Bill Text: IL SB3745 | 2019-2020 | 101st General Assembly | Introduced

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Bill Title: Amends the Historic Preservation Tax Credit Act. Provides that the aggregate amount of the credit may not exceed $3,000,000. Provides that credits may be awarded upon completion of the project and approval of a complete application (currently, review of the project). Provides that the taxpayer is not eligible to receive credits under that Act and as qualified River Edge Redevelopment Zone property for the same qualified expenditures or qualified rehabilitation plan. Makes various technical corrections concerning allocation of credits. Amends the Illinois Income Tax Act with respect to the Historic Preservation Tax Credit to include provisions concerning limited liability companies. Effective immediately.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2021-01-13 - Session Sine Die [SB3745 Detail]

Download: Illinois-2019-SB3745-Introduced.html

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101ST GENERAL ASSEMBLY State of Illinois 2019 and 2020 SB3745 Introduced 2/14/2020, by Sen. Cristina Castro SYNOPSIS AS INTRODUCED:
35 ILCS 31/5
35 ILCS 31/10
35 ILCS 31/20
35 ILCS 31/25
35 ILCS 5/228
Amends the Historic Preservation Tax Credit Act. Provides that the aggregate amount of the credit may not exceed $3,000,000. Provides that credits may be awarded upon completion of the project and approval of a complete application (currently, review of the project). Provides that the taxpayer is not eligible to receive credits under that Act and as qualified River Edge Redevelopment Zone property for the same qualified expenditures or qualified rehabilitation plan. Makes various technical corrections concerning allocation of credits. Amends the Illinois Income Tax Act with respect to the Historic Preservation Tax Credit to include provisions concerning limited liability companies. Effective immediately.
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FISCAL NOTE ACT MAY APPLY
A BILL FOR
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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 Historic Preservation Tax Credit Act is
amended by changing Sections 5, 10, 20, and 25 as follows:
(35 ILCS 31/5)
Sec. 5. Definitions. As used in this Act, unless the
context clearly indicates otherwise:
"Director" means the Director of Natural Resources or his
or her designee.
"Division" means the State Historic Preservation Office
within the Department of Natural Resources.
"Phased rehabilitation" means a project that is completed
in phases, as defined under Section 47 of the federal Internal
Revenue Code and pursuant to National Park Service regulations
at 36 C.F.R. 67.
"Placed in service" means the date when the property is
placed in a condition or state of readiness and availability
for a specifically assigned function as defined under Section
47 of the federal Internal Revenue Code and federal Treasury
Regulation Sections 1.46 and 1.48.
"Qualified expenditures" means all the costs and expenses
defined as qualified rehabilitation expenditures under Section

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47 of the federal Internal Revenue Code that were incurred in
connection with a qualified rehabilitation plan historic
structure.
"Qualified historic structure" means any structure that is
located in Illinois and is defined as a certified historic
structure under Section 47(c)(3) of the federal Internal
Revenue Code.
"Qualified rehabilitation plan" means a project that is
approved by the Department of Natural Resources and the
National Park Service as being consistent with the United
States Secretary of the Interior's Standards for
Rehabilitation.
"Qualified taxpayer" means the owner of the qualified
historic structure or any other person or entity who may
qualify for the federal rehabilitation credit allowed by
Section 47 of the federal Internal Revenue Code.
"Recapture event" means any of the following events
occurring during the recapture period:
(1) failure to place in service the rehabilitated
portions of the qualified historic structure, or failure to
maintain the rehabilitated portions of the qualified
historic structure in service after they are placed in
service; provided that a recapture event under this
paragraph (1) shall not include a removal from service for
a reasonable period of time to conduct maintenance and
repairs that are reasonably necessary to protect the health

