever is later. 30 (C) Employed in the enterprise zone or Foreign 31 Trade Zone or Sub-Zone. An employee is employed in 32 an enterprise zone or federally designated Foreign 33 Trade Zone or Sub-Zone if his services are rendered 34 there or it is the base of operations for the SB729 Engrossed -13- LRB9205003SMdv 1 services performed. 2 (D) A full-time employee working 30 or more 3 hours per week. 4 (4) For tax years ending on or after December 31, 5 1985 and prior to December 31, 1988, the credit shall be 6 allowed for the tax year in which the eligible employees 7 are hired. For tax years ending on or after December 31, 8 1988, the credit shall be allowed for the tax year 9 immediately following the tax year in which the eligible 10 employees are hired. If the amount of the credit exceeds 11 the tax liability for that year, whether it exceeds the 12 original liability or the liability as later amended, 13 such excess may be carried forward and applied to the tax 14 liability of the 5 taxable years following the excess 15 credit year. The credit shall be applied to the earliest 16 year for which there is a liability. If there is credit 17 from more than one tax year that is available to offset a 18 liability, earlier credit shall be applied first. 19 (5) The Department of Revenue shall promulgate such 20 rules and regulations as may be deemed necessary to carry 21 out the purposes of this subsection (g). 22 (6) The credit shall be available for eligible 23 employees hired on or after January 1, 1986. 24 (h) Investment credit; High Impact Business. 25 (1) Subject to subsection (b) of Section 5.5 of the 26 Illinois Enterprise Zone Act, a taxpayer shall be allowed 27 a credit against the tax imposed by subsections (a) and 28 (b) of this Section for investment in qualified property 29 which is placed in service by a Department of Commerce 30 and Community Affairs designated High Impact Business. 31 The credit shall be .5% of the basis for such property. 32 The credit shall not be available until the minimum 33 investments in qualified property set forth in Section 34 5.5 of the Illinois Enterprise Zone Act have been SB729 Engrossed -14- LRB9205003SMdv 1 satisfied and shall not be allowed to the extent that it 2 would reduce a taxpayer's liability for the tax imposed 3 by subsections (a) and (b) of this Section to below zero. 4 The credit applicable to such minimum investments shall 5 be taken in the taxable year in which such minimum 6 investments have been completed. The credit for 7 additional investments beyond the minimum investment by a 8 designated high impact business shall be available only 9 in the taxable year in which the property is placed in 10 service and shall not be allowed to the extent that it 11 would reduce a taxpayer's liability for the tax imposed 12 by subsections (a) and (b) of this Section to below zero. 13 For tax years ending on or after December 31, 1987, the 14 credit shall be allowed for the tax year in which the 15 property is placed in service, or, if the amount of the 16 credit exceeds the tax liability for that year, whether 17 it exceeds the original liability or the liability as 18 later amended, such excess may be carried forward and 19 applied to the tax liability of the 5 taxable years 20 following the excess credit year. The credit shall be 21 applied to the earliest year for which there is a 22 liability. If there is credit from more than one tax 23 year that is available to offset a liability, the credit 24 accruing first in time shall be applied first. 25 Changes made in this subdivision (h)(1) by Public 26 Act 88-670 restore changes made by Public Act 85-1182 and 27 reflect existing law. 28 (2) The term qualified property means property 29 which: 30 (A) is tangible, whether new or used, 31 including buildings and structural components of 32 buildings; 33 (B) is depreciable pursuant to Section 167 of 34 the Internal Revenue Code, except that "3-year SB729 Engrossed -15- LRB9205003SMdv 1 property" as defined in Section 168(c)(2)(A) of that 2 Code is not eligible for the credit provided by this 3 subsection (h); 4 (C) is acquired by purchase as defined in 5 Section 179(d) of the Internal Revenue Code; and 6 (D) is not eligible for the Enterprise Zone 7 Investment Credit provided by subsection (f) of this 8 Section. 9 (3) The basis of qualified property shall be the 10 basis used to compute the depreciation deduction for 11 federal income tax purposes. 12 (4) If the basis of the property for federal income 13 tax depreciation purposes is increased after it has been 14 placed in service in a federally designated Foreign Trade 15 Zone or Sub-Zone located in Illinois by the taxpayer, the 16 amount of such increase shall be deemed property placed 17 in service on the date of such increase in basis. 