Bill Text: IL SB1427 | 2015-2016 | 99th General Assembly | Engrossed

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Bill Title: Amends the Economic Development for a Growing Economy Tax Credit Act. Makes a technical change in a Section concerning the purpose of the Act.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Engrossed - Dead) 2015-05-15 - Rule 19(a) / Re-referred to Rules Committee [SB1427 Detail]

Download: Illinois-2015-SB1427-Engrossed.html

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AN ACT concerning revenue.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Economic Development for a Growing Economy
Tax Credit Act is amended by changing Sections 5-5, 5-20, 5-25,
and 5-50 as follows:
(35 ILCS 10/5-5)
Sec. 5-5. Definitions. As used in this Act:
"Agreement" means the Agreement between a Taxpayer and the
Department under the provisions of Section 5-50 of this Act.
"Applicant" means a Taxpayer that is operating a business
located or that the Taxpayer plans to locate within the State
of Illinois and that is engaged in interstate or intrastate
commerce for the purpose of manufacturing, processing,
assembling, warehousing, or distributing products, conducting
research and development, providing tourism services, or
providing services in interstate commerce, office industries,
or agricultural processing, but excluding retail, retail food,
health, or professional services. "Applicant" does not include
a Taxpayer who closes or substantially reduces an operation at
one location in the State and relocates substantially the same
operation to another location in the State. This does not
prohibit a Taxpayer from expanding its operations at another

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location in the State, provided that existing operations of a
similar nature located within the State are not closed or
substantially reduced. This also does not prohibit a Taxpayer
from moving its operations from one location in the State to
another location in the State for the purpose of expanding the
operation provided that the Department determines that
expansion cannot reasonably be accommodated within the
municipality in which the business is located, or in the case
of a business located in an incorporated area of the county,
within the county in which the business is located, after
conferring with the chief elected official of the municipality
or county and taking into consideration any evidence offered by
the municipality or county regarding the ability to accommodate
expansion within the municipality or county.
"Committee" means the Illinois Business Investment
Committee created under Section 5-25 of this Act within the
Illinois Economic Development Board.
"Credit" means the amount agreed to between the Department
and Applicant under this Act, but not to exceed the Incremental
Income Tax attributable to the Applicant's project.
"Department" means the Department of Commerce and Economic
Opportunity.
"Director" means the Director of Commerce and Economic
Opportunity.
"Full-time Employee" means an individual who is employed
for consideration for at least 35 hours each week or who

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renders any other standard of service generally accepted by
industry custom or practice as full-time employment. An
individual for whom a W-2 is issued by a Professional Employer
Organization (PEO) is a full-time employee if employed in the
service of the Applicant for consideration for at least 35
hours each week or who renders any other standard of service
generally accepted by industry custom or practice as full-time
employment to Applicant.
"Incremental Income Tax" means the total amount withheld
during the taxable year from the compensation of New Employees
under Article 7 of the Illinois Income Tax Act arising from
employment at a project that is the subject of an Agreement.
"New Employee" means:
(a) A Full-time Employee first employed by a Taxpayer
in the project that is the subject of an Agreement and who
is hired after the Taxpayer enters into the tax credit
Agreement.
(b) The term "New Employee" does not include:
(1) an employee of the Taxpayer who performs a job
that was previously performed by another employee, if
that job existed for at least 6 months before hiring
the employee;
(2) an employee of the Taxpayer who was previously
employed in Illinois by a Related Member of the
Taxpayer and whose employment was shifted to the
Taxpayer after the Taxpayer entered into the tax credit

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Agreement; or
(3) a child, grandchild, parent, or spouse, other
than a spouse who is legally separated from the
individual, of any individual who has a direct or an
indirect ownership interest of at least 5% in the
profits, capital, or value of the Taxpayer; or .
(4) an employee of the Taxpayer who was previously
employed in Illinois by the Taxpayer and whose
employment was shifted to the project after the
Taxpayer entered into the Agreement.
(c) Notwithstanding paragraph (1) of subsection (b),
an employee may be considered a New Employee under the
Agreement if the employee performs a job that was
previously performed by an employee who was:
(1) treated under the Agreement as a New Employee;
and
(2) promoted by the Taxpayer to another job.
(d) Notwithstanding subsection (a), the Department may
award Credit to an Applicant with respect to an employee
hired prior to the date of the Agreement if:
(1) the Applicant is in receipt of a letter from
the Department stating an intent to enter into a credit
Agreement;
(2) the letter described in paragraph (1) is issued
by the Department not later than 15 days after the
effective date of this Act; and