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and safety of the public or to protect the structural
integrity of the qualified historic structure or a
neighboring structure;
(2) demolition or other alteration of the qualified
historic structure in a manner that is inconsistent with
the qualified rehabilitation plan or the Secretary of the
Interior's Standards for Rehabilitation;
(3) disposition of the rehabilitated qualified
historic structure in whole or a proportional disposition
of a partnership interest therein, except as otherwise
permitted by this Section; or
(4) use of the qualified historic structure in a manner
that is inconsistent with the qualified rehabilitation
plan or that is otherwise inconsistent with the provisions
and intent of this Section.
A recapture event occurring in one taxable year shall be
deemed continuing to subsequent taxable years unless and until
corrected.
The following dispositions of a qualified historic
structure shall not be deemed to be a recapture event for
purposes of this Section:
(1) a transfer by reason of death;
(2) a transfer between spouses incident to divorce;
(3) a sale by and leaseback to an entity that, when the
rehabilitated portions of the qualified historic structure
are placed in service, will be a lessee of the qualified

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historic structure, but only for so long as the entity
continues to be a lessee; and
(4) a mere change in the form of conducting the trade
or business by the owner (or, if applicable, the lessee) of
the qualified historic structure, so long as the property
interest in such qualified historic structure is retained
in such trade or business and the owner or lessee retains a
substantial interest in such trade or business.
"Recapture period" means the 5-year period beginning on the
date that the qualified historic structure or rehabilitated
portions of the qualified historic structure are placed in
service.
"Substantial rehabilitation" means that the qualified
rehabilitation expenditures during the 24-month period
selected by the taxpayer at the time and in the manner
prescribed by rule and ending with or within the taxable year
exceed the greater of (i) the adjusted basis of the building
and its structural components or (ii) $5,000. The adjusted
basis of the building and its structural components shall be
determined as of the beginning of the first day of such
24-month period or as of the beginning of the first day of the
holding period of the building, whichever is later. For
purposes of determining the adjusted basis, the determination
of the beginning of the holding period shall be made without
regard to any reconstruction by the taxpayer in connection with
the rehabilitation. In the case of any phased rehabilitation,

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with phases set forth in architectural plans and specifications
completed before the rehabilitation begins, this definition
shall be applied by substituting "60-month period" for
"24-month period" wherever that term occurs in the definition.
(Source: P.A. 100-629, eff. 1-1-19.)
(35 ILCS 31/10)
Sec. 10. Allowable credit.
(a) To the extent authorized by this Act, for taxable years
beginning on or after January 1, 2019 and ending on or before
December 31, 2023, there shall be allowed a tax credit to the
qualified taxpayer against the tax imposed by subsections (a)
and (b) of Section 201 of the Illinois Income Tax Act in an
aggregate amount equal to 25% of qualified expenditures, but
not to exceed $3,000,000, incurred by a qualified taxpayer
undertaking a qualified rehabilitation plan of a qualified
historic structure, provided that the total amount of such
expenditures must (i) equal $5,000 or more or (ii) exceed the
adjusted basis of the qualified historic structure on the first
day the qualified rehabilitation plan commenced. If the
qualified rehabilitation plan spans multiple years, the
aggregate credit for the entire project shall be allowed in the
last taxable year.
(b) To obtain a tax credit certificate pursuant to this
Section, the qualified taxpayer must apply with the Division.
The Division shall determine the amount of eligible

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rehabilitation expenditures within 45 days after receipt of a
complete application. The taxpayer must provide to the Division
a third-party cost certification conducted by a certified
public accountant verifying (i) the qualified and
non-qualified rehabilitation expenses and (ii) that the
qualified expenditures exceed the adjusted basis of the
qualified historic structure on the first day the qualified
rehabilitation plan commenced. The accountant shall provide
appropriate review and testing of invoices. The Division is
authorized, but not required, to accept this third-party cost
certification to determine the amount of qualified
expenditures. The Division and the National Park Service shall
determine whether the rehabilitation is consistent with the
Standards of the Secretary of the United States Department of
the Interior.
(c) If the amount of any tax credit awarded under this Act
exceeds the qualified taxpayer's income tax liability for the
year in which the qualified rehabilitation plan was placed in
service, the excess amount may be carried forward for deduction
from the taxpayer's income tax liability in the next succeeding
year or years until the total amount of the credit has been
used, except that a credit may not be carried forward for
deduction after the tenth taxable year after the taxable year
in which the qualified rehabilitation plan was placed in
service. Upon completion of the project and approval of the
complete application review of the project, the Division shall

