Bill Text: IL SB1691 | 2009-2010 | 96th General Assembly | Enrolled

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Bill Title: Amends the Senior Citizens Real Estate Tax Deferral Act. Increases the income limitation under the Act to $55,000 (instead of $50,000) beginning in 2009. Amends the Property Tax Code. Provides that the maximum income limitation under the Senior Citizens Assessment Freeze Homestead Exemption is the income limitation set forth in the Senior Citizens Real Estate Tax Deferral Act. Effective immediately.

Spectrum: Slight Partisan Bill (Republican 20-8)

Status: (Passed) 2009-07-31 - Public Act . . . . . . . . . 96-0116 [SB1691 Detail]

Download: Illinois-2009-SB1691-Enrolled.html

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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 Illinois Income Tax Act is amended by
changing Section 201 as follows:
(35 ILCS 5/201) (from Ch. 120, par. 2-201)
Sec. 201. Tax Imposed.
(a) In general. A tax measured by net income is hereby
imposed on every individual, corporation, trust and estate for
each taxable year ending after July 31, 1969 on the privilege
of earning or receiving income in or as a resident of this
State. Such tax shall be in addition to all other occupation or
privilege taxes imposed by this State or by any municipal
corporation or political subdivision thereof.
(b) Rates. The tax imposed by subsection (a) of this
Section shall be determined as follows, except as adjusted by
subsection (d-1):
(1) In the case of an individual, trust or estate, for
taxable years ending prior to July 1, 1989, an amount equal
to 2 1/2% of the taxpayer's net income for the taxable
year.
(2) In the case of an individual, trust or estate, for
taxable years beginning prior to July 1, 1989 and ending

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after June 30, 1989, an amount equal to the sum of (i) 2
1/2% of the taxpayer's net income for the period prior to
July 1, 1989, as calculated under Section 202.3, and (ii)
3% of the taxpayer's net income for the period after June
30, 1989, as calculated under Section 202.3.
(3) In the case of an individual, trust or estate, for
taxable years beginning after June 30, 1989, an amount
equal to 3% of the taxpayer's net income for the taxable
year.
(4) (Blank).
(5) (Blank).
(6) In the case of a corporation, for taxable years
ending prior to July 1, 1989, an amount equal to 4% of the
taxpayer's net income for the taxable year.
(7) In the case of a corporation, for taxable years
beginning prior to July 1, 1989 and ending after June 30,
1989, an amount equal to the sum of (i) 4% of the
taxpayer's net income for the period prior to July 1, 1989,
as calculated under Section 202.3, and (ii) 4.8% of the
taxpayer's net income for the period after June 30, 1989,
as calculated under Section 202.3.
(8) In the case of a corporation, for taxable years
beginning after June 30, 1989, an amount equal to 4.8% of
the taxpayer's net income for the taxable year.
(c) Personal Property Tax Replacement Income Tax.
Beginning on July 1, 1979 and thereafter, in addition to such

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income tax, there is also hereby imposed the Personal Property
Tax Replacement Income Tax measured by net income on every
corporation (including Subchapter S corporations), partnership
and trust, for each taxable year ending after June 30, 1979.
Such taxes are imposed on the privilege of earning or receiving
income in or as a resident of this State. The Personal Property
Tax Replacement Income Tax shall be in addition to the income
tax imposed by subsections (a) and (b) of this Section and in
addition to all other occupation or privilege taxes imposed by
this State or by any municipal corporation or political
subdivision thereof.
(d) Additional Personal Property Tax Replacement Income
Tax Rates. The personal property tax replacement income tax
imposed by this subsection and subsection (c) of this Section
in the case of a corporation, other than a Subchapter S
corporation and except as adjusted by subsection (d-1), shall
be an additional amount equal to 2.85% of such taxpayer's net
income for the taxable year, except that beginning on January
1, 1981, and thereafter, the rate of 2.85% specified in this
subsection shall be reduced to 2.5%, and in the case of a
partnership, trust or a Subchapter S corporation shall be an
additional amount equal to 1.5% of such taxpayer's net income
for the taxable year.
(d-1) Rate reduction for certain foreign insurers. In the
case of a foreign insurer, as defined by Section 35A-5 of the
Illinois Insurance Code, whose state or country of domicile

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imposes on insurers domiciled in Illinois a retaliatory tax
(excluding any insurer whose premiums from reinsurance assumed
are 50% or more of its total insurance premiums as determined
under paragraph (2) of subsection (b) of Section 304, except
that for purposes of this determination premiums from
reinsurance do not include premiums from inter-affiliate
reinsurance arrangements), beginning with taxable years ending
on or after December 31, 1999, the sum of the rates of tax
imposed by subsections (b) and (d) shall be reduced (but not
increased) to the rate at which the total amount of tax imposed
under this Act, net of all credits allowed under this Act,
shall equal (i) the total amount of tax that would be imposed
on the foreign insurer's net income allocable to Illinois for
the taxable year by such foreign insurer's state or country of
domicile if that net income were subject to all income taxes
and taxes measured by net income imposed by such foreign
insurer's state or country of domicile, net of all credits
allowed or (ii) a rate of zero if no such tax is imposed on such
income by the foreign insurer's state of domicile. For the
purposes of this subsection (d-1), an inter-affiliate includes
a mutual insurer under common management.
(1) For the purposes of subsection (d-1), in no event
shall the sum of the rates of tax imposed by subsections
(b) and (d) be reduced below the rate at which the sum of:
(A) the total amount of tax imposed on such foreign
insurer under this Act for a taxable year, net of all

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credits allowed under this Act, plus
(B) the privilege tax imposed by Section 409 of the
Illinois Insurance Code, the fire insurance company
tax imposed by Section 12 of the Fire Investigation
Act, and the fire department taxes imposed under
Section 11-10-1 of the Illinois Municipal Code,
equals 1.25% for taxable years ending prior to December 31,
2003, or 1.75% for taxable years ending on or after
December 31, 2003, of the net taxable premiums written for
the taxable year, as described by subsection (1) of Section
409 of the Illinois Insurance Code. This paragraph will in
no event increase the rates imposed under subsections (b)
and (d).
(2) Any reduction in the rates of tax imposed by this
subsection shall be applied first against the rates imposed
by subsection (b) and only after the tax imposed by
subsection (a) net of all credits allowed under this
Section other than the credit allowed under subsection (i)
has been reduced to zero, against the rates imposed by
subsection (d).
This subsection (d-1) is exempt from the provisions of
Section 250.
(e) Investment credit. A taxpayer shall be allowed a credit
against the Personal Property Tax Replacement Income Tax for
investment in qualified property.
(1) A taxpayer shall be allowed a credit equal to .5%

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of the basis of qualified property placed in service during
the taxable year, provided such property is placed in
service on or after July 1, 1984. There shall be allowed an
additional credit equal to .5% of the basis of qualified
property placed in service during the taxable year,
provided such property is placed in service on or after
July 1, 1986, and the taxpayer's base employment within
Illinois has increased by 1% or more over the preceding
year as determined by the taxpayer's employment records
filed with the Illinois Department of Employment Security.
Taxpayers who are new to Illinois shall be deemed to have
met the 1% growth in base employment for the first year in
which they file employment records with the Illinois
Department of Employment Security. The provisions added to
this Section by Public Act 85-1200 (and restored by Public
Act 87-895) shall be construed as declaratory of existing
law and not as a new enactment. If, in any year, the
increase in base employment within Illinois over the
preceding year is less than 1%, the additional credit shall
be limited to that percentage times a fraction, the
numerator of which is .5% and the denominator of which is
1%, but shall not exceed .5%. The investment credit shall
not be allowed to the extent that it would reduce a
taxpayer's liability in any tax year below zero, nor may
any credit for qualified property be allowed for any year
other than the year in which the property was placed in

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service in Illinois. For tax years ending on or after
December 31, 1987, and on or before December 31, 1988, 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 years if the taxpayer (i) makes investments
which cause the creation of a minimum of 2,000 full-time
equivalent jobs in Illinois, (ii) is located in an
enterprise zone established pursuant to the Illinois
Enterprise Zone Act and (iii) is certified by the
Department of Commerce and Community Affairs (now
Department of Commerce and Economic Opportunity) as
complying with the requirements specified in clause (i) and
(ii) by July 1, 1986. The Department of Commerce and
Community Affairs (now Department of Commerce and Economic
Opportunity) shall notify the Department of Revenue of all
such certifications immediately. For tax years ending
after December 31, 1988, 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

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years following the excess credit years. The credit shall
be applied to the earliest year for which there is a
liability. If there is credit from more than one tax year
that is available to offset a liability, earlier credit
shall be applied first.
(2) The term "qualified property" means property
which:
(A) is tangible, whether new or used, including
buildings and structural components of buildings and
signs that are real property, but not including land or
improvements to real property that are not a structural
component of a building such as landscaping, sewer
lines, local access roads, fencing, parking lots, and
other appurtenances;
(B) is depreciable pursuant to Section 167 of the
Internal Revenue Code, except that "3-year property"
as defined in Section 168(c)(2)(A) of that Code is not
eligible for the credit provided by this subsection
(e);
(C) is acquired by purchase as defined in Section
179(d) of the Internal Revenue Code;
(D) is used in Illinois by a taxpayer who is
primarily engaged in manufacturing, or in mining coal
or fluorite, or in retailing, or was placed in service
on or after July 1, 2006 in a River Edge Redevelopment
Zone established pursuant to the River Edge

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Redevelopment Zone Act; and
(E) has not previously been used in Illinois in
such a manner and by such a person as would qualify for
the credit provided by this subsection (e) or
subsection (f).
(3) For purposes of this subsection (e),
"manufacturing" means the material staging and production
of tangible personal property by procedures commonly
regarded as manufacturing, processing, fabrication, or
assembling which changes some existing material into new
shapes, new qualities, or new combinations. For purposes of
this subsection (e) the term "mining" shall have the same
meaning as the term "mining" in Section 613(c) of the
Internal Revenue Code. For purposes of this subsection (e),
the term "retailing" means the sale of tangible personal
property or services rendered in conjunction with the sale
of tangible consumer goods or commodities.
(4) The basis of qualified property shall be the basis
used to compute the depreciation deduction for federal
income tax purposes.
(5) If the basis of the property for federal income tax
depreciation purposes is increased after it has been placed
in service 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.
(6) The term "placed in service" shall have the same