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(3) the employee was hired after the date the
letter described in paragraph (1) was issued.
"Noncompliance Date" means, in the case of a Taxpayer that
is not complying with the requirements of the Agreement or the
provisions of this Act, the day following the last date upon
which the Taxpayer was in compliance with the requirements of
the Agreement and the provisions of this Act, as determined by
the Director, pursuant to Section 5-65.
"Pass Through Entity" means an entity that is exempt from
the tax under subsection (b) or (c) of Section 205 of the
Illinois Income Tax Act.
"Project" means a for-profit economic development activity
or activities at a single site, or of one or more taxpayers at
multiple sites if the economic activities are vertically
integrated.
"Professional Employer Organization" (PEO) means an
employee leasing company, as defined in Section 206.1(A)(2) of
the Illinois Unemployment Insurance Act.
"Related Member" means a person that, with respect to the
Taxpayer during any portion of the taxable year, is any one of
the following:
(1) An individual stockholder, if the stockholder and
the members of the stockholder's family (as defined in
Section 318 of the Internal Revenue Code) own directly,
indirectly, beneficially, or constructively, in the
aggregate, at least 50% of the value of the Taxpayer's

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outstanding stock.
(2) A partnership, estate, or trust and any partner or
beneficiary, if the partnership, estate, or trust, and its
partners or beneficiaries own directly, indirectly,
beneficially, or constructively, in the aggregate, at
least 50% of the profits, capital, stock, or value of the
Taxpayer.
(3) A corporation, and any party related to the
corporation in a manner that would require an attribution
of stock from the corporation to the party or from the
party to the corporation under the attribution rules of
Section 318 of the Internal Revenue Code, if the Taxpayer
owns directly, indirectly, beneficially, or constructively
at least 50% of the value of the corporation's outstanding
stock.
(4) A corporation and any party related to that
corporation in a manner that would require an attribution
of stock from the corporation to the party or from the
party to the corporation under the attribution rules of
Section 318 of the Internal Revenue Code, if the
corporation and all such related parties own in the
aggregate at least 50% of the profits, capital, stock, or
value of the Taxpayer.
(5) A person to or from whom there is attribution of
stock ownership in accordance with Section 1563(e) of the
Internal Revenue Code, except, for purposes of determining

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whether a person is a Related Member under this paragraph,
20% shall be substituted for 5% wherever 5% appears in
Section 1563(e) of the Internal Revenue Code.
"Retained Employee" means a full-time employee employed by
a taxpayer during the term of the Agreement whose job duties
are directly and substantially related to the project. The term
"Retained Employee" does not include a child, grandchild,
parent, or spouse, other than a spouse who is legally separated
from the individual, of any individual who has direct or
indirect ownership interest of at least 5% in the profits,
capital, or value of the taxpayer. For purposes of this
definition, "directly and substantially related to the
project" means at least two-thirds of the employee's job duties
must be directly related to the project and the employee must
devote at least two-thirds of his or her time to the project.
"Taxpayer" means an individual, corporation, partnership,
or other entity that has any Illinois Income Tax liability.
(Source: P.A. 94-793, eff. 5-19-06; 95-375, eff. 8-23-07.)
(35 ILCS 10/5-20)
Sec. 5-20. Application for a project to create and retain
new jobs.
(a) Any Taxpayer proposing a project located or planned to
be located in Illinois may request consideration for
designation of its project, by formal written letter of request
or by formal application to the Department, in which the

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Applicant states its intent to make at least a specified level
of investment and intends to hire or retain a specified number
of full-time employees at a designated location in Illinois. As
circumstances require, the Department may require a formal
application from an Applicant and a formal letter of request
for assistance.
(b) In order to qualify for Credits under this Act, an
Applicant's project must:
(1) involve an investment of at least $5,000,000 in
capital improvements to be placed in service and to employ
at least 25 New Employees within the State as a direct
result of the project;
(2) involve an investment in capital improvements to be
placed in service in the State at a level of at least an
amount (to be expressly specified by the Department and the
Committee) in capital improvements to be placed in service
and will employ at least an amount (to be expressly
specified by the Department and the Committee) of New
Employees or Retained Employees within the State as
specified by the Department, provided that the Department
has and the Committee have determined that the project will
provide a substantial economic benefit to the State; or
(3) if the applicant has 100 or fewer employees,
involve an investment of at least $1,000,000 in capital
improvements to be placed in service and to employ at least
5 New Employees within the State as a direct result of the

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project.
The Director may approve projects that do not meet the
specified minimum job creation and investment thresholds set
forth in this subsection (b) for an applicant meeting all other
requirements of this Act provided that one or more of the
following conditions are met:
(A) approval would support a business with potential to
generate additional growth by attracting companion
businesses; or
(B) approval would avert loss of one of the area's
major sources of employment.
(c) After receipt of an application, the Department may
enter into an Agreement with the Applicant if the application
is accepted in accordance with Section 5-25.
(Source: P.A. 93-882, eff. 1-1-05.)
(35 ILCS 10/5-25)
Sec. 5-25. Review of Application.
(a) In addition to those duties granted under the Illinois
Economic Development Board Act, the Illinois Economic
Development Board shall form a Business Investment Committee
for the purpose of making recommendations for applications. At
the request of the Board, the Director of Commerce and Economic
Opportunity or his or her designee, the Director of the
Governor's Office of Management and Budget or his or her
designee, the Director of Revenue or his or her designee, the