18 (5) The term "placed in service" shall have the 19 same meaning as under Section 46 of the Internal Revenue 20 Code. 21 (6) If during any taxable year ending on or before 22 December 31, 1996, any property ceases to be qualified 23 property in the hands of the taxpayer within 48 months 24 after being placed in service, or the situs of any 25 qualified property is moved outside Illinois within 48 26 months after being placed in service, the tax imposed 27 under subsections (a) and (b) of this Section for such 28 taxable year shall be increased. Such increase shall be 29 determined by (i) recomputing the investment credit which 30 would have been allowed for the year in which credit for 31 such property was originally allowed by eliminating such 32 property from such computation, and (ii) subtracting such 33 recomputed credit from the amount of credit previously 34 allowed. For the purposes of this paragraph (6), a SB729 Engrossed -16- LRB9205003SMdv 1 reduction of the basis of qualified property resulting 2 from a redetermination of the purchase price shall be 3 deemed a disposition of qualified property to the extent 4 of such reduction. 5 (7) Beginning with tax years ending after December 6 31, 1996, if a taxpayer qualifies for the credit under 7 this subsection (h) and thereby is granted a tax 8 abatement and the taxpayer relocates its entire facility 9 in violation of the explicit terms and length of the 10 contract under Section 18-183 of the Property Tax Code, 11 the tax imposed under subsections (a) and (b) of this 12 Section shall be increased for the taxable year in which 13 the taxpayer relocated its facility by an amount equal to 14 the amount of credit received by the taxpayer under this 15 subsection (h). 16 (i) A credit shall be allowed against the tax imposed by 17 subsections (a) and (b) of this Section for the tax imposed 18 by subsections (c) and (d) of this Section. This credit 19 shall be computed by multiplying the tax imposed by 20 subsections (c) and (d) of this Section by a fraction, the 21 numerator of which is base income allocable to Illinois and 22 the denominator of which is Illinois base income, and further 23 multiplying the product by the tax rate imposed by 24 subsections (a) and (b) of this Section. 25 Any credit earned on or after December 31, 1986 under 26 this subsection which is unused in the year the credit is 27 computed because it exceeds the tax liability imposed by 28 subsections (a) and (b) for that year (whether it exceeds the 29 original liability or the liability as later amended) may be 30 carried forward and applied to the tax liability imposed by 31 subsections (a) and (b) of the 5 taxable years following the 32 excess credit year. This credit shall be applied first to 33 the earliest year for which there is a liability. If there 34 is a credit under this subsection from more than one tax year SB729 Engrossed -17- LRB9205003SMdv 1 that is available to offset a liability the earliest credit 2 arising under this subsection shall be applied first. 3 If, during any taxable year ending on or after December 4 31, 1986, the tax imposed by subsections (c) and (d) of this 5 Section for which a taxpayer has claimed a credit under this 6 subsection (i) is reduced, the amount of credit for such tax 7 shall also be reduced. Such reduction shall be determined by 8 recomputing the credit to take into account the reduced tax 9 imposed by subsection (c) and (d). If any portion of the 10 reduced amount of credit has been carried to a different 11 taxable year, an amended return shall be filed for such 12 taxable year to reduce the amount of credit claimed. 13 (j) Training expense credit. Beginning with tax years 14 ending on or after December 31, 1986, a taxpayer shall be 15 allowed a credit against the tax imposed by subsection (a) 16 and (b) under this Section for all amounts paid or accrued, 17 on behalf of all persons employed by the taxpayer in Illinois 18 or Illinois residents employed outside of Illinois by a 19 taxpayer, for educational or vocational training in 20 semi-technical or technical fields or semi-skilled or skilled 21 fields, which were deducted from gross income in the 22 computation of taxable income. The credit against the tax 23 imposed by subsections (a) and (b) shall be 1.6% of such 24 training expenses. For partners, shareholders of subchapter 25 S corporations, and owners of limited liability companies, if 26 the liability company is treated as a partnership for 27 purposes of federal and State income taxation, there shall be 28 allowed a credit under this subsection (j) to be determined 29 in accordance with the determination of income and 30 distributive share of income under Sections 702 and 704 and 31 subchapter S of the Internal Revenue Code. 32 Any credit allowed under this subsection which is unused 33 in the year the credit is earned may be carried forward to 34 each of the 5 taxable years following the year for which the SB729 Engrossed -18- LRB9205003SMdv 1 credit is first computed until it is used. This credit shall 2 be applied first to the earliest year for which there is a 3 liability. If there is a credit under this subsection from 4 more than one tax year that is available to offset a 5 liability the earliest credit arising under this subsection 6 shall be applied first. 7 (k) Research and development credit. 