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issue a single certificate in the amount of the eligible
credits equal to 25% of the qualified expenditures incurred
during the eligible taxable years, not to exceed the lesser of
the allocated amount or $3,000,000 per single qualified
rehabilitation plan. Prior to the issuance of the tax credit
certificate, the qualified taxpayer must provide to the
Division verification that the rehabilitated structure is a
qualified historic structure.. At the time the certificate is
issued, an issuance fee up to the maximum amount of 2% of the
amount of the credits issued by the certificate may be
collected from the qualified taxpayer applicant to administer
the Act. If collected, this issuance fee shall be directed to
the Division Historic Property Administrative Fund or other
such fund as appropriate for use of the Division in the
administration of the Historic Preservation Tax Credit
Program. The taxpayer must attach the certificate or legal
documentation of her or his proportional share of the
certificate to the tax return on which the credits are to be
claimed. The tax credit under this Section may not reduce the
taxpayer's liability to less than zero. If the amount of the
credit exceeds the tax liability for the year, the excess
credit may be carried forward and applied to the tax liability
of the 10 taxable years following the first excess credit year.
The taxpayer is not eligible to receive credits under this
Section and under Section 221 of the Illinois Income Tax Act
for the same qualified expenditures or qualified

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rehabilitation plan.
(d) If the taxpayer is (i) a corporation having an election
in effect under Subchapter S of the federal Internal Revenue
Code, (ii) a partnership, or (iii) a limited liability company,
the credit provided under this Act may be claimed by the
shareholders of the corporation, the partners of the
partnership, or the members of the limited liability company in
the same manner as those shareholders, partners, or members
account for their proportionate shares of the income or losses
of the corporation, partnership, or limited liability company,
or as provided in the bylaws or other executed agreement of the
corporation, partnership, or limited liability company.
Credits granted to a partnership, a limited liability company
taxed as a partnership, or other multiple owners of property
shall be passed through to the partners, members, or owners
respectively on a pro rata basis or pursuant to an executed
agreement among the partners, members, or owners documenting
any alternate distribution method.
(e) If a recapture event occurs during the recapture period
with respect to a qualified historic structure, then for any
taxable year in which the credits are allowed as specified in
this Act, the tax under the applicable Section of this Act
shall be increased by applying the recapture percentage set
forth below to the tax decrease resulting from the application
of credits allowed under this Act to the taxable year in
question.

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For the purposes of this subsection, the recapture
percentage shall be determined as follows:
(1) if the recapture event occurs within the first year
after commencement of the recapture period, then the
recapture percentage is 100%;
(2) if the recapture event occurs within the second
year after commencement of the recapture period, then the
recapture percentage is 80%;
(3) if the recapture event occurs within the third year
after commencement of the recapture period, then the
recapture percentage is 60%;
(4) if the recapture event occurs within the fourth
year after commencement of the recapture period, then the
recapture percentage is 40%; and
(5) if the recapture event occurs within the fifth year
after commencement of the recapture period, then the
recapture percentage is 20%.
In the case of any recapture event, the carryforwards under
this Act shall be adjusted by reason of such event.
(f) The Division may adopt rules to implement this Section
in addition to the rules expressly authorized herein.
(Source: P.A. 100-629, eff. 1-1-19; 101-81, eff. 7-12-19.)
(35 ILCS 31/20)
Sec. 20. Limitations, reporting, and monitoring.
(a) In every calendar year that this program is in effect,

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the Division is authorized to allocate $15,000,000 in tax
credits in addition to any unallocated, returned, or rescinded
allocations from previous years, pursuant to qualified
rehabilitation plans. The Division shall award not more than an
aggregate of $15,000,000 in total annual tax credits pursuant
to qualified rehabilitation plans for qualified historic
structures. The Division shall not allocate or award award not
more than $3,000,000 in tax credits with regard to a single
qualified rehabilitation plan. In allocating awarding tax
credits under this Act, the Division must prioritize
applications projects that meet one or more of the following:
(1) the qualified historic structure is located in a
county that borders a State with a historic
income-producing property rehabilitation credit;
(2) the qualified historic structure was previously
owned by a federal, state, or local governmental entity for
no less than 6 months;
(3) the qualified historic structure is located in a
census tract that has a median family income at or below
the State median family income; data from the most recent
5-year estimate from the American Community Survey (ACS),
published by the U.S. Census Bureau, shall be used to
determine eligibility;
(4) the qualified rehabilitation plan includes in the
development partnership a Community Development Entity or
a low-profit (B Corporation) or not-for-profit