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meaning as under Section 46 of the Internal Revenue Code.
(7) If during any taxable year, any property ceases to
be qualified property in the hands of the taxpayer within
48 months after being placed in service, or the situs of
any qualified property is moved outside Illinois within 48
months after being placed in service, the Personal Property
Tax Replacement Income Tax for such taxable year shall be
increased. Such increase shall be determined by (i)
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, (ii) subtracting such recomputed credit
from the amount of credit previously allowed. For the
purposes of this paragraph (7), a reduction of the basis of
qualified property resulting from a redetermination of the
purchase price shall be deemed a disposition of qualified
property to the extent of such reduction.
(8) Unless the investment credit is extended by law,
the basis of qualified property shall not include costs
incurred after December 31, 2013 2008, except for costs
incurred pursuant to a binding contract entered into on or
before December 31, 2013 2008.
(9) Each taxable year ending before December 31, 2000,
a partnership may elect to pass through to its partners the
credits to which the partnership is entitled under this
subsection (e) for the taxable year. A partner may use the

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credit allocated to him or her under this paragraph only
against the tax imposed in subsections (c) and (d) of this
Section. If the partnership makes that election, those
credits shall be allocated among the partners in the
partnership in accordance with the rules set forth in
Section 704(b) of the Internal Revenue Code, and the rules
promulgated under that Section, and the allocated amount of
the credits shall be allowed to the partners for that
taxable year. The partnership shall make this election on
its Personal Property Tax Replacement Income Tax return for
that taxable year. The election to pass through the credits
shall be irrevocable.
For taxable years ending on or after December 31, 2000,
a partner that qualifies its partnership for a subtraction
under subparagraph (I) of paragraph (2) of subsection (d)
of Section 203 or a shareholder that qualifies a Subchapter
S corporation for a subtraction under subparagraph (S) of
paragraph (2) of subsection (b) of Section 203 shall be
allowed a credit under this subsection (e) equal to its
share of the credit earned under this subsection (e) during
the taxable year by the partnership or Subchapter S
corporation, determined 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. This paragraph is exempt from the provisions
of Section 250.

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(f) Investment credit; Enterprise Zone; River Edge
Redevelopment Zone.
(1) A taxpayer shall be allowed a credit against the
tax imposed by subsections (a) and (b) of this Section for
investment in qualified property which is placed in service
in an Enterprise Zone created pursuant to the Illinois
Enterprise Zone Act or, for property placed in service on
or after July 1, 2006, a River Edge Redevelopment Zone
established pursuant to the River Edge Redevelopment Zone
Act. For partners, shareholders of Subchapter S
corporations, and owners of limited liability companies,
if the liability company is treated as a partnership for
purposes of federal and State income taxation, there shall
be allowed a credit under this subsection (f) to be
determined 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. The credit
shall be .5% of the basis for such property. The credit
shall be available only in the taxable year in which the
property is placed in service in the Enterprise Zone or
River Edge Redevelopment Zone and shall not be allowed to
the extent that it would reduce a taxpayer's liability for
the tax imposed by subsections (a) and (b) of this Section
to below zero. For tax years ending on or after December
31, 1985, the credit shall be allowed for the tax year in
which the property is placed in service, or, if the amount

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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 credit from more than one tax year
that is available to offset a liability, the credit
accruing first in time shall be applied first.
(2) The term qualified property means property which:
(A) is tangible, whether new or used, including
buildings and structural components of buildings;
(B) is depreciable pursuant to Section 167 of the
Internal Revenue Code, except that "3-year property"
as defined in Section 168(c)(2)(A) of that Code is not
eligible for the credit provided by this subsection
(f);
(C) is acquired by purchase as defined in Section
179(d) of the Internal Revenue Code;
(D) is used in the Enterprise Zone or River Edge
Redevelopment Zone by the taxpayer; and
(E) has not been previously used in Illinois in
such a manner and by such a person as would qualify for
the credit provided by this subsection (f) or
subsection (e).
(3) The basis of qualified property shall be the basis

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used to compute the depreciation deduction for federal
income tax purposes.
(4) If the basis of the property for federal income tax
depreciation purposes is increased after it has been placed
in service in the Enterprise Zone or River Edge
Redevelopment Zone by the taxpayer, the amount of such
increase shall be deemed property placed in service on the
date of such increase in basis.
(5) The term "placed in service" shall have the same
meaning as under Section 46 of the Internal Revenue Code.
(6) If during any taxable year, any property ceases to
be qualified property in the hands of the taxpayer within
48 months after being placed in service, or the situs of
any qualified property is moved outside the Enterprise Zone
or River Edge Redevelopment Zone within 48 months after
being placed in service, the tax imposed under subsections
(a) and (b) of this Section for such taxable year shall be
increased. Such increase shall be determined by (i)
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 (ii) subtracting such recomputed credit
from the amount of credit previously allowed. For the
purposes of this paragraph (6), a reduction of the basis of
qualified property resulting from a redetermination of the
purchase price shall be deemed a disposition of qualified

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property to the extent of such reduction.
(7) There shall be allowed an additional credit equal
to 0.5% of the basis of qualified property placed in
service during the taxable year in a River Edge
Redevelopment Zone, provided such property is placed in
service on or after July 1, 2006, and the taxpayer's base
employment within Illinois has increased by 1% or more over
the preceding year as determined by the taxpayer's
employment records filed with the Illinois Department of
Employment Security. Taxpayers who are new to Illinois
shall be deemed to have met the 1% growth in base
employment for the first year in which they file employment
records with the Illinois Department of Employment
Security. If, in any year, the increase in base employment
within Illinois over the preceding year is less than 1%,
the additional credit shall be limited to that percentage
times a fraction, the numerator of which is 0.5% and the
denominator of which is 1%, but shall not exceed 0.5%.
(g) Jobs Tax Credit; Enterprise Zone, River Edge
Redevelopment Zone, and Foreign Trade Zone or Sub-Zone.
(1) A taxpayer conducting a trade or business in an
enterprise zone or a High Impact Business designated by the
Department of Commerce and Economic Opportunity or for
taxable years ending on or after December 31, 2006, in a
River Edge Redevelopment Zone conducting a trade or
business in a federally designated Foreign Trade Zone or

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Sub-Zone shall be allowed a credit against the tax imposed
by subsections (a) and (b) of this Section in the amount of
$500 per eligible employee hired to work in the zone during
the taxable year.
(2) To qualify for the credit:
(A) the taxpayer must hire 5 or more eligible
employees to work in an enterprise zone, River Edge
Redevelopment Zone, or federally designated Foreign
Trade Zone or Sub-Zone during the taxable year;
(B) the taxpayer's total employment within the
enterprise zone, River Edge Redevelopment Zone, or
federally designated Foreign Trade Zone or Sub-Zone
must increase by 5 or more full-time employees beyond
the total employed in that zone at the end of the
previous tax year for which a jobs tax credit under
this Section was taken, or beyond the total employed by
the taxpayer as of December 31, 1985, whichever is
later; and
(C) the eligible employees must be employed 180
consecutive days in order to be deemed hired for
purposes of this subsection.
(3) An "eligible employee" means an employee who is:
(A) Certified by the Department of Commerce and
Economic Opportunity as "eligible for services"
pursuant to regulations promulgated in accordance with
Title II of the Job Training Partnership Act, Training

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Services for the Disadvantaged or Title III of the Job
Training Partnership Act, Employment and Training
Assistance for Dislocated Workers Program.
(B) Hired after the enterprise zone, River Edge
Redevelopment Zone, or federally designated Foreign
Trade Zone or Sub-Zone was designated or the trade or
business was located in that zone, whichever is later.
(C) Employed in the enterprise zone, River Edge
Redevelopment Zone, or Foreign Trade Zone or Sub-Zone.
An employee is employed in an enterprise zone or
federally designated Foreign Trade Zone or Sub-Zone if
his services are rendered there or it is the base of
operations for the services performed.
(D) A full-time employee working 30 or more hours
per week.
(4) For tax years ending on or after December 31, 1985
and prior to December 31, 1988, the credit shall be allowed
for the tax year in which the eligible employees are hired.
For tax years ending on or after December 31, 1988, the
credit shall be allowed for the tax year immediately
following the tax year in which the eligible employees are
hired. 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

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credit shall be applied to the earliest year for which
there is a liability. If there is credit from more than one
tax year that is available to offset a liability, earlier
credit shall be applied first.
(5) The Department of Revenue shall promulgate such
rules and regulations as may be deemed necessary to carry
out the purposes of this subsection (g).
(6) The credit shall be available for eligible
employees hired on or after January 1, 1986.
(h) Investment credit; High Impact Business.
(1) Subject to subsections (b) and (b-5) of Section 5.5
of the Illinois Enterprise Zone Act, a taxpayer shall be
allowed a credit against the tax imposed by subsections (a)
and (b) of this Section for investment in qualified
property which is placed in service by a Department of
Commerce and Economic Opportunity designated High Impact
Business. The credit shall be .5% of the basis for such
property. The credit shall not be available (i) until the
minimum investments in qualified property set forth in
subdivision (a)(3)(A) of Section 5.5 of the Illinois
Enterprise Zone Act have been satisfied or (ii) until the
time authorized in subsection (b-5) of the Illinois
Enterprise Zone Act for entities designated as High Impact
Businesses under subdivisions (a)(3)(B), (a)(3)(C), and
(a)(3)(D) of Section 5.5 of the Illinois Enterprise Zone
Act, and shall not be allowed to the extent that it would

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reduce a taxpayer's liability for the tax imposed by
subsections (a) and (b) of this Section to below zero. The
credit applicable to such investments shall be taken in the
taxable year in which such investments have been completed.
The credit for additional investments beyond the minimum
investment by a designated high impact business authorized
under subdivision (a)(3)(A) of Section 5.5 of the Illinois
Enterprise Zone Act 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 subsections (a)
and (b) of this Section to below zero. 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 credit from more than one
tax year that is available to offset a liability, the
credit accruing first in time shall be applied first.
Changes made in this subdivision (h)(1) by Public Act
88-670 restore changes made by Public Act 85-1182 and
reflect existing law.