8 Beginning with tax years ending after July 1, 1990, a 9 taxpayer shall be allowed a credit against the tax imposed by 10 subsections (a) and (b) of this Section for increasing 11 research activities in this State. The credit allowed 12 against the tax imposed by subsections (a) and (b) shall be 13 equal to 6 1/2% of the qualifying expenditures for increasing 14 research activities in this State. For partners, shareholders 15 of subchapter S corporations, and owners of limited liability 16 companies, if the liability company is treated as a 17 partnership for purposes of federal and State income 18 taxation, there shall be allowed a credit under this 19 subsection to be determined in accordance with the 20 determination of income and distributive share of income 21 under Sections 702 and 704 and subchapter S of the Internal 22 Revenue Code. 23 For purposes of this subsection:,24 "Qualifying expenditures" means the qualifying 25 expenditures as defined for the federal credit for increasing 26 research activities which would be allowable under Section 41 27 of the Internal Revenue Code and which are conducted in this 28 State.,29 "Qualifying expenditures for increasing research 30 activities in this State" means, at the election of the 31 taxpayer, either (1) the excess of qualifying expenditures 32 for the taxable year in which incurred over qualifying 33 expenditures for the base period or (2) as an alternate 34 credit, for taxable years ending on or after December 31, SB729 Engrossed -19- LRB9205003SMdv 1 2001, the qualifying expenditures for the taxable year 2 incurred in this State computed in a manner consistent with 3 the alternative incremental credit described in Section 4 41(c)(4) of the Internal Revenue Code. For purposes of the 5 alternative incremental credit, "base amount", "basic 6 research payment", and "qualified research expense" mean the 7 same as defined for the federal credit for increasing 8 research activities under Section 41 of the Internal Revenue 9 Code, except that for the alternative incremental credit such 10 amounts are for activities conducted within the State of 11 Illinois. The taxpayer may make this election regardless of 12 the method used for the taxpayer's federal income tax. An 13 election is for the tax year, and the taxpayer may use 14 another or the same method for any subsequent year. For 15 purposes of the alternate credit computation, the credit 16 percentages applicable to qualified research expenses 17 described in clauses (i), (ii), and (iii) of Section 18 41(c)(4)(A) of the Internal Revenue Code are 1.65%, 2.20%, 19 and 2.75%, respectively.,20 "Qualifying expenditures for the base period" means the 21 average of the qualifying expenditures for each year in the 22 base period, and "base period" means the 3 taxable years 23 immediately preceding the taxable year for which the 24 determination is being made. 25 Any credit in excess of the tax liability for the taxable 26 year may be carried forward. A taxpayer may elect to have the 27 unused credit shown on its final completed return carried 28 over as a credit against the tax liability for the following 29 5 taxable years or until it has been fully used, whichever 30 occurs first. 31 If an unused credit is carried forward to a given year 32 from 2 or more earlier years, that credit arising in the 33 earliest year will be applied first against the tax liability 34 for the given year. If a tax liability for the given year SB729 Engrossed -20- LRB9205003SMdv 1 still remains, the credit from the next earliest year will 2 then be applied, and so on, until all credits have been used 3 or no tax liability for the given year remains. Any 4 remaining unused credit or credits then will be carried 5 forward to the next following year in which a tax liability 6 is incurred, except that no credit can be carried forward to 7 a year which is more than 5 years after the year in which the 8 expense for which the credit is given was incurred. 9 Unless extended by law, the credit shall not include 10 costs incurred after December 31, 20092004, except for costs 11 incurred pursuant to a binding contract entered into on or 12 before December 31, 20092004. 13 No inference shall be drawn from this amendatory Act of 14 the 91st General Assembly in construing this Section for 15 taxable years beginning before January 1, 1999. 16 (l) Environmental Remediation Tax Credit. 17 (i) For tax years ending after December 31, 1997 18 and on or before December 31, 2001, a taxpayer shall be 19 allowed a credit against the tax imposed by subsections 20 (a) and (b) of this Section for certain amounts paid for 21 unreimbursed eligible remediation costs, as specified in 22 this subsection. For purposes of this Section, 23 "unreimbursed eligible remediation costs" means costs 24 approved by the Illinois Environmental Protection Agency 25 ("Agency") under Section 58.14 of the Environmental 26 Protection Act that were paid in performing environmental 27 remediation at a site for which a No Further Remediation 28 Letter was issued by the Agency and recorded under 29 Section 58.10 of the Environmental Protection Act. The 30 credit must be claimed for the taxable year in which 31 Agency approval of the eligible remediation costs is 32 granted. The credit is not available to any taxpayer if 33 the taxpayer or any related party caused or contributed 34 to, in any material respect, a release of regulated SB729 Engrossed -21- LRB9205003SMdv 1 substances on, in, or under the site that was identified 2 and addressed by the remedial action pursuant to the Site 3 Remediation Program of the Environmental Protection Act. 4 After the Pollution Control Board rules are adopted 5 pursuant to the Illinois Administrative Procedure Act for 6 the administration and enforcement of