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Director of Employment Security or his or her designee, and an
elected official of the affected locality, such as the chair of
the county board or the mayor, may serve as members of the
Committee to assist with its analysis and deliberations.
(b) At the Department's request, the Committee shall
convene, make inquiries, and conduct studies in the manner and
by the methods as it deems desirable, review information with
respect to Applicants, and make recommendations for projects to
benefit the State. In making its recommendation that an
Applicant's application for Credit should or should not be
accepted, which shall occur within a reasonable time frame as
determined by the nature of the application, the Committee
shall determine that all the following conditions exist:
(1) The Applicant's project intends, as required by
subsection (b) of Section 5-20 to make the required
investment in the State and intends to hire or retain the
required number of New Employees or Retained Employees in
Illinois as a result of that project.
(2) The Applicant's project is economically sound and
will benefit the people of the State of Illinois by
increasing opportunities for employment and strengthen the
economy of Illinois.
(3) That, if not for the Credit, the project would not
occur in Illinois, which may be demonstrated by any means
including, but not limited to, evidence the Applicant has
multi-state location options and could reasonably and

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efficiently locate outside of the State, or demonstration
that at least one other state is being considered for the
project, or evidence the receipt of the Credit is a major
factor in the Applicant's decision and that without the
Credit, the Applicant likely would not create new jobs in
Illinois, or demonstration that receiving the Credit is
essential to the Applicant's decision to create or retain
new jobs in the State.
(4) A cost differential is identified, using best
available data, in the projected costs for the Applicant's
project compared to the costs in the competing state,
including the impact of the competing state's incentive
programs. The competing state's incentive programs shall
include state, local, private, and federal funds
available.
(5) The political subdivisions affected by the project
have committed local incentives with respect to the
project, considering local ability to assist.
(6) Awarding the Credit will result in an overall
positive fiscal impact to the State, as certified by the
Committee using the best available data.
(7) The Credit is not prohibited by Section 5-35 of
this Act.
(Source: P.A. 94-793, eff. 5-19-06.)
(35 ILCS 10/5-50)

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Sec. 5-50. Contents of Agreements with Applicants. The
Department shall enter into an Agreement with an Applicant that
is awarded a Credit under this Act. The Agreement must include
all of the following:
(1) A detailed description of the project that is the
subject of the Agreement, including the location and amount
of the investment and jobs created or retained.
(2) The duration of the Credit and the first taxable
year for which the Credit may be claimed.
(3) The Credit amount that will be allowed for each
taxable year.
(4) A requirement that the Taxpayer shall maintain
operations at the project location that shall be stated as
a minimum number of years not to exceed 10.
(5) A specific method for determining the number of New
Employees employed during a taxable year.
(6) A requirement that the Taxpayer shall annually
report to the Department the number of New Employees and
Retained Employees, the Incremental Income Tax withheld in
connection with the New Employees and Retained Employees,
and any other information the Director needs to perform the
Director's duties under this Act.
(7) A requirement that the Director is authorized to
verify with the appropriate State agencies the amounts
reported under paragraph (6), and after doing so shall
issue a certificate to the Taxpayer stating that the

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amounts have been verified.
(8) A requirement that the Taxpayer shall provide
written notification to the Director not more than 30 days
after the Taxpayer makes or receives a proposal that would
transfer the Taxpayer's State tax liability obligations to
a successor Taxpayer.
(9) A detailed description of the number of New
Employees to be hired, Retained Employees to be retained,
and the occupation and payroll of the full-time jobs to be
created or retained as a result of the project.
(10) The minimum investment the business enterprise
will make in capital improvements, the time period for
placing the property in service, and the designated
location in Illinois for the investment.
(11) A requirement that the Taxpayer shall provide
written notification to the Director and the Committee not
more than 30 days after the Taxpayer determines that the
minimum job creation or retention, employment payroll, or
investment no longer is being or will be achieved or
maintained as set forth in the terms and conditions of the
Agreement.
(12) A provision that, if the total number of New
Employees or Retained Employees falls below a specified
level, the allowance of Credit shall be suspended until the
number of New Employees and Retained Employees equals or
exceeds the Agreement amount.

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(13) A detailed description of the items for which the
costs incurred by the Taxpayer will be included in the
limitation on the Credit provided in Section 5-30.
(13.5) A provision that, if the Taxpayer never meets
either the investment or job creation and retention
requirements specified in the Agreement during the entire
5-year period beginning on the first day of the first
taxable year in which the Agreement is executed and ending
on the last day of the fifth taxable year after the
Agreement is executed, then the Agreement is automatically
terminated on the last day of the fifth taxable year after
the Agreement is executed and the Taxpayer is not entitled
to the award of any credits for any of that 5-year period.
(14) Any other performance conditions or contract
provisions as the Department determines are appropriate.
The Department shall post on its website the terms of each
Agreement entered into under this Act on or after the effective
date of this amendatory Act of the 97th General Assembly.
(Source: P.A. 97-2, eff. 5-6-11; 97-749, eff. 7-6-12.)
Section 99. Effective date. This Act takes effect upon
becoming law.