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(2) The term qualified property means property which:
(A) is tangible, whether new or used, including
buildings and structural components of buildings;
(B) is depreciable pursuant to Section 167 of the
Internal Revenue Code, except that "3-year property"
as defined in Section 168(c)(2)(A) of that Code is not
eligible for the credit provided by this subsection
(h);
(C) is acquired by purchase as defined in Section
179(d) of the Internal Revenue Code; and
(D) is not eligible for the Enterprise Zone
Investment Credit provided by subsection (f) of this
Section.
(3) The basis of qualified property shall be the basis
used to compute the depreciation deduction for federal
income tax purposes.
(4) 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.
(5) The term "placed in service" shall have the same
meaning as under Section 46 of the Internal Revenue Code.
(6) If during any taxable year ending on or before
December 31, 1996, any property ceases to be qualified

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property in the hands of the taxpayer within 48 months
after being placed in service, or the situs of any
qualified property is moved outside Illinois within 48
months after being placed in service, the tax imposed under
subsections (a) and (b) of this Section for such taxable
year shall be increased. Such increase shall be determined
by (i) 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 (ii) subtracting such recomputed
credit from the amount of credit previously allowed. For
the purposes of this paragraph (6), a reduction of the
basis of qualified property resulting from a
redetermination of the purchase price shall be deemed a
disposition of qualified property to the extent of such
reduction.
(7) Beginning with tax years ending after December 31,
1996, if a taxpayer qualifies for the credit under this
subsection (h) and thereby is granted a tax abatement and
the taxpayer 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 relocated its
facility by an amount equal to the amount of credit
received by the taxpayer under this subsection (h).

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(i) Credit for Personal Property Tax Replacement Income
Tax. For tax years ending prior to December 31, 2003, a credit
shall be allowed against the tax imposed by subsections (a) and
(b) of this Section for the tax imposed by subsections (c) and
(d) of this Section. This credit shall be computed by
multiplying the tax imposed by subsections (c) and (d) of this
Section by a fraction, the numerator of which is base income
allocable to Illinois and the denominator of which is Illinois
base income, and further multiplying the product by the tax
rate imposed by subsections (a) and (b) of this Section.
Any credit earned on or after December 31, 1986 under this
subsection which is unused in the year the credit is computed
because it exceeds the tax liability imposed by subsections (a)
and (b) for that year (whether it exceeds the original
liability or the liability as later amended) may be carried
forward and applied to the tax liability imposed by subsections
(a) and (b) of the 5 taxable years following the excess credit
year, provided that no credit may be carried forward to any
year ending on or after December 31, 2003. This credit shall be
applied first to the earliest year for which there is a
liability. If there is a credit under this subsection from more
than one tax year that is available to offset a liability the
earliest credit arising under this subsection shall be applied
first.
If, during any taxable year ending on or after December 31,
1986, the tax imposed by subsections (c) and (d) of this

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Section for which a taxpayer has claimed a credit under this
subsection (i) is reduced, the amount of credit for such tax
shall also be reduced. Such reduction shall be determined by
recomputing the credit to take into account the reduced tax
imposed by subsections (c) and (d). If any portion of the
reduced amount of credit has been carried to a different
taxable year, an amended return shall be filed for such taxable
year to reduce the amount of credit claimed.
(j) Training expense credit. Beginning with tax years
ending on or after December 31, 1986 and prior to December 31,
2003, a taxpayer shall be allowed a credit against the tax
imposed by subsections (a) and (b) under this Section for all
amounts paid or accrued, on behalf of all persons employed by
the taxpayer in Illinois or Illinois residents employed outside
of Illinois by a taxpayer, for educational or vocational
training in semi-technical or technical fields or semi-skilled
or skilled fields, which were deducted from gross income in the
computation of taxable income. The credit against the tax
imposed by subsections (a) and (b) shall be 1.6% of such
training expenses. For partners, shareholders of subchapter S
corporations, and owners of limited liability companies, if the
liability company is treated as a partnership for purposes of
federal and State income taxation, there shall be allowed a
credit under this subsection (j) to be determined in accordance
with the determination of income and distributive share of
income under Sections 702 and 704 and subchapter S of the

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Internal Revenue Code.
Any credit allowed under this subsection which is unused in
the year the credit is earned may be carried forward to each of
the 5 taxable years following the year for which the credit is
first computed until it is used. This credit shall be applied
first to the earliest year for which there is a liability. If
there is a credit under this subsection from more than one tax
year that is available to offset a liability the earliest
credit arising under this subsection shall be applied first. No
carryforward credit may be claimed in any tax year ending on or
after December 31, 2003.
(k) Research and development credit.
For tax years ending after July 1, 1990 and prior to
December 31, 2003, and beginning again for tax years ending on
or after December 31, 2004, a taxpayer shall be allowed a
credit against the tax imposed by subsections (a) and (b) of
this Section for increasing research activities in this State.
The credit allowed against the tax imposed by subsections (a)
and (b) shall be equal to 6 1/2% of the qualifying expenditures
for increasing research activities in this State. For partners,
shareholders of subchapter S corporations, and owners of
limited liability companies, if the liability company is
treated as a partnership for purposes of federal and State
income taxation, there shall be allowed a credit under this
subsection to be determined in accordance with the
determination of income and distributive share of income under

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Sections 702 and 704 and subchapter S of the Internal Revenue
Code.
For purposes of this subsection, "qualifying expenditures"
means the qualifying expenditures as defined for the federal
credit for increasing research activities which would be
allowable under Section 41 of the Internal Revenue Code and
which are conducted in this State, "qualifying expenditures for
increasing research activities in this State" means the excess
of qualifying expenditures for the taxable year in which
incurred over qualifying expenditures for the base period,
"qualifying expenditures for the base period" means the average
of the qualifying expenditures for each year in the base
period, and "base period" means the 3 taxable years immediately
preceding the taxable year for which the determination is being
made.
Any credit in excess of the tax liability for the taxable
year may be carried forward. A taxpayer may elect to have the
unused credit shown on its final completed return carried over
as a credit against the tax liability for the following 5
taxable years or until it has been fully used, whichever occurs
first; provided that no credit earned in a tax year ending
prior to December 31, 2003 may be carried forward to any year
ending on or after December 31, 2003.
If an unused credit is carried forward to a given year from
2 or more earlier years, that credit arising in the earliest
year will be applied first against the tax liability for the

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given year. If a tax liability for the given year still
remains, the credit from the next earliest year will then be
applied, and so on, until all credits have been used or no tax
liability for the given year remains. Any remaining unused
credit or credits then will be carried forward to the next
following year in which a tax liability is incurred, except
that no credit can be carried forward to a year which is more
than 5 years after the year in which the expense for which the
credit is given was incurred.
No inference shall be drawn from this amendatory Act of the
91st General Assembly in construing this Section for taxable
years beginning before January 1, 1999.
(l) Environmental Remediation Tax Credit.
(i) For tax years ending after December 31, 1997 and on
or before December 31, 2001, a taxpayer shall be allowed a
credit against the tax imposed by subsections (a) and (b)
of this Section for certain amounts paid for unreimbursed
eligible remediation costs, as specified in this
subsection. For purposes of this Section, "unreimbursed
eligible remediation costs" means costs approved by the
Illinois Environmental Protection Agency ("Agency") under
Section 58.14 of the Environmental Protection Act that were
paid in performing environmental remediation at a site for
which a No Further Remediation Letter was issued by the
Agency and recorded under Section 58.10 of the
Environmental Protection Act. The credit must be claimed

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for the taxable year in which Agency approval of the
eligible remediation costs is granted. The credit is not
available to any taxpayer if the taxpayer or any related
party caused or contributed to, in any material respect, a
release of regulated substances on, in, or under the site
that was identified and addressed by the remedial action
pursuant to the Site Remediation Program of the
Environmental Protection Act. After the Pollution Control
Board rules are adopted pursuant to the Illinois
Administrative Procedure Act for the administration and
enforcement of Section 58.9 of the Environmental
Protection Act, determinations as to credit availability
for purposes of this Section shall be made consistent with
those rules. For purposes of this Section, "taxpayer"
includes a person whose tax attributes the taxpayer has
succeeded to under Section 381 of the Internal Revenue Code
and "related party" includes the persons disallowed a
deduction for losses by paragraphs (b), (c), and (f)(1) of
Section 267 of the Internal Revenue Code by virtue of being
a related taxpayer, as well as any of its partners. The
credit allowed against the tax imposed by subsections (a)
and (b) shall be equal to 25% of the unreimbursed eligible
remediation costs in excess of $100,000 per site, except
that the $100,000 threshold shall not apply to any site
contained in an enterprise zone as determined by the
Department of Commerce and Community Affairs (now

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Department of Commerce and Economic Opportunity). The
total credit allowed shall not exceed $40,000 per year with
a maximum total of $150,000 per site. For partners and
shareholders of subchapter S corporations, there shall be
allowed a credit under this subsection to be determined 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.
(ii) A credit allowed under this subsection that is
unused in the year the credit is earned may be carried
forward to each of the 5 taxable years following the year
for which the credit is first earned until it is used. The
term "unused credit" does not include any amounts of
unreimbursed eligible remediation costs in excess of the
maximum credit per site authorized under paragraph (i).
This credit shall be applied first to the earliest year for
which there is a liability. If there is a credit under this
subsection from more than one tax year that is available to
offset a liability, the earliest credit arising under this
subsection shall be applied first. A credit allowed under
this subsection may be sold to a buyer as part of a sale of
all or part of the remediation site for which the credit
was granted. The purchaser of a remediation site and the
tax credit shall succeed to the unused credit and remaining
carry-forward period of the seller. To perfect the
transfer, the assignor shall record the transfer in the