Section 58.9 of the 7 Environmental Protection Act, determinations as to credit 8 availability for purposes of this Section shall be made 9 consistent with those rules. For purposes of this 10 Section, "taxpayer" includes a person whose tax 11 attributes the taxpayer has succeeded to under Section 12 381 of the Internal Revenue Code and "related party" 13 includes the persons disallowed a deduction for losses by 14 paragraphs (b), (c), and (f)(1) of Section 267 of the 15 Internal Revenue Code by virtue of being a related 16 taxpayer, as well as any of its partners. The credit 17 allowed against the tax imposed by subsections (a) and 18 (b) shall be equal to 25% of the unreimbursed eligible 19 remediation costs in excess of $100,000 per site, except 20 that the $100,000 threshold shall not apply to any site 21 contained in an enterprise zone as determined by the 22 Department of Commerce and Community Affairs. The total 23 credit allowed shall not exceed $40,000 per year with a 24 maximum total of $150,000 per site. For partners and 25 shareholders of subchapter S corporations, there shall be 26 allowed a credit under this subsection to be determined 27 in accordance with the determination of income and 28 distributive share of income under Sections 702 and 704 29 andofsubchapter S of the Internal Revenue Code. 30 (ii) A credit allowed under this subsection that is 31 unused in the year the credit is earned may be carried 32 forward to each of the 5 taxable years following the year 33 for which the credit is first earned until it is used. 34 The term "unused credit" does not include any amounts of SB729 Engrossed -22- LRB9205003SMdv 1 unreimbursed eligible remediation costs in excess of the 2 maximum credit per site authorized under paragraph (i). 3 This credit shall be applied first to the earliest year 4 for which there is a liability. If there is a credit 5 under this subsection from more than one tax year that is 6 available to offset a liability, the earliest credit 7 arising under this subsection shall be applied first. A 8 credit allowed under this subsection may be sold to a 9 buyer as part of a sale of all or part of the remediation 10 site for which the credit was granted. The purchaser of 11 a remediation site and the tax credit shall succeed to 12 the unused credit and remaining carry-forward period of 13 the seller. To perfect the transfer, the assignor shall 14 record the transfer in the chain of title for the site 15 and provide written notice to the Director of the 16 Illinois Department of Revenue of the assignor's intent 17 to sell the remediation site and the amount of the tax 18 credit to be transferred as a portion of the sale. In no 19 event may a credit be transferred to any taxpayer if the 20 taxpayer or a related party would not be eligible under 21 the provisions of subsection (i). 22 (iii) For purposes of this Section, the term "site" 23 shall have the same meaning as under Section 58.2 of the 24 Environmental Protection Act. 25 (m) Education expense credit. 26 Beginning with tax years ending after December 31, 1999, 27 a taxpayer who is the custodian of one or more qualifying 28 pupils shall be allowed a credit against the tax imposed by 29 subsections (a) and (b) of this Section for qualified 30 education expenses incurred on behalf of the qualifying 31 pupils. The credit shall be equal to 25% of qualified 32 education expenses, but in no event may the total credit 33 under this Section claimed by a family that is the custodian 34 of qualifying pupils exceed $500. In no event shall a credit SB729 Engrossed -23- LRB9205003SMdv 1 under this subsection reduce the taxpayer's liability under 2 this Act to less than zero. This subsection is exempt from 3 the provisions of Section 250 of this Act. 4 For purposes of this subsection; 5 "Qualifying pupils" means individuals who (i) are 6 residents of the State of Illinois, (ii) are under the age of 7 21 at the close of the school year for which a credit is 8 sought, and (iii) during the school year for which a credit 9 is sought were full-time pupils enrolled in a kindergarten 10 through twelfth grade education program at any school, as 11 defined in this subsection. 12 "Qualified education expense" means the amount incurred 13 on behalf of a qualifying pupil in excess of $250 for 14 tuition, book fees, and lab fees at the school in which the 15 pupil is enrolled during the regular school year. 16 "School" means any public or nonpublic elementary or 17 secondary school in Illinois that is in compliance with Title 18 VI of the Civil Rights Act of 1964 and attendance at which 19 satisfies the requirements of Section 26-1 of the School 20 Code, except that nothing shall be construed to require a 21 child to attend any particular public or nonpublic school to 22 qualify for the credit under this Section. 23 "Custodian" means, with respect to qualifying pupils, an 24 Illinois resident who is a parent, the parents, a legal 25 guardian, or the legal guardians of the qualifying pupils. 26 (Source: P.A. 90-123, eff. 7-21-97; 90-458, eff. 8-17-97; 27 90-605, eff. 6-30-98; 90-655, eff. 7-30-98; 90-717, eff. 28 8-7-98; 90-792, eff. 1-1-99; 91-9, eff. 1-1-00; 91-357, eff. 29 7-29-99; 91-643, eff. 8-20-99; 91-644, eff. 8-20-99; 91-860, 30 eff. 6-22-00; 91-913, eff. 1-1-01; revised 10-24-00.)