Current through Register Vol. 48, No. 38, September 20, 2024
a) Subject to the minimum investment
requirements of Section 5.5 of the Illinois Enterprise Zone Act, a taxpayer
shall be allowed a credit against the tax imposed by IITA Sections 201(a) and
(b) for investment in qualified property which is placed in service in a
federally designated Foreign Trade Zone or Sub-Zone located in Illinois by a
Department of Commerce and Community Affairs designated High Impact Business.
The credit is reported on Schedules 1299 A, C or D. Recapture (see subsection
(i) below) is computed on Schedule 4255.
b) The credit shall be .5% of the basis for
such property.
c) The credit shall
not be available until the minimum investments in qualified and shall not be
allowed to the extent that it would reduce a taxpayer's liability for the tax
imposed by IITA Sections 201(a) and (b) to below zero. The credit applicable to
such minimum investments shall be taken in the taxable year in which such
minimum investments have been completed. The credit for additional investments
beyond the minimum investment by a designated high impact business shall be
available only in the taxable year in which the property is placed in service
and shall not be allowed to the extent that it would reduce a taxpayer's
liability for the tax imposed by IITA Sections 201(a) and (b) to below zero.
The minimum investments required by Section 5.5 of the Illinois Enterprise Zone
Act are:
1) $12,000,000 which will be placed
in service in qualified property with an intention to create 500 full-time
equivalent jobs at a designated location in Illinois, or
2) $30,000,000 which will be placed in
service in qualified property with the intention to retain 1,500 full-time jobs
at a designated location in Illinois.
The Illinois Department of Commerce and Community Affairs
must certify that the minimum investment requirements have been met.
d) For tax years ending
on or after December 31, 1987, the credit shall be allowed for the tax year in
which the property is placed in service, or, if the amount of the credit
exceeds the tax liability for that year, whether it exceeds the original
liability or the liability as later amended, such excess may be carried forward
and applied to the tax liability of the 5 taxable years following the excess
credit year. The credit shall be applied to the earliest year for which there
is a liability. If there is a credit from more than one tax year that is
available to offset a liability, the credit accruing first in time shall be
applied first.
e) The term
"qualified property" means property which is:
1) tangible, whether new or used;
A) Tangible property includes objects or
things that are physically capable of being touched and seen and over which a
person may assert rights of ownership.
B) Tangible property consists of personalty
or realty and includes such items as buildings, structural components of
buildings, machinery, equipment and vehicles.
C) Items such as stock certificates, bonds,
notes and the like are not tangible personal property. While the certificate or
paper may be tangible, the item itself, the share of ownership of a corporation
or the promise to pay is an intangible that is memorialized by the
paper.
D) The terms "new or used"
shall have their commonly ascribed meanings.
2) depreciable pursuant to IRC Section 167,
except that "3-year property" as defined in IRC Section 168 is not eligible for
the credit provided by IITA Section 201(h);
A)
Depreciable property is property used in the trade or business of a taxpayer,
or held for production of income, which is subject to wear and tear,
exhaustion, or obsolescence.
B)
Property that is depreciated under the Modified Accelerated Cost Recovery
System (MARCS), as provided by IRC Section 168, is considered depreciable
pursuant to IRC Section 167 for purposes of the Enterprise Zone Investment
Credit.
C) Examples of tangible
property that is not depreciable include land, inventories or stock-in-trade,
natural resources, and coin or currency.
D) The provisions of Internal Revenue Service
regulation Section 1.167(a) -4 will be utilized in making determinations as to
whether particular leasehold improvements are depreciable.
3) acquired by purchase as defined in IRC
Section 179(d); and
A) A purchase is any
acquisition of property except:
i) an
acquisition from a person whose relationship to the acquiring person is such
that a resulting loss would be disallowed under IRC Sections 267 or
707(b);
ii) an acquisition by one
component member of a controlled group from another component member of the
group;
iii) an acquisition of
property if the basis of the property in the hands of the person acquiring it
is determined in whole or in part by its adjusted basis in the hands of the
person from whom the property was acquired; or
iv) an acquisition of property, the basis of
which is determined under IRC Section 1014(a). IRC Section 1014(a) covers
property received from a decedent. Property acquired by bequest or demise is
not acquired by purchase.
B) For purposes of determining whether
property is acquired by purchase as defined by IRC 179(d), the family of an
individual includes only his spouse and ancestral and lineal descendants of the
individual and his spouse.
C) For
purposes of determining whether property is acquired by purchase only, a
controlled group has the same meaning as in IRC Section 1563(a), except stock
ownership of only 50% or more is required (also see IRS Regulation Section
1.179 -4(f)).