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chain of title for the site and provide written notice to
the Director of the Illinois Department of Revenue of the
assignor's intent to sell the remediation site and the
amount of the tax credit to be transferred as a portion of
the sale. In no event may a credit be transferred to any
taxpayer if the taxpayer or a related party would not be
eligible under the provisions of subsection (i).
(iii) For purposes of this Section, the term "site"
shall have the same meaning as under Section 58.2 of the
Environmental Protection Act.
(m) Education expense credit. Beginning with tax years
ending after December 31, 1999, a taxpayer who is the custodian
of one or more qualifying pupils shall be allowed a credit
against the tax imposed by subsections (a) and (b) of this
Section for qualified education expenses incurred on behalf of
the qualifying pupils. The credit shall be equal to 25% of
qualified education expenses, but in no event may the total
credit under this subsection claimed by a family that is the
custodian of qualifying pupils exceed $500. In no event shall a
credit under this subsection reduce the taxpayer's liability
under this Act to less than zero. This subsection is exempt
from the provisions of Section 250 of this Act.
For purposes of this subsection:
"Qualifying pupils" means individuals who (i) are
residents of the State of Illinois, (ii) are under the age of
21 at the close of the school year for which a credit is

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sought, and (iii) during the school year for which a credit is
sought were full-time pupils enrolled in a kindergarten through
twelfth grade education program at any school, as defined in
this subsection.
"Qualified education expense" means the amount incurred on
behalf of a qualifying pupil in excess of $250 for tuition,
book fees, and lab fees at the school in which the pupil is
enrolled during the regular school year.
"School" means any public or nonpublic elementary or
secondary school in Illinois that is in compliance with Title
VI of the Civil Rights Act of 1964 and attendance at which
satisfies the requirements of Section 26-1 of the School Code,
except that nothing shall be construed to require a child to
attend any particular public or nonpublic school to qualify for
the credit under this Section.
"Custodian" means, with respect to qualifying pupils, an
Illinois resident who is a parent, the parents, a legal
guardian, or the legal guardians of the qualifying pupils.
(n) River Edge Redevelopment Zone site remediation tax
credit.
(i) For tax years ending on or after December 31, 2006,
a taxpayer shall be allowed a credit against the tax
imposed by subsections (a) and (b) of this Section for
certain amounts paid for unreimbursed eligible remediation
costs, as specified in this subsection. For purposes of
this Section, "unreimbursed eligible remediation costs"

SB1691 Enrolled - 31 - LRB096 11154 HLH 21529 b
means costs approved by the Illinois Environmental
Protection Agency ("Agency") under Section 58.14a of the
Environmental Protection Act that were paid in performing
environmental remediation at a site within a River Edge
Redevelopment Zone for which a No Further Remediation
Letter was issued by the Agency and recorded under Section
58.10 of the Environmental Protection Act. The credit must
be claimed for the taxable year in which Agency approval of
the eligible remediation costs is granted. The credit is
not available to any taxpayer if the taxpayer or any
related party caused or contributed to, in any material
respect, a release of regulated substances on, in, or under
the site that was identified and addressed by the remedial
action pursuant to the Site Remediation Program of the
Environmental Protection Act. Determinations as to credit
availability for purposes of this Section shall be made
consistent with rules adopted by the Pollution Control
Board pursuant to the Illinois Administrative Procedure
Act for the administration and enforcement of Section 58.9
of the Environmental Protection Act. For purposes of this
Section, "taxpayer" includes a person whose tax attributes
the taxpayer has succeeded to under Section 381 of the
Internal Revenue Code and "related party" includes the
persons disallowed a deduction for losses by paragraphs
(b), (c), and (f)(1) of Section 267 of the Internal Revenue
Code by virtue of being a related taxpayer, as well as any

SB1691 Enrolled - 32 - LRB096 11154 HLH 21529 b
of its partners. The credit allowed against the tax imposed
by subsections (a) and (b) shall be equal to 25% of the
unreimbursed eligible remediation costs in excess of
$100,000 per site.
(ii) A credit allowed under this subsection that is
unused in the year the credit is earned may be carried
forward to each of the 5 taxable years following the year
for which the credit is first earned until it is used. This
credit shall be applied first to the earliest year for
which there is a liability. If there is a credit under this
subsection from more than one tax year that is available to
offset a liability, the earliest credit arising under this
subsection shall be applied first. A credit allowed under
this subsection may be sold to a buyer as part of a sale of
all or part of the remediation site for which the credit
was granted. The purchaser of a remediation site and the
tax credit shall succeed to the unused credit and remaining
carry-forward period of the seller. To perfect the
transfer, the assignor shall record the transfer in the
chain of title for the site and provide written notice to
the Director of the Illinois Department of Revenue of the
assignor's intent to sell the remediation site and the
amount of the tax credit to be transferred as a portion of
the sale. In no event may a credit be transferred to any
taxpayer if the taxpayer or a related party would not be
eligible under the provisions of subsection (i).

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(iii) For purposes of this Section, the term "site"
shall have the same meaning as under Section 58.2 of the
Environmental Protection Act.
(iv) This subsection is exempt from the provisions of
Section 250.
(Source: P.A. 94-1021, eff. 7-12-06; 95-454, eff. 8-27-07.)
Section 10. The Use Tax Act is amended by changing Sections
3-5, 3-30, and 3-85 as follows:
(35 ILCS 105/3-5) (from Ch. 120, par. 439.3-5)
Sec. 3-5. Exemptions. Use of the following tangible
personal property is exempt from the tax imposed by this Act:
(1) Personal property purchased from a corporation,
society, association, foundation, institution, or
organization, other than a limited liability company, that is
organized and operated as a not-for-profit service enterprise
for the benefit of persons 65 years of age or older if the
personal property was not purchased by the enterprise for the
purpose of resale by the enterprise.
(2) Personal property purchased by a not-for-profit
Illinois county fair association for use in conducting,
operating, or promoting the county fair.
(3) Personal property purchased by a not-for-profit arts or
cultural organization that establishes, by proof required by
the Department by rule, that it has received an exemption under

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Section 501(c)(3) of the Internal Revenue Code and that is
organized and operated primarily for the presentation or
support of arts or cultural programming, activities, or
services. These organizations include, but are not limited to,
music and dramatic arts organizations such as symphony
orchestras and theatrical groups, arts and cultural service
organizations, local arts councils, visual arts organizations,
and media arts organizations. On and after the effective date
of this amendatory Act of the 92nd General Assembly, however,
an entity otherwise eligible for this exemption shall not make
tax-free purchases unless it has an active identification
number issued by the Department.
(4) Personal property purchased by a governmental body, by
a corporation, society, association, foundation, or
institution organized and operated exclusively for charitable,
religious, or educational purposes, or by a not-for-profit
corporation, society, association, foundation, institution, or
organization that has no compensated officers or employees and
that is organized and operated primarily for the recreation of
persons 55 years of age or older. A limited liability company
may qualify for the exemption under this paragraph only if the
limited liability company is organized and operated
exclusively for educational purposes. On and after July 1,
1987, however, no entity otherwise eligible for this exemption
shall make tax-free purchases unless it has an active exemption
identification number issued by the Department.

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(5) Until July 1, 2003, a passenger car that is a
replacement vehicle to the extent that the purchase price of
the car is subject to the Replacement Vehicle Tax.
(6) Until July 1, 2003 and beginning again on September 1,
2004 through August 30, 2014, graphic arts machinery and
equipment, including repair and replacement parts, both new and
used, and including that manufactured on special order,
certified by the purchaser to be used primarily for graphic
arts production, and including machinery and equipment
purchased for lease. Equipment includes chemicals or chemicals
acting as catalysts but only if the chemicals or chemicals
acting as catalysts effect a direct and immediate change upon a
graphic arts product.
(7) Farm chemicals.
(8) Legal tender, currency, medallions, or gold or silver
coinage issued by the State of Illinois, the government of the
United States of America, or the government of any foreign
country, and bullion.
(9) Personal property purchased from a teacher-sponsored
student organization affiliated with an elementary or
secondary school located in Illinois.
(10) A motor vehicle of the first division, a motor vehicle
of the second division that is a self-contained motor vehicle
designed or permanently converted to provide living quarters
for recreational, camping, or travel use, with direct walk
through to the living quarters from the driver's seat, or a

SB1691 Enrolled - 36 - LRB096 11154 HLH 21529 b
motor vehicle of the second division that is of the van
configuration designed for the transportation of not less than
7 nor more than 16 passengers, as defined in Section 1-146 of
the Illinois Vehicle Code, that is used for automobile renting,
as defined in the Automobile Renting Occupation and Use Tax
Act.
(11) Farm machinery and equipment, both new and used,
including that manufactured on special order, certified by the
purchaser to be used primarily for production agriculture or
State or federal agricultural programs, including individual
replacement parts for the machinery and equipment, including
machinery and equipment purchased for lease, and including
implements of husbandry defined in Section 1-130 of the
Illinois Vehicle Code, farm machinery and agricultural
chemical and fertilizer spreaders, and nurse wagons required to
be registered under Section 3-809 of the Illinois Vehicle Code,
but excluding other motor vehicles required to be registered
under the Illinois Vehicle Code. Horticultural polyhouses or
hoop houses used for propagating, growing, or overwintering
plants shall be considered farm machinery and equipment under
this item (11). Agricultural chemical tender tanks and dry
boxes shall include units sold separately from a motor vehicle
required to be licensed and units sold mounted on a motor
vehicle required to be licensed if the selling price of the
tender is separately stated.
Farm machinery and equipment shall include precision

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farming equipment that is installed or purchased to be
installed on farm machinery and equipment including, but not
limited to, tractors, harvesters, sprayers, planters, seeders,
or spreaders. Precision farming equipment includes, but is not
limited to, soil testing sensors, computers, monitors,
software, global positioning and mapping systems, and other
such equipment.
Farm machinery and equipment also includes computers,
sensors, software, and related equipment used primarily in the
computer-assisted operation of production agriculture
facilities, equipment, and activities such as, but not limited
to, the collection, monitoring, and correlation of animal and
crop data for the purpose of formulating animal diets and
agricultural chemicals. This item (11) is exempt from the
provisions of Section 3-90.
(12) Fuel and petroleum products sold to or used by an air
common carrier, certified by the carrier to be used for
consumption, shipment, or storage in the conduct of its
business as an air common carrier, for a flight destined for or
returning from a location or locations outside the United
States without regard to previous or subsequent domestic
stopovers.
(13) Proceeds of mandatory service charges separately
stated on customers' bills for the purchase and consumption of
food and beverages purchased at retail from a retailer, to the
extent that the proceeds of the service charge are in fact

