§ 5-5 — Definitions

Illinois § 5-5

• Jurisdiction: Illinois
• Topic: GOVERNMENT
• Ch. 35: REVENUE
• Act 35 ILCS 10/: Economic Development for a Growing Economy Tax Credit Act.
• Art.: Article 5 - Economic Development for a Growing Economy Tax Credit Act

Text

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, professional services, and services delivered to business customer sites. "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 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. "Credit" means the amount agreed to between the Department and Applicant under this Act, but not to exceed the lesser of: (1) the sum of (i) 50% of the Incremental Income Tax attributable to New Employees at the Applicant's project and (ii) 10% of the training costs of New Employees; or (2) 100% of the Incremental Income Tax attributable to New Employees at the Applicant's project. However, if the project is located in an underserved area, then the amount of the Credit may not exceed the lesser of: (1) the sum of (i) 75% of the Incremental Income Tax attributable to New Employees at the Applicant's project and (ii) 10% of the training costs of New Employees; or (2) 100% of the Incremental Income Tax attributable to New Employees at the Applicant's project. If the project is not located in an underserved area and the Applicant agrees to hire the required number of New Employees, then the maximum amount of the Credit for that Applicant may be increased by an amount not to exceed 25% of the Incremental Income Tax attributable to retained employees at the Applicant's project. If the project is located in an underserved area and the Applicant agrees to hire the required number of New Employees, then the maximum amount of the credit for that Applicant may be increased by an amount not to exceed 50% of the Incremental Income Tax attributable to retained employees at 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 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. The employee need not be physically present at the EDGE project location during the entire full-time workweek; however, the agreement shall set forth a minimum number of hours during which the employee is scheduled to be present at the EDGE project location. "Incremental Income Tax" means the total amount withheld during the taxable year from the compensation of New Employees and, if applicable, retained employees under Article 7 of the Illinois Income Tax Act arising from employment at a project that is the subject of an Agreement. "New Construction EDGE Agreement" means the Agreement between a Taxpayer and the Department under the provisions of Section 5-51 of this Act. "New Construction EDGE Credit" means an amount agreed to between the Department and the Applicant under this Act as part of a New Construction EDGE Agreement that does not exceed 50% of the Incremental Income Tax attributable to New Construction EDGE Employees at the Applicant's project; however, if the New Construction EDGE Project is located in an underserved area, then the amount of the New Construction EDGE Credit may not exceed 75% of the Incremental Income Tax attributable to New Construction EDGE Employees at the Applicant's New Construction EDGE Project. "New Construction EDGE Employee" means a laborer or worker who is employed by a contractor or subcontractor in the actual construction work on the site of a New Construction EDGE Project, pursuant to a New Construction EDGE Agreement. "New Construction EDGE Incremental Income Tax" means the total amount withheld during the taxable year from the compensation of New Construction EDGE Employees. "New Construction EDGE Project" means the building of a Taxpayer's structure or building, or making improvements of any kind to real property. "New Construction EDGE Project" does not include the routine operation, routine repair, or routine maintenance of existing structures, buildings, or real property. "New Employee" means: (a) A Full-time Employee first employed by a Taxpayer at the project, or assigned to the project as their primary work location, 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 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. (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 (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. "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 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 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. "Startup taxpayer" means, for Agreements that are executed before the effective date of the changes made to this Section by this amendatory Act of the 103rd General Assembly, a corporation, partnership, or other entity incorporated or organized no more than 5 years before the filing of an application for an Agreement that has never had any Illinois income tax liability, excluding any Illinois income tax liability of a Related Member which shall not be attributed to the startup taxpayer. "Startup taxpayer" means, for Agreements that are executed on or after the effective date of this amendatory Act of the 103rd General Assembly, a corporation, partnership, or other entity that is incorporated or organized no more than 10 years before the filing of an application for an Agreement and that has never had any Illinois income tax liability. For the purpose of determining whether the taxpayer has had any Illinois income tax liability, the Illinois income tax liability of a Related Member shall not be attributed to the startup taxpayer. "Taxpayer" means an individual, corporation, partnership, or other entity that has any Illinois Income Tax liability. Until July 1, 2022, "underserved area" means a geographic area that meets one or more of the following conditions: (1) the area has a poverty rate of at least 20% according to the latest federal decennial census; (2) 75% or more of the children in the area participate in the federal free lunch program according to reported statistics from the State Board of Education; (3) at least 20% of the households in the area receive assistance under the Supplemental Nutrition Assistance Program (SNAP); or (4) the area has an average unemployment rate, as determined by the Illinois Department of Employment Security, that is more than 120% of the national unemployment average, as determined by the U.S. Department of Labor, for a period of at least 2 consecutive calendar years preceding the date of the application. On and after July 1, 2022, "underserved area" means a geographic area that meets one or more of the following conditions: (1) the area has a poverty rate of at least 20% according to the latest American Community Survey; (2) 35% or more of the families with children in the area are living below 130% of the poverty line, according to the latest American Community Survey; (3) at least 20% of the households in the area receive assistance under the Supplemental Nutrition Assistance Program (SNAP); or (4) the area has an average unemployment rate, as determined by the Illinois Department of Employment Security, that is more than 120% of the national unemployment average, as determined by the U.S. Department of Labor, for a period of at least 2 consecutive calendar years preceding the date of the application.

Legislative History

(Source: P.A. 102-330, eff. 1-1-22; 102-700, eff. 4-19-22; 102-1125, eff. 2-3-23; 103-9, eff. 6-7-23; 103-595, eff. 6-26-24.)