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organization, as defined by Section 501(c)(3) of the
Internal Revenue Code; or
(5) the qualified historic structure is located in an
area declared under an Emergency Declaration or Major
Disaster Declaration under the federal Robert T. Stafford
Disaster Relief and Emergency Assistance Act. The
declaration must be no older than 3 years at the time of
application.
(b) The annual aggregate authorization program allocation
of $15,000,000 set forth in subsection (a) shall be allocated
by the Division, in such proportion as determined by the
Director Department, on a per calendar basis twice in each
calendar year that the program is in effect, provided that: (i)
the amount initially allocated by the Division for the first
any one calendar application period shall not exceed 65% of the
total allowable amount available for allocation. Any
unallocated and (ii) any portion of the allocated allowable
amount remaining unused as of the end of any of the second
calendar application period of a given calendar year shall be
rolled over into and added to the total authorized allocated
amount for the next available calendar year. The qualified
rehabilitation plan must meet a readiness test, as defined in
the rules created by the Division, in order for the application
Applicant to qualify. In any given application period,
applications Applicants that qualify under this Act will be
prioritized as set forth in subsection (a) and placed in a

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queue based on the date and time the application is received.
Applicants whose applications qualify but do not receive an
allocation until such time as the application period total
allowable amount is reached. Applicants must reapply to be
considered in subsequent for each application periods period.
(c) Subject On or before December 31, 2019, and on or
before December 31 of each odd-numbered year thereafter through
2023, subject to appropriation and prior to equal disbursement
to the Division, moneys in the Historic Property Administrative
Fund shall be used, on a biennial basis, beginning at the end
of the second first fiscal year after the effective date of
this amendatory Act of the 101st General Assembly, to hire a
qualified third party to prepare a biennial report to assess
the overall impact effectiveness of this Act from the qualified
rehabilitation plans projects under this Act completed in that
year and in previous years. Baseline data of the metrics in the
report shall be collected at the initiation of a qualified
rehabilitation plan project. The overall economic impact shall
include at least:
(1) the number of applications, project locations, and
proposed use of qualified historic structures;
(2) the amount of credits awarded and the number and
location of projects receiving credit allocations;
(3) the status of ongoing projects and projected
qualifying expenditures for ongoing projects;
(4) for completed projects, the total amount of

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qualifying rehabilitation expenditures and non-qualifying
expenditures, the number of housing units created and the
number of housing units that qualify as affordable, and the
total square footage rehabilitated and developed;
(5) direct, indirect, and induced economic impacts;
(6) temporary, permanent, and construction jobs
created; and
(7) sales, income, and property tax generation before
construction, during construction, and after completion.
The report to the General Assembly shall be filed with the
Clerk of the House of Representatives and the Secretary of the
Senate in electronic form only, in the manner that the Clerk
and the Secretary shall direct.
(d) Any time prior to issuance of a tax credit certificate,
the Director of the Division, the State Historic Preservation
Officer, or staff of the Division may, upon reasonable notice
to the project owner of not less than 3 business days, conduct
a site visit to the project to inspect and evaluate the
project.
(e) Any time prior to the issuance of a tax credit
certificate and for a period of 4 years following the effective
date of a project tax credit certificate, the Director may,
upon reasonable notice of not less than 30 calendar days,
request a status report from the Applicant consisting of
information and updates relevant to the status of the project.
Status reports shall not be requested more than twice yearly.

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(f) In order to demonstrate sufficient evidence of
reviewable progress within 12 months after the date the
Applicant received notification of allocation approval from
the Division, the Director may require the Applicant to shall
provide all of the following:
(1) a viable financial plan which demonstrates by way
of an executed agreement that all financing has been
secured for the project; such financing shall include, but
not be limited to, equity investment as demonstrated by
letters of commitment from the owner of the property,
investment partners, and equity investors;
(2) (blank); final construction drawings or approved
building permits that demonstrate the complete
rehabilitation of the full scope of the application; and
(3) all historic approvals, including all federal and
State rehabilitation documents required by the Division.
The Director shall review the submitted evidence and may
request additional documentation from the Applicant if
necessary. The Applicant will have 30 calendar days to provide
the information requested, otherwise the allocation approval
may be rescinded at the discretion of the Director.
(g) In order to demonstrate sufficient evidence of
reviewable progress within 24 18 months after the date the
application received notification of approval from the
Division, the Director may require the Applicant is required to
provide detailed evidence that the Applicant has secured and