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turned over as tips or as a substitute for tips to the
employees who participate directly in preparing, serving,
hosting or cleaning up the food or beverage function with
respect to which the service charge is imposed.
(14) Until July 1, 2003, oil field exploration, drilling,
and production equipment, including (i) rigs and parts of rigs,
rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
tubular goods, including casing and drill strings, (iii) pumps
and pump-jack units, (iv) storage tanks and flow lines, (v) any
individual replacement part for oil field exploration,
drilling, and production equipment, and (vi) machinery and
equipment purchased for lease; but excluding motor vehicles
required to be registered under the Illinois Vehicle Code.
(15) Photoprocessing machinery and equipment, including
repair and replacement parts, both new and used, including that
manufactured on special order, certified by the purchaser to be
used primarily for photoprocessing, and including
photoprocessing machinery and equipment purchased for lease.
(16) Until July 1, 2003, coal exploration, mining,
offhighway hauling, processing, maintenance, and reclamation
equipment, including replacement parts and equipment, and
including equipment purchased for lease, but excluding motor
vehicles required to be registered under the Illinois Vehicle
Code.
(17) Until July 1, 2003, distillation machinery and
equipment, sold as a unit or kit, assembled or installed by the

SB1691 Enrolled - 39 - LRB096 11154 HLH 21529 b
retailer, certified by the user to be used only for the
production of ethyl alcohol that will be used for consumption
as motor fuel or as a component of motor fuel for the personal
use of the user, and not subject to sale or resale.
(18) Manufacturing and assembling machinery and equipment
used primarily in the process of manufacturing or assembling
tangible personal property for wholesale or retail sale or
lease, whether that sale or lease is made directly by the
manufacturer or by some other person, whether the materials
used in the process are owned by the manufacturer or some other
person, or whether that sale or lease is made apart from or as
an incident to the seller's engaging in the service occupation
of producing machines, tools, dies, jigs, patterns, gauges, or
other similar items of no commercial value on special order for
a particular purchaser.
(19) Personal property delivered to a purchaser or
purchaser's donee inside Illinois when the purchase order for
that personal property was received by a florist located
outside Illinois who has a florist located inside Illinois
deliver the personal property.
(20) Semen used for artificial insemination of livestock
for direct agricultural production.
(21) Horses, or interests in horses, registered with and
meeting the requirements of any of the Arabian Horse Club
Registry of America, Appaloosa Horse Club, American Quarter
Horse Association, United States Trotting Association, or

SB1691 Enrolled - 40 - LRB096 11154 HLH 21529 b
Jockey Club, as appropriate, used for purposes of breeding or
racing for prizes. This item (21) is exempt from the provisions
of Section 3-90, and the exemption provided for under this item
(21) applies for all periods beginning May 30, 1995, but no
claim for credit or refund is allowed on or after January 1,
2008 for such taxes paid during the period beginning May 30,
2000 and ending on January 1, 2008.
(22) Computers and communications equipment utilized for
any hospital purpose and equipment used in the diagnosis,
analysis, or treatment of hospital patients purchased by a
lessor who leases the equipment, under a lease of one year or
longer executed or in effect at the time the lessor would
otherwise be subject to the tax imposed by this Act, to a
hospital that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act. If the equipment is leased in a
manner that does not qualify for this exemption or is used in
any other non-exempt manner, the lessor shall be liable for the
tax imposed under this Act or the Service Use Tax Act, as the
case may be, based on the fair market value of the property at
the time the non-qualifying use occurs. No lessor shall collect
or attempt to collect an amount (however designated) that
purports to reimburse that lessor for the tax imposed by this
Act or the Service Use Tax Act, as the case may be, if the tax
has not been paid by the lessor. If a lessor improperly
collects any such amount from the lessee, the lessee shall have

SB1691 Enrolled - 41 - LRB096 11154 HLH 21529 b
a legal right to claim a refund of that amount from the lessor.
If, however, that amount is not refunded to the lessee for any
reason, the lessor is liable to pay that amount to the
Department.
(23) Personal property purchased by a lessor who leases the
property, under a lease of one year or longer executed or in
effect at the time the lessor would otherwise be subject to the
tax imposed by this Act, to a governmental body that has been
issued an active sales tax exemption identification number by
the Department under Section 1g of the Retailers' Occupation
Tax Act. If the property is leased in a manner that does not
qualify for this exemption or used in any other non-exempt
manner, the lessor shall be liable for the tax imposed under
this Act or the Service Use Tax Act, as the case may be, based
on the fair market value of the property at the time the
non-qualifying use occurs. No lessor shall collect or attempt
to collect an amount (however designated) that purports to
reimburse that lessor for the tax imposed by this Act or the
Service Use Tax Act, as the case may be, if the tax has not been
paid by the lessor. If a lessor improperly collects any such
amount from the lessee, the lessee shall have a legal right to
claim a refund of that amount from the lessor. If, however,
that amount is not refunded to the lessee for any reason, the
lessor is liable to pay that amount to the Department.
(24) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or

SB1691 Enrolled - 42 - LRB096 11154 HLH 21529 b
before December 31, 2004, personal property that is donated for
disaster relief to be used in a State or federally declared
disaster area in Illinois or bordering Illinois by a
manufacturer or retailer that is registered in this State to a
corporation, society, association, foundation, or institution
that has been issued a sales tax exemption identification
number by the Department that assists victims of the disaster
who reside within the declared disaster area.
(25) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is used in the
performance of infrastructure repairs in this State, including
but not limited to municipal roads and streets, access roads,
bridges, sidewalks, waste disposal systems, water and sewer
line extensions, water distribution and purification
facilities, storm water drainage and retention facilities, and
sewage treatment facilities, resulting from a State or
federally declared disaster in Illinois or bordering Illinois
when such repairs are initiated on facilities located in the
declared disaster area within 6 months after the disaster.
(26) Beginning July 1, 1999, game or game birds purchased
at a "game breeding and hunting preserve area" or an "exotic
game hunting area" as those terms are used in the Wildlife Code
or at a hunting enclosure approved through rules adopted by the
Department of Natural Resources. This paragraph is exempt from
the provisions of Section 3-90.

SB1691 Enrolled - 43 - LRB096 11154 HLH 21529 b
(27) A motor vehicle, as that term is defined in Section
1-146 of the Illinois Vehicle Code, that is donated to a
corporation, limited liability company, society, association,
foundation, or institution that is determined by the Department
to be organized and operated exclusively for educational
purposes. For purposes of this exemption, "a corporation,
limited liability company, society, association, foundation,
or institution organized and operated exclusively for
educational purposes" means all tax-supported public schools,
private schools that offer systematic instruction in useful
branches of learning by methods common to public schools and
that compare favorably in their scope and intensity with the
course of study presented in tax-supported schools, and
vocational or technical schools or institutes organized and
operated exclusively to provide a course of study of not less
than 6 weeks duration and designed to prepare individuals to
follow a trade or to pursue a manual, technical, mechanical,
industrial, business, or commercial occupation.
(28) Beginning January 1, 2000, personal property,
including food, purchased through fundraising events for the
benefit of a public or private elementary or secondary school,
a group of those schools, or one or more school districts if
the events are sponsored by an entity recognized by the school
district that consists primarily of volunteers and includes
parents and teachers of the school children. This paragraph
does not apply to fundraising events (i) for the benefit of

SB1691 Enrolled - 44 - LRB096 11154 HLH 21529 b
private home instruction or (ii) for which the fundraising
entity purchases the personal property sold at the events from
another individual or entity that sold the property for the
purpose of resale by the fundraising entity and that profits
from the sale to the fundraising entity. This paragraph is
exempt from the provisions of Section 3-90.
(29) Beginning January 1, 2000 and through December 31,
2001, new or used automatic vending machines that prepare and
serve hot food and beverages, including coffee, soup, and other
items, and replacement parts for these machines. Beginning
January 1, 2002 and through June 30, 2003, machines and parts
for machines used in commercial, coin-operated amusement and
vending business if a use or occupation tax is paid on the
gross receipts derived from the use of the commercial,
coin-operated amusement and vending machines. This paragraph
is exempt from the provisions of Section 3-90.
(30) Beginning January 1, 2001 and through June 30, 2011,
food for human consumption that is to be consumed off the
premises where it is sold (other than alcoholic beverages, soft
drinks, and food that has been prepared for immediate
consumption) and prescription and nonprescription medicines,
drugs, medical appliances, and insulin, urine testing
materials, syringes, and needles used by diabetics, for human
use, when purchased for use by a person receiving medical
assistance under Article 5 of the Illinois Public Aid Code who
resides in a licensed long-term care facility, as defined in

SB1691 Enrolled - 45 - LRB096 11154 HLH 21529 b
the Nursing Home Care Act.
(31) Beginning on the effective date of this amendatory Act
of the 92nd General Assembly, computers and communications
equipment utilized for any hospital purpose and equipment used
in the diagnosis, analysis, or treatment of hospital patients
purchased by a lessor who leases the equipment, under a lease
of one year or longer executed or in effect at the time the
lessor would otherwise be subject to the tax imposed by this
Act, to a hospital that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act. If the equipment is leased in a
manner that does not qualify for this exemption or is used in
any other nonexempt manner, the lessor shall be liable for the
tax imposed under this Act or the Service Use Tax Act, as the
case may be, based on the fair market value of the property at
the time the nonqualifying use occurs. No lessor shall collect
or attempt to collect an amount (however designated) that
purports to reimburse that lessor for the tax imposed by this
Act or the Service Use Tax Act, as the case may be, if the tax
has not been paid by the lessor. If a lessor improperly
collects any such amount from the lessee, the lessee shall have
a legal right to claim a refund of that amount from the lessor.
If, however, that amount is not refunded to the lessee for any
reason, the lessor is liable to pay that amount to the
Department. This paragraph is exempt from the provisions of
Section 3-90.

