Bill Text: IL HB3025 | 2019-2020 | 101st General Assembly | Introduced

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Bill Title: Creates the School Building Rehabilitation Tax Credit Act. Creates an income tax credit equal to 25% of the qualified expenditures incurred by a qualified taxpayer undertaking a qualified rehabilitation plan of a vacant school building. Provides that, to be eligible for the credit, the taxpayer must apply with the Department of Revenue. Provides that the credit is subject to certain limitations. Amends the Illinois Income Tax Act to make conforming changes. Effective immediately.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Introduced - Dead) 2019-03-29 - House Committee Amendment No. 1 Rule 19(c) / Re-referred to Rules Committee [HB3025 Detail]

Download: Illinois-2019-HB3025-Introduced.html

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101ST GENERAL ASSEMBLY State of Illinois 2019 and 2020 HB3025 Introduced , by Rep. Jehan Gordon-Booth SYNOPSIS AS INTRODUCED:
New Act
35 ILCS 5/229 new
Creates the School Building Rehabilitation Tax Credit Act. Creates an income tax credit equal to 25% of the qualified expenditures incurred by a qualified taxpayer undertaking a qualified rehabilitation plan of a vacant school building. Provides that, to be eligible for the credit, the taxpayer must apply with the Department of Revenue. Provides that the credit is subject to certain limitations. Amends the Illinois Income Tax Act to make conforming changes. 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 1. Short title. This Act may be cited as the School
Building Rehabilitation Tax Credit Act.
Section 5. Definitions. As used in this Act, unless the
context clearly indicates otherwise:
"Department" means the Department of Revenue.
"Phased rehabilitation" means a project that is completed
in phases.
"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.
"Qualified expenditures" means all the costs and expenses
for construction materials used to repurpose a qualified school
building.
"Qualified school building" means a vacant school building
located in Illinois.
"Qualified rehabilitation plan" means a project involving
a qualified school building that is approved by the Department.
"Qualified taxpayer" means the owner of the qualified
school building.
"Recapture event" means any of the following events

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occurring during the recapture period:
(1) failure to place in service the rehabilitated
portions of the qualified school building, or failure to
maintain the rehabilitated portions of the qualified
school building 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
and safety of the public or to protect the structural
integrity of the qualified school building or a neighboring
structure;
(2) demolition or other alteration of the qualified
school building in a manner that is inconsistent with the
qualified rehabilitation plan;
(3) disposition of the rehabilitated qualified school
building in whole or a proportional disposition of a
partnership interest therein, except as otherwise
permitted by this Section; or
(4) use of the qualified school building 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.

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The following dispositions of a qualified school building
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 school building
are placed in service, will be a lessee of the qualified
school building, 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 school building, so long as the property
interest in such qualified school building 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 school building or rehabilitated
portions of the qualified school building are placed in
service.
"Substantial rehabilitation" means that the qualified
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

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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, 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.
Section 10. Allowable credit.
(a) To the extent authorized by this Act, for taxable years
beginning on or after January 1, 2020 and ending on or before
December 31, 2024, there shall be allowed a tax credit 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 incurred by a qualified taxpayer
undertaking a qualified rehabilitation plan of a qualified
school building, provided that the total amount of such
expenditures must (i) equal $5,000 or more or (ii) exceed the
adjusted basis of the qualified school building on the first
day the qualified rehabilitation plan commenced. If the
qualified rehabilitation plan spans multiple years, the

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aggregate credit for the entire project shall be allowed in the
last taxable year.
(b) To obtain a tax credit pursuant to this Section, the
taxpayer must apply with the Department. The Department shall
determine the amount of eligible rehabilitation expenditures
within 45 days after receipt of a complete application. The
taxpayer must provide to the Department 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 school building on the first
day the qualified rehabilitation plan commenced. The
accountant shall provide appropriate review and testing of
invoices. The Department is authorized, but not required, to
accept this third-party cost certification to determine the
amount of qualified expenditures.
(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 a credit
against 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 and review of the project, the

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Department shall issue a single certificate in the amount of
the eligible credits equal to 25% of the qualified expenditures
incurred during the eligible taxable years. 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 applicant to administer the Act. If
collected, this issuance fee shall be directed to the Tax
Compliance and Administration Fund for use of the Department in
the administration of this 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
excess credit year.
(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,

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or as provided in the by-laws 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 school building, 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.
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

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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.
(d) The Department may adopt rules to implement this
Section in addition to the rules expressly authorized herein.
Section 20. Limitations, reporting, and monitoring.
(a) The Department shall award not more than an aggregate
of $15,000,000 in total annual tax credits pursuant to
qualified rehabilitation plans for qualified school building.
The Department shall award not more than $3,000,000 in tax
credits with regard to a single qualified rehabilitation plan.
In awarding tax credits under this Act, the Department must
prioritize projects that meet one or more of the following:
(1) the qualified school building was previously owned
by a federal, State, or local governmental entity;
(2) the qualified school building 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),

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published by the U.S. Census Bureau, shall be used to
determine eligibility;
(3) the qualified rehabilitation plan includes in the
development partnership a Community Development Entity or
a low-profit (B Corporation) or not-for-profit
organization, as defined by Section 501(c)(3) of the
Internal Revenue Code; or
(4) the qualified school building 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.
(b) The annual aggregate program allocation of $15,000,000
set forth in subsection (a) shall be allocated by the
Department, in such proportion as determined by the Department,
on a per calendar basis twice in each year that the program is
in effect, provided that: (i) the amount initially allocated by
the Department for any one calendar application period shall
not exceed 65% of the total allowable amount 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 into and added to the
total 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 Department, in order for
the Applicant to qualify. Applicants that qualify under this
Act will be placed in a queue based on the date and time the

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application is received until the application period total
allowable amount is reached. Applicants must reapply for each
application period.
(c) On or before December 31, 2020, and on or before
December 31 of each even-numbered year thereafter through 2024,
subject to appropriation and prior to equal disbursement to the
Department, moneys in the Tax Compliance and Administration
Fund attributable to fees under this Act shall be used,
beginning at the end of the first fiscal year after the
effective date of this Act, to hire a qualified third party to
prepare a biennial report to assess the overall effectiveness
of this Act from the qualified rehabilitation 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 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
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

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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 Department, the State Historic Preservation
Officer, or staff of the Department 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.
(f) In order to demonstrate sufficient evidence of
reviewable progress within 12 months after the date the
Applicant received notification of approval from the

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Department, the Applicant 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; and
(2) final construction drawings or approved building
permits that demonstrate the complete rehabilitation of
the full scope of the application.
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 approval may be
rescinded at the discretion of the Director.
(g) In order to demonstrate sufficient evidence of
reviewable progress within 18 months after the date the
application received notification of approval from the
Department, the Applicant is required to provide detailed
evidence that the Applicant has secured and 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

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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 approval may be rescinded at the
discretion of the Director.
If the Applicant fails to document reviewable progress
within 18 months of approval, the Director may notify the
Applicant that the 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
Applicant's certification of completion and reflected on the
certificate issued by the Department is subject to inspection,
examination, and audit.
The 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 Department.
Section 25. Powers. The Department shall adopt rules for
the administration of this Act.

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Section 60. The Illinois Income Tax Act is amended by
adding Section 229 as follows:
(35 ILCS 5/229 new)
Sec. 229. School Building Rehabilitation Tax Credit. For
taxable years beginning on or after January 1, 2020 and ending
on or before December 31, 2024, each taxpayer that is awarded a
credit under the School Building Rehabilitation Tax Credit Act
is entitled to a credit as provided in that Act.
Section 99. Effective date. This Act takes effect upon
becoming law.