Illinois General Assembly
The House and Senate have adjourned until the fall veto session. The first day of the veto session is scheduled for October 28.
This week I continue working through the details of the recent tax-related legislation. P.A. 101-0009,
I've received clarification of a couple of items from the Department of Revenue.
The Department has confirmed that the expansion of the manufacturing machinery and equipment exemption to include production-related tangible personal property (items formerly covered by the expired Manufacturers' Purchase Credit) includes production-related tangible personal property utilized in graphic arts production.
I received a question from a member as to whether the expansion included graphic arts production. My reading of the legislation is that it does include graphic arts production by virtue of the expansion of the manufacturing machinery and equipment exemption in 2017 to include graphic arts production. The Department confirmed that graphic arts production is included.
The Department also confirmed that the exemption for production-related tangible personal property applies to stand-alone research and development facilities. You may recall that Section 130.331(b)(3)(C) of the Department's rules for the Manufacturers' Purchase Credit provided eligibility for MPC for "All tangible personal property used or consumed by a manufacturer or graphic arts producer in research and development regardless of use within or without a manufacturing or graphic arts production facility." The Department confirmed that stand-alone research and development facilities will qualify for the exemption for production-related tangible personal property under the new manufacturing machinery and equipment exemption.
I also spent some reviewing the portion of SB 689 that contains various provisions authorizing construction jobs income tax credits, the "Blue Collar Jobs Act."
The credit is for 50% of the amount of the incremental income tax attributable to qualifying construction jobs or 75% in the case of projects located in an "underserved" area. The term "underserved area" has the same meaning as the term is used in the existing EDGE credit.
High impact businesses can qualify for the construction jobs credit. It doesn't appear that there are any new categories of High Impact businesses established by the legislation, so it appears a taxpayer must comply with the existing investment and job creation requirements to be a high impact business in order to qualify for the High Impact Business construction jobs credit.,
Businesses that make a $10,000,000 capital investment in an Enterprise Zone can receive the Enterprise Zone construction jobs credit, There do not appear to be any job creation requirements under the Enterprise Zone construction jobs credit.
The new enterprise zone construction jobs credit provides that a taxpayer considering a project in an Enterprise Zone must meet the $10,000,000 capital investment requirement, and "receive approval from the designating city or county, and make application to DCEO and receive approval from DCEO." The legislation also requires that "The application must describe the nature and benefit of the project to the certified Enterprise Zone and its potential contributors."
There is also a New Construction EDGE Credit that requires a capital investment of at least $10,000,000. This credit incorporates Section 5-20 of the existing EDGE credit into the requirements for the New Construction EDGE Credit. For example, in the case of an applicant with more than 100 employees it requires the lesser of 10% of the number of full-time employees employed by the applicant world-wide or 50 new employees. From my initial review, it does not appear there is any prohibition against combining/stacking the existing EDGE credit and the New Construction EDGE Credit.
SB 689 establishes a River Edge Construction Jobs credit that requires a capital investment of only $1,000,000. There do not appear to be any job creation requirements for the River Edge Construction Jobs Credit.
The credits are 4 independent credits. A taxpayer may qualify as, (1) a High Impact business (it seems to allow existing high impact businesses to enter into a project and unless I missed it there is no particular capital investment required for a High Impact Business), or (2) a business in an Enterprise Zone that makes a $10,000,000 capital investment, or (3) a New construction EDGE agreement - if you qualify for an EDGE credit under the investment and job creation criteria you can also get the New Construction EDGE credit, or (4) a River Edge construction jobs credit which only has a $1,000,000 capital investment requirement.
There is a $20,000,000 annual cap for these new construction jobs tax income tax credits. I'm not sure how the cap will be implemented. It could be done on a "first come, first served" basis. But, then what happens if you do a project and are shut out of the credit for a particular tax year? Do you lose the credit?
I'll also follow up with the folks at DCEO to make sure I'm not missing anything.
No tax-related cases this week