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(32) Beginning on the effective date of this amendatory Act
of the 92nd General Assembly, personal property purchased by a
lessor who leases the property, under a lease of one year or
longer executed or in effect at the time the lessor would
otherwise be subject to the tax imposed by this Act, to a
governmental body that has been issued an active sales tax
exemption identification number by the Department under
Section 1g of the Retailers' Occupation Tax Act. If the
property is leased in a manner that does not qualify for this
exemption or used in any other nonexempt manner, the lessor
shall be liable for the tax imposed under this Act or the
Service Use Tax Act, as the case may be, based on the fair
market value of the property at the time the nonqualifying use
occurs. No lessor shall collect or attempt to collect an amount
(however designated) that purports to reimburse that lessor for
the tax imposed by this Act or the Service Use Tax Act, as the
case may be, if the tax has not been paid by the lessor. If a
lessor improperly collects any such amount from the lessee, the
lessee shall have a legal right to claim a refund of that
amount from the lessor. If, however, that amount is not
refunded to the lessee for any reason, the lessor is liable to
pay that amount to the Department. This paragraph is exempt
from the provisions of Section 3-90.
(33) On and after July 1, 2003 and through June 30, 2004,
the use in this State of motor vehicles of the second division
with a gross vehicle weight in excess of 8,000 pounds and that

SB1691 Enrolled - 47 - LRB096 11154 HLH 21529 b
are subject to the commercial distribution fee imposed under
Section 3-815.1 of the Illinois Vehicle Code. Beginning on July
1, 2004 and through June 30, 2005, the use in this State of
motor vehicles of the second division: (i) with a gross vehicle
weight rating in excess of 8,000 pounds; (ii) that are subject
to the commercial distribution fee imposed under Section
3-815.1 of the Illinois Vehicle Code; and (iii) that are
primarily used for commercial purposes. Through June 30, 2005,
this exemption applies to repair and replacement parts added
after the initial purchase of such a motor vehicle if that
motor vehicle is used in a manner that would qualify for the
rolling stock exemption otherwise provided for in this Act. For
purposes of this paragraph, the term "used for commercial
purposes" means the transportation of persons or property in
furtherance of any commercial or industrial enterprise,
whether for-hire or not.
(34) Beginning January 1, 2008, tangible personal property
used in the construction or maintenance of a community water
supply, as defined under Section 3.145 of the Environmental
Protection Act, that is operated by a not-for-profit
corporation that holds a valid water supply permit issued under
Title IV of the Environmental Protection Act. This paragraph is
exempt from the provisions of Section 3-90.
(Source: P.A. 94-1002, eff. 7-3-06; 95-88, eff. 1-1-08; 95-538,
eff. 1-1-08; 95-876, eff. 8-21-08.)

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(35 ILCS 105/3-30) (from Ch. 120, par. 439.3-30)
Sec. 3-30. Graphic arts production. For the purposes of
this Act, "graphic arts production" means the production of
tangible personal property for wholesale or retail sale or
lease by means of printing, including ink jet printing, by one
or more of the processes described in Groups 323110 through
323122 of Subsector 323, Groups 511110 through 511199 of
Subsector 511, and Group 512230 of Subsector 512 of the North
American Industry Classification System published by the U.S.
Office of Management and Budget, 1997 edition. Graphic arts
production does not include (i) the transfer of images onto
paper or other tangible personal property by means of
photocopying or (ii) final printed products in electronic or
audio form, including the production of software or
audio-books. For purposes of this Section, persons engaged
primarily in the business of printing or publishing newspapers
or magazines that qualify as newsprint and ink, by one or more
of the processes described in Groups 511110 through 511199 of
subsector 511 of the North American Industry Classification
System published by the U.S. Office of Management and Budget,
1997 edition, are deemed to be engaged in graphic arts
production.
(Source: P.A. 91-51, eff. 6-30-99; 91-541, eff. 8-13-99.)
(35 ILCS 105/3-85)
Sec. 3-85. Manufacturer's Purchase Credit. For purchases

SB1691 Enrolled - 49 - LRB096 11154 HLH 21529 b
of machinery and equipment made on and after January 1, 1995
through June 30, 2003, and on and after September 1, 2004
through August 30, 2014, a purchaser of manufacturing machinery
and equipment that qualifies for the exemption provided by
paragraph (18) of Section 3-5 of this Act earns a credit in an
amount equal to a fixed percentage of the tax which would have
been incurred under this Act on those purchases. For purchases
of graphic arts machinery and equipment made on or after July
1, 1996 and through June 30, 2003, and on and after September
1, 2004 through August 30, 2014, a purchaser of graphic arts
machinery and equipment that qualifies for the exemption
provided by paragraph (6) of Section 3-5 of this Act earns a
credit in an amount equal to a fixed percentage of the tax that
would have been incurred under this Act on those purchases. The
credit earned for purchases of manufacturing machinery and
equipment or graphic arts machinery and equipment shall be
referred to as the Manufacturer's Purchase Credit. A graphic
arts producer is a person engaged in graphic arts production as
defined in Section 2-30 of the Retailers' Occupation Tax Act.
Beginning July 1, 1996, all references in this Section to
manufacturers or manufacturing shall also be deemed to refer to
graphic arts producers or graphic arts production.
The amount of credit shall be a percentage of the tax that
would have been incurred on the purchase of manufacturing
machinery and equipment or graphic arts machinery and equipment
if the exemptions provided by paragraph (6) or paragraph (18)

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of Section 3-5 of this Act had not been applicable. The
percentage shall be as follows:
(1) 15% for purchases made on or before June 30, 1995.
(2) 25% for purchases made after June 30, 1995, and on
or before June 30, 1996.
(3) 40% for purchases made after June 30, 1996, and on
or before June 30, 1997.
(4) 50% for purchases made on or after July 1, 1997.
(a) Manufacturer's Purchase Credit earned prior to July 1,
2003. This subsection (a) applies to Manufacturer's Purchase
Credit earned prior to July 1, 2003. A purchaser of production
related tangible personal property desiring to use the
Manufacturer's Purchase Credit shall certify to the seller
prior to October 1, 2003 that the purchaser is satisfying all
or part of the liability under the Use Tax Act or the Service
Use Tax Act that is due on the purchase of the production
related tangible personal property by use of Manufacturer's
Purchase Credit. The Manufacturer's Purchase Credit
certification must be dated and shall include the name and
address of the purchaser, the purchaser's registration number,
if registered, the credit being applied, and a statement that
the State Use Tax or Service Use Tax liability is being
satisfied with the manufacturer's or graphic arts producer's
accumulated purchase credit. Certification may be incorporated
into the manufacturer's or graphic arts producer's purchase
order. Manufacturer's Purchase Credit certification provided

SB1691 Enrolled - 51 - LRB096 11154 HLH 21529 b
by the manufacturer or graphic arts producer prior to October
1, 2003 may be used to satisfy the retailer's or serviceman's
liability under the Retailers' Occupation Tax Act or Service
Occupation Tax Act for the credit claimed, not to exceed 6.25%
of the receipts subject to tax from a qualifying purchase, but
only if the retailer or serviceman reports the Manufacturer's
Purchase Credit claimed as required by the Department. A
Manufacturer's Purchase Credit reported on any original or
amended return filed under this Act after October 20, 2003
shall be disallowed. The Manufacturer's Purchase Credit earned
by purchase of exempt manufacturing machinery and equipment or
graphic arts machinery and equipment is a non-transferable
credit. A manufacturer or graphic arts producer that enters
into a contract involving the installation of tangible personal
property into real estate within a manufacturing or graphic
arts production facility may, prior to October 1, 2003,
authorize a construction contractor to utilize credit
accumulated by the manufacturer or graphic arts producer to
purchase the tangible personal property. A manufacturer or
graphic arts producer intending to use accumulated credit to
purchase such tangible personal property shall execute a
written contract authorizing the contractor to utilize a
specified dollar amount of credit. The contractor shall
furnish, prior to October 1, 2003, the supplier with the
manufacturer's or graphic arts producer's name, registration
or resale number, and a statement that a specific amount of the

SB1691 Enrolled - 52 - LRB096 11154 HLH 21529 b
Use Tax or Service Use Tax liability, not to exceed 6.25% of
the selling price, is being satisfied with the credit. The
manufacturer or graphic arts producer shall remain liable to
timely report all information required by the annual Report of
Manufacturer's Purchase Credit Used for all credit utilized by
a construction contractor.
No Manufacturer's Purchase Credit earned prior to July 1,
2003 may be used after October 1, 2003. The Manufacturer's
Purchase Credit may be used to satisfy liability under the Use
Tax Act or the Service Use Tax Act due on the purchase of
production related tangible personal property (including
purchases by a manufacturer, by a graphic arts producer, or by
a lessor who rents or leases the use of the property to a
manufacturer or graphic arts producer) that does not otherwise
qualify for the manufacturing machinery and equipment
exemption or the graphic arts machinery and equipment
exemption. "Production related tangible personal property"
means (i) all tangible personal property used or consumed by
the purchaser in a manufacturing facility in which a
manufacturing process described in Section 2-45 of the
Retailers' Occupation Tax Act takes place, including tangible
personal property purchased for incorporation into real estate
within a manufacturing facility and including, but not limited
to, tangible personal property used or consumed in activities
such as preproduction material handling, receiving, quality
control, inventory control, storage, staging, and packaging

SB1691 Enrolled - 53 - LRB096 11154 HLH 21529 b
for shipping and transportation purposes; (ii) all tangible
personal property used or consumed by the purchaser in a
graphic arts facility in which graphic arts production as
described in Section 2-30 of the Retailers' Occupation Tax Act
takes place, including tangible personal property purchased
for incorporation into real estate within a graphic arts
facility and including, but not limited to, all tangible
personal property used or consumed in activities such as
graphic arts preliminary or pre-press production,
pre-production material handling, receiving, quality control,
inventory control, storage, staging, sorting, labeling,
mailing, tying, wrapping, and packaging; and (iii) all tangible
personal property used or consumed by the purchaser for
research and development. "Production related tangible
personal property" does not include (i) tangible personal
property used, within or without a manufacturing facility, in
sales, purchasing, accounting, fiscal management, marketing,
personnel recruitment or selection, or landscaping or (ii)
tangible personal property required to be titled or registered
with a department, agency, or unit of federal, state, or local
government. The Manufacturer's Purchase Credit may be used,
prior to October 1, 2003, to satisfy the tax arising either
from the purchase of machinery and equipment on or after
January 1, 1995 for which the exemption provided by paragraph
(18) of Section 3-5 of this Act was erroneously claimed, or the
purchase of machinery and equipment on or after July 1, 1996