D) Property that the
taxpayer constructs, reconstructs or erects is generally considered acquired by
purchase.
4) not
eligible for the Enterprise Zone Investment Credit provided by IITA Section
201(f).
f) The basis of
qualified property shall be the basis used to compute the depreciation
deduction for federal income tax purposes.
1)
In computing the amount of credit available for a taxable year, the credit rate
will be applied to the total basis of all qualified property that is placed in
service by a high impact business located in a foreign trade zone or sub-zone
in Illinois during the taxable year, provided the property continues to qualify
on the last day of the taxable year.
2) If the basis of the property for federal
income tax depreciation purposes is increased after it has been placed in
service in a federally designated foreign trade zone or sub-zone located in
Illinois by the taxpayer, the amount of such increase shall be deemed property
placed in service on the date of such increase in basis.
3) Property that has been fully expensed
under IRC Section 179 has no federal depreciable basis with which to compute
the credit. Property not fully expensed under IRC 179 can still qualify for the
credit.
g) The term
"placed in service" shall have the same meaning as under IRC Section 46. (IITA
Section 201(h)(5)) Property is placed in service for purposes of the credit in
the earlier of the following years:
1) That
in which, under the taxpayer's depreciation practice, depreciation begins on
the property; or
2) That in which
the property is placed in a condition or state of readiness and availability
for a specifically assigned function.
h) If, during any taxable year ending on or
before December 31, 1996, any property ceases to be qualified property in the
hands of the taxpayer within 48 months after being placed in service in a
foreign trade zone or sub-zone, or the situs of any qualified property is moved
outside Illinois within 48 months after being placed in service, the tax
imposed under IITA Section 201(a) and (b) of this Section for such taxable year
shall be increased.
1) Any property disposed
of by the taxpayer within 48 months after being placed in service ceases to
qualify.
A) A taxpayer disposes of property
when he sells the property, exchanges or trades-in worn-out property for new
property, abandons the property or retires it from use.
B) Property destroyed by casualty, stolen, or
transferred as a gift is disposed of property.
C) Property that is mortgaged or used as
security for a loan is not disposed of property, provided that the taxpayer
continues to use the property in its business within a foreign trade zone or
subzone located in Illinois.
D)
Property transferred to a trustee in bankruptcy is considered disposed of
property.
E) A transfer of property
by foreclosure is a disposition of property.
F) A reduction in the basis of qualified
property resulting from a redetermination of the purchase price of the property
is a disposition of property to the extent of such reduction in basis in the
year in which the reduction takes place. For example, this would occur when
property is purchased and placed in service in one year, and in a later year
the taxpayer receives a refund of a portion of the original purchase
price.
2) Any property
converted to personal use ceases to qualify for the credit.
3) The increase in tax shall be determined
by:
A) recomputing the investment credit
which would have been allowed for the year in which credit for such property
was originally allowed by eliminating such property from such computation,
and
B) subtracting such computed
credit from the amount of credit previously allowed. The difference between the
recomputed credit and the credit actually claimed is added to the income tax
for year in which the property ceased to qualify.
EXAMPLE: In 1990, High Impact Business A places qualifying
property with a basis of $55,000 into service in Illinois and computes a credit
for the year of $275 ($55,000 x .5%). High Impact Business A's 1990 income tax
is $275. After application of the credit, High Impact Business A has no
remaining income tax liability. In the following year, High Impact Business A
moved a qualifying asset having a basis of $5,000 from Illinois to Missouri and
is required to recapture a portion of the credit applied against its 1990
income tax liability. The credit applied against High Impact Business A's
income tax must be recaptured because the property was moved outside of
Illinois and no longer qualifies for the credit. In order to determine its
additional income tax for 1991, High Impact Business A must recompute its 1990
credit by eliminating the disqualified property ($55,000 - $5,000 x .5% =
$250). This recomputed credit is subtracted from the credit actually used in
1990 against the income tax ($275 - $250 = $25) and the difference is added to
High Impact Business A's 1991 income tax.
i) If, during any taxable year
ending after December 31, 1996, a taxpayer who has been allowed a credit under
IITA Section 201(h) relocates its entire facility in violation of the explicit
terms and length of the contract under Section 18-183 of the Property Tax Code,
the tax imposed under subsections (a) and (b) of this Section shall be
increased for the taxable year in which the taxpayer relocates that facility by
an amount equal to the amount of credit received by the taxpayer under this
IITA Section 201(h) with respect to qualified property placed in service at
that facility.