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closed on financing for the complete scope of rehabilitation
for the project. To demonstrate evidence that the Applicant has
secured and closed on financing, the Applicant will need to
provide signed and processed loan agreements, bank financing
documents or other legal and contractual evidence to
demonstrate that adequate financing is available to complete
the project. The Director shall review the submitted evidence
and may request additional documentation from the Applicant if
necessary. The Applicant will have 30 calendar days to provide
the information requested, otherwise the allocation approval
may be rescinded at the discretion of the Director.
If the Applicant fails to document reviewable progress
within 24 18 months of approval, the Director may notify the
Applicant that the allocation application is rescinded.
However, should financing and construction be imminent, the
Director may elect to grant the Applicant no more than 5 months
to close on financing and commence construction. If the
Applicant fails to meet these conditions in the required
timeframe, the Director shall notify the Applicant that the
application is rescinded. Any such rescinded allocation shall
be added to the aggregate amount of credits available for
allocation for the year in which the forfeiture occurred.
The amount of the qualified expenditures identified in the
qualified taxpayer's Applicant's certification of completion
and reflected on the Historic Preservation Tax Credit
certificate issued by the Director is subject to inspection,

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examination, and audit by the Department of Revenue.
The qualified taxpayer Applicant shall establish and
maintain for a period of 4 years following the effective date
on a project tax credit certificate such records as required by
the Director. Such records include, but are not limited to,
records documenting project expenditures and compliance with
the U.S. Secretary of the Interior's Standards. The Applicant
shall make such records available for review and verification
by the Director, the State Historic Preservation Officer, the
Department of Revenue, or appropriate staff, as well as other
appropriate State agencies. In the event the Director
determines an Applicant has submitted a status an annual report
containing erroneous information or data not supported by
records established and maintained under this Act, the Director
may, after providing notice, require the Applicant to resubmit
corrected reports.
(Source: P.A. 100-629, eff. 1-1-19.)
(35 ILCS 31/25)
Sec. 25. Powers. The Division may shall adopt rules for the
administration of this Act. The Division may enter into an
intergovernmental agreement with the Department of Commerce
and Economic Opportunity, the Department of Revenue, or both,
for the administration of this Act. Such intergovernmental
agreement may allow for the distribution of all or a portion of
the issuance fee imposed under Section 10 to the Department of

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Commerce and Economic Opportunity or the Department of Revenue,
as applicable.
(Source: P.A. 100-629, eff. 1-1-19.)
Section 10. The Illinois Income Tax Act is amended by
changing Section 228 as follows:
(35 ILCS 5/228)
Sec. 228. Historic preservation credit. For tax years
beginning on or after January 1, 2019 and ending on or before
December 31, 2023, a taxpayer who qualifies for a credit under
the Historic Preservation Tax Credit Act is entitled to a
credit against the taxes imposed under subsections (a) and (b)
of Section 201 of this Act as provided in that Act. If the
taxpayer is a partnership, or Subchapter S corporation, or a
limited liability company the credit shall be allowed to the
partners, or shareholders, or members in accordance with the
determination of income and distributive share of income under
Sections 702 and 704 and Subchapter S of the Internal Revenue
Code provided that credits granted to a partnership, a limited
liability company taxed as a partnership, or other multiple
owners of property shall be passed through to the partners,
members, or owners respectively on a pro rata basis or pursuant
to an executed agreement among the partners, members, or owners
documenting any alternate distribution method. If the amount of
any tax credit awarded under this Section exceeds the qualified

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taxpayer's income tax liability for the year in which the
qualified rehabilitation plan was placed in service, the excess
amount may be carried forward as provided in the Historic
Preservation Tax Credit Act.
(Source: P.A. 100-629, eff. 1-1-19; 101-81, eff. 7-12-19.)
Section 99. Effective date. This Act takes effect upon
becoming law.