SB1691 Enrolled - 54 - LRB096 11154 HLH 21529 b
for which the exemption provided by paragraph (6) of Section
3-5 of this Act was erroneously claimed, but not in
satisfaction of penalty, if any, and interest for failure to
pay the tax when due. A purchaser of production related
tangible personal property who is required to pay Illinois Use
Tax or Service Use Tax on the purchase directly to the
Department may, prior to October 1, 2003, utilize the
Manufacturer's Purchase Credit in satisfaction of the tax
arising from that purchase, but not in satisfaction of penalty
and interest. A purchaser who uses the Manufacturer's Purchase
Credit to purchase property which is later determined not to be
production related tangible personal property may be liable for
tax, penalty, and interest on the purchase of that property as
of the date of purchase but shall be entitled to use the
disallowed Manufacturer's Purchase Credit, so long as it has
not expired and is used prior to October 1, 2003, on qualifying
purchases of production related tangible personal property not
previously subject to credit usage. The Manufacturer's
Purchase Credit earned by a manufacturer or graphic arts
producer expires the last day of the second calendar year
following the calendar year in which the credit arose. No
Manufacturer's Purchase Credit may be used after September 30,
2003 regardless of when that credit was earned.
A purchaser earning Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Earned for each calendar year no later than the last day

SB1691 Enrolled - 55 - LRB096 11154 HLH 21529 b
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is earned. A Report of
Manufacturer's Purchase Credit Earned shall be filed on forms
as prescribed or approved by the Department and shall state,
for each month of the calendar year: (i) the total purchase
price of all purchases of exempt manufacturing or graphic arts
machinery on which the credit was earned; (ii) the total State
Use Tax or Service Use Tax which would have been due on those
items; (iii) the percentage used to calculate the amount of
credit earned; (iv) the amount of credit earned; and (v) such
other information as the Department may reasonably require. A
purchaser earning Manufacturer's Purchase Credit shall
maintain records which identify, as to each purchase of
manufacturing or graphic arts machinery and equipment on which
the purchaser earned Manufacturer's Purchase Credit, the
vendor (including, if applicable, either the vendor's
registration number or Federal Employer Identification
Number), the purchase price, and the amount of Manufacturer's
Purchase Credit earned on each purchase.
A purchaser using Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Used for each calendar year no later than the last day
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is used. A Report of
Manufacturer's Purchase Credit Used shall be filed on forms as
prescribed or approved by the Department and shall state, for

SB1691 Enrolled - 56 - LRB096 11154 HLH 21529 b
each month of the calendar year: (i) the total purchase price
of production related tangible personal property purchased
from Illinois suppliers; (ii) the total purchase price of
production related tangible personal property purchased from
out-of-state suppliers; (iii) the total amount of credit used
during such month; and (iv) such other information as the
Department may reasonably require. A purchaser using
Manufacturer's Purchase Credit shall maintain records that
identify, as to each purchase of production related tangible
personal property on which the purchaser used Manufacturer's
Purchase Credit, the vendor (including, if applicable, either
the vendor's registration number or Federal Employer
Identification Number), the purchase price, and the amount of
Manufacturer's Purchase Credit used on each purchase.
No annual report shall be filed before May 1, 1996 or after
June 30, 2004. A purchaser that fails to file an annual Report
of Manufacturer's Purchase Credit Earned or an annual Report of
Manufacturer's Purchase Credit Used by the last day of the
sixth month following the end of the calendar year shall
forfeit all Manufacturer's Purchase Credit for that calendar
year unless it establishes that its failure to file was due to
reasonable cause. Manufacturer's Purchase Credit reports may
be amended to report and claim credit on qualifying purchases
not previously reported at any time before the credit would
have expired, unless both the Department and the purchaser have
agreed to an extension of the statute of limitations for the

SB1691 Enrolled - 57 - LRB096 11154 HLH 21529 b
issuance of a notice of tax liability as provided in Section 4
of the Retailers' Occupation Tax Act. If the time for
assessment or refund has been extended, then amended reports
for a calendar year may be filed at any time prior to the date
to which the statute of limitations for the calendar year or
portion thereof has been extended. No Manufacturer's Purchase
Credit report filed with the Department for periods prior to
January 1, 1995 shall be approved. Manufacturer's Purchase
Credit claimed on an amended report may be used, until October
1, 2003, to satisfy tax liability under the Use Tax Act or the
Service Use Tax Act (i) on qualifying purchases of production
related tangible personal property made after the date the
amended report is filed or (ii) assessed by the Department on
qualifying purchases of production related tangible personal
property made in the case of manufacturers on or after January
1, 1995, or in the case of graphic arts producers on or after
July 1, 1996.
If the purchaser is not the manufacturer or a graphic arts
producer, but rents or leases the use of the property to a
manufacturer or graphic arts producer, the purchaser may earn,
report, and use Manufacturer's Purchase Credit in the same
manner as a manufacturer or graphic arts producer.
A purchaser shall not be entitled to any Manufacturer's
Purchase Credit for a purchase that is required to be reported
and is not timely reported as provided in this Section. A
purchaser remains liable for (i) any tax that was satisfied by

SB1691 Enrolled - 58 - LRB096 11154 HLH 21529 b
use of a Manufacturer's Purchase Credit, as of the date of
purchase, if that use is not timely reported as required in
this Section and (ii) for any applicable penalties and interest
for failing to pay the tax when due. No Manufacturer's Purchase
Credit may be used after September 30, 2003 to satisfy any tax
liability imposed under this Act, including any audit
liability.
(b) Manufacturer's Purchase Credit earned on and after
September 1, 2004. This subsection (b) applies to
Manufacturer's Purchase Credit earned on and after September 1,
2004. Manufacturer's Purchase Credit earned on or after
September 1, 2004 may only be used to satisfy the Use Tax or
Service Use Tax liability incurred on production related
tangible personal property purchased on or after September 1,
2004. A purchaser of production related tangible personal
property desiring to use the Manufacturer's Purchase Credit
shall certify to the seller that the purchaser is satisfying
all or part of the liability under the Use Tax Act or the
Service Use Tax Act that is due on the purchase of the
production related tangible personal property by use of
Manufacturer's Purchase Credit. The Manufacturer's Purchase
Credit certification must be dated and shall include the name
and address of the purchaser, the purchaser's registration
number, if registered, the credit being applied, and a
statement that the State Use Tax or Service Use Tax liability
is being satisfied with the manufacturer's or graphic arts

SB1691 Enrolled - 59 - LRB096 11154 HLH 21529 b
producer's accumulated purchase credit. Certification may be
incorporated into the manufacturer's or graphic arts
producer's purchase order. Manufacturer's Purchase Credit
certification provided by the manufacturer or graphic arts
producer may be used to satisfy the retailer's or serviceman's
liability under the Retailers' Occupation Tax Act or Service
Occupation Tax Act for the credit claimed, not to exceed 6.25%
of the receipts subject to tax from a qualifying purchase, but
only if the retailer or serviceman reports the Manufacturer's
Purchase Credit claimed as required by the Department. The
Manufacturer's Purchase Credit earned by purchase of exempt
manufacturing machinery and equipment or graphic arts
machinery and equipment is a non-transferable credit. A
manufacturer or graphic arts producer that enters into a
contract involving the installation of tangible personal
property into real estate within a manufacturing or graphic
arts production facility may, on or after September 1, 2004,
authorize a construction contractor to utilize credit
accumulated by the manufacturer or graphic arts producer to
purchase the tangible personal property. A manufacturer or
graphic arts producer intending to use accumulated credit to
purchase such tangible personal property shall execute a
written contract authorizing the contractor to utilize a
specified dollar amount of credit. The contractor shall furnish
the supplier with the manufacturer's or graphic arts producer's
name, registration or resale number, and a statement that a

SB1691 Enrolled - 60 - LRB096 11154 HLH 21529 b
specific amount of the Use Tax or Service Use Tax liability,
not to exceed 6.25% of the selling price, is being satisfied
with the credit. The manufacturer or graphic arts producer
shall remain liable to timely report all information required
by the annual Report of Manufacturer's Purchase Credit Used for
all credit utilized by a construction contractor.
The Manufacturer's Purchase Credit may be used to satisfy
liability under the Use Tax Act or the Service Use Tax Act due
on the purchase, made on or after September 1, 2004, of
production related tangible personal property (including
purchases by a manufacturer, by a graphic arts producer, or by
a lessor who rents or leases the use of the property to a
manufacturer or graphic arts producer) that does not otherwise
qualify for the manufacturing machinery and equipment
exemption or the graphic arts machinery and equipment
exemption. "Production related tangible personal property"
means (i) all tangible personal property used or consumed by
the purchaser in a manufacturing facility in which a
manufacturing process described in Section 2-45 of the
Retailers' Occupation Tax Act takes place, including tangible
personal property purchased for incorporation into real estate
within a manufacturing facility and including, but not limited
to, tangible personal property used or consumed in activities
such as preproduction material handling, receiving, quality
control, inventory control, storage, staging, and packaging
for shipping and transportation purposes; (ii) all tangible

SB1691 Enrolled - 61 - LRB096 11154 HLH 21529 b
personal property used or consumed by the purchaser in a
graphic arts facility in which graphic arts production as
described in Section 2-30 of the Retailers' Occupation Tax Act
takes place, including tangible personal property purchased
for incorporation into real estate within a graphic arts
facility and including, but not limited to, all tangible
personal property used or consumed in activities such as
graphic arts preliminary or pre-press production,
pre-production material handling, receiving, quality control,
inventory control, storage, staging, sorting, labeling,
mailing, tying, wrapping, and packaging; and (iii) all tangible
personal property used or consumed by the purchaser for
research and development. "Production related tangible
personal property" does not include (i) tangible personal
property used, within or without a manufacturing facility, in
sales, purchasing, accounting, fiscal management, marketing,
personnel recruitment or selection, or landscaping or (ii)
tangible personal property required to be titled or registered
with a department, agency, or unit of federal, state, or local
government. The Manufacturer's Purchase Credit may be used to
satisfy the tax arising either from the purchase of machinery
and equipment on or after September 1, 2004 for which the
exemption provided by paragraph (18) of Section 3-5 of this Act
was erroneously claimed, or the purchase of machinery and
equipment on or after September 1, 2004 for which the exemption
provided by paragraph (6) of Section 3-5 of this Act was

SB1691 Enrolled - 62 - LRB096 11154 HLH 21529 b
erroneously claimed, but not in satisfaction of penalty, if
any, and interest for failure to pay the tax when due. A
purchaser of production related tangible personal property
that is purchased on or after September 1, 2004 who is required
to pay Illinois Use Tax or Service Use Tax on the purchase
directly to the Department may utilize the Manufacturer's
Purchase Credit in satisfaction of the tax arising from that
purchase, but not in satisfaction of penalty and interest. A
purchaser who uses the Manufacturer's Purchase Credit to
purchase property on and after September 1, 2004 which is later
determined not to be production related tangible personal
property may be liable for tax, penalty, and interest on the
purchase of that property as of the date of purchase but shall
be entitled to use the disallowed Manufacturer's Purchase
Credit, so long as it has not expired and is used on qualifying
purchases of production related tangible personal property not
previously subject to credit usage. The Manufacturer's
Purchase Credit earned by a manufacturer or graphic arts
producer expires the last day of the second calendar year
following the calendar year in which the credit arose. A
purchaser earning Manufacturer's Purchase Credit shall sign
and file an annual Report of Manufacturer's Purchase Credit
Earned for each calendar year no later than the last day of the
sixth month following the calendar year in which a
Manufacturer's Purchase Credit is earned. A Report of
Manufacturer's Purchase Credit Earned shall be filed on forms

SB1691 Enrolled - 63 - LRB096 11154 HLH 21529 b
as prescribed or approved by the Department and shall state,
for each month of the calendar year: (i) the total purchase
price of all purchases of exempt manufacturing or graphic arts
machinery on which the credit was earned; (ii) the total State
Use Tax or Service Use Tax which would have been due on those
items; (iii) the percentage used to calculate the amount of
credit earned; (iv) the amount of credit earned; and (v) such
other information as the Department may reasonably require. A
purchaser earning Manufacturer's Purchase Credit shall
maintain records which identify, as to each purchase of
manufacturing or graphic arts machinery and equipment on which
the purchaser earned Manufacturer's Purchase Credit, the
vendor (including, if applicable, either the vendor's
registration number or Federal Employer Identification
Number), the purchase price, and the amount of Manufacturer's
Purchase Credit earned on each purchase. A purchaser using
Manufacturer's Purchase Credit shall sign and file an annual
Report of Manufacturer's Purchase Credit Used for each calendar
year no later than the last day of the sixth month following
the calendar year in which a Manufacturer's Purchase Credit is
used. A Report of Manufacturer's Purchase Credit Used shall be
filed on forms as prescribed or approved by the Department and
shall state, for each month of the calendar year: (i) the total
purchase price of production related tangible personal
property purchased from Illinois suppliers; (ii) the total
purchase price of production related tangible personal

SB1691 Enrolled - 64 - LRB096 11154 HLH 21529 b
property purchased from out-of-state suppliers; (iii) the
total amount of credit used during such month; and (iv) such
other information as the Department may reasonably require. A
purchaser using Manufacturer's Purchase Credit shall maintain
records that identify, as to each purchase of production
related tangible personal property on which the purchaser used
Manufacturer's Purchase Credit, the vendor (including, if
applicable, either the vendor's registration number or Federal
Employer Identification Number), the purchase price, and the
amount of Manufacturer's Purchase Credit used on each purchase.
A purchaser that fails to file an annual Report of
Manufacturer's Purchase Credit Earned or an annual Report of
Manufacturer's Purchase Credit Used by the last day of the
sixth month following the end of the calendar year shall
forfeit all Manufacturer's Purchase Credit for that calendar
year unless it establishes that its failure to file was due to
reasonable cause. Manufacturer's Purchase Credit reports may
be amended to report and claim credit on qualifying purchases
not previously reported at any time before the credit would
have expired, unless both the Department and the purchaser have
agreed to an extension of the statute of limitations for the
issuance of a notice of tax liability as provided in Section 4
of the Retailers' Occupation Tax Act. If the time for
assessment or refund has been extended, then amended reports
for a calendar year may be filed at any time prior to the date
to which the statute of limitations for the calendar year or

SB1691 Enrolled - 65 - LRB096 11154 HLH 21529 b
portion thereof has been extended. Manufacturer's Purchase
Credit claimed on an amended report may be used to satisfy tax
liability under the Use Tax Act or the Service Use Tax Act (i)
on qualifying purchases of production related tangible
personal property made after the date the amended report is
filed or (ii) assessed by the Department on qualifying
production related tangible personal property purchased on or
after September 1, 2004. If the purchaser is not the
manufacturer or a graphic arts producer, but rents or leases
the use of the property to a manufacturer or graphic arts
producer, the purchaser may earn, report, and use
Manufacturer's Purchase Credit in the same manner as a
manufacturer or graphic arts producer. A purchaser shall not be
entitled to any Manufacturer's Purchase Credit for a purchase
that is required to be reported and is not timely reported as
provided in this Section. A purchaser remains liable for (i)
any tax that was satisfied by use of a Manufacturer's Purchase
Credit, as of the date of purchase, if that use is not timely
reported as required in this Section and (ii) for any
applicable penalties and interest for failing to pay the tax
when due.
(Source: P.A. 93-24, eff. 6-20-03; 93-840, eff. 7-30-04.)
Section 15. The Service Use Tax Act is amended by changing
Sections 3-5, 3-30, and 3-70 as follows:

SB1691 Enrolled - 66 - LRB096 11154 HLH 21529 b
(35 ILCS 110/3-5) (from Ch. 120, par. 439.33-5)
Sec. 3-5. Exemptions. Use of the following tangible
personal property is exempt from the tax imposed by this Act:
(1) Personal property purchased from a corporation,
society, association, foundation, institution, or
organization, other than a limited liability company, that is
organized and operated as a not-for-profit service enterprise
for the benefit of persons 65 years of age or older if the
personal property was not purchased by the enterprise for the
purpose of resale by the enterprise.
(2) Personal property purchased by a non-profit Illinois
county fair association for use in conducting, operating, or
promoting the county fair.
(3) Personal property purchased by a not-for-profit arts or
cultural organization that establishes, by proof required by
the Department by rule, that it has received an exemption under
Section 501(c)(3) of the Internal Revenue Code and that is
organized and operated primarily for the presentation or
support of arts or cultural programming, activities, or
services. These organizations include, but are not limited to,
music and dramatic arts organizations such as symphony
orchestras and theatrical groups, arts and cultural service
organizations, local arts councils, visual arts organizations,
and media arts organizations. On and after the effective date
of this amendatory Act of the 92nd General Assembly, however,
an entity otherwise eligible for this exemption shall not make

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tax-free purchases unless it has an active identification
number issued by the Department.
(4) Legal tender, currency, medallions, or gold or silver
coinage issued by the State of Illinois, the government of the
United States of America, or the government of any foreign
country, and bullion.
(5) Until July 1, 2003 and beginning again on September 1,
2004 through August 30, 2014, graphic arts machinery and
equipment, including repair and replacement parts, both new and
used, and including that manufactured on special order or
purchased for lease, certified by the purchaser to be used
primarily for graphic arts production. Equipment includes
chemicals or chemicals acting as catalysts but only if the
chemicals or chemicals acting as catalysts effect a direct and
immediate change upon a graphic arts product.
(6) Personal property purchased from a teacher-sponsored
student organization affiliated with an elementary or
secondary school located in Illinois.
(7) Farm machinery and equipment, both new and used,
including that manufactured on special order, certified by the
purchaser to be used primarily for production agriculture or
State or federal agricultural programs, including individual
replacement parts for the machinery and equipment, including
machinery and equipment purchased for lease, and including
implements of husbandry defined in Section 1-130 of the
Illinois Vehicle Code, farm machinery and agricultural

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chemical and fertilizer spreaders, and nurse wagons required to
be registered under Section 3-809 of the Illinois Vehicle Code,
but excluding other motor vehicles required to be registered
under the Illinois Vehicle Code. Horticultural polyhouses or
hoop houses used for propagating, growing, or overwintering
plants shall be considered farm machinery and equipment under
this item (7). Agricultural chemical tender tanks and dry boxes
shall include units sold separately from a motor vehicle
required to be licensed and units sold mounted on a motor
vehicle required to be licensed if the selling price of the
tender is separately stated.
Farm machinery and equipment shall include precision
farming equipment that is installed or purchased to be
installed on farm machinery and equipment including, but not
limited to, tractors, harvesters, sprayers, planters, seeders,
or spreaders. Precision farming equipment includes, but is not
limited to, soil testing sensors, computers, monitors,
software, global positioning and mapping systems, and other
such equipment.
Farm machinery and equipment also includes computers,
sensors, software, and related equipment used primarily in the
computer-assisted operation of production agriculture
facilities, equipment, and activities such as, but not limited
to, the collection, monitoring, and correlation of animal and
crop data for the purpose of formulating animal diets and
agricultural chemicals. This item (7) is exempt from the

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provisions of Section 3-75.
(8) Fuel and petroleum products sold to or used by an air
common carrier, certified by the carrier to be used for
consumption, shipment, or storage in the conduct of its
business as an air common carrier, for a flight destined for or
returning from a location or locations outside the United
States without regard to previous or subsequent domestic
stopovers.
(9) Proceeds of mandatory service charges separately
stated on customers' bills for the purchase and consumption of
food and beverages acquired as an incident to the purchase of a
service from a serviceman, to the extent that the proceeds of
the service charge are in fact turned over as tips or as a
substitute for tips to the employees who participate directly
in preparing, serving, hosting or cleaning up the food or
beverage function with respect to which the service charge is
imposed.
(10) Until July 1, 2003, oil field exploration, drilling,
and production equipment, including (i) rigs and parts of rigs,
rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
tubular goods, including casing and drill strings, (iii) pumps
and pump-jack units, (iv) storage tanks and flow lines, (v) any
individual replacement part for oil field exploration,
drilling, and production equipment, and (vi) machinery and
equipment purchased for lease; but excluding motor vehicles
required to be registered under the Illinois Vehicle Code.

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(11) Proceeds from the sale of photoprocessing machinery
and equipment, including repair and replacement parts, both new
and used, including that manufactured on special order,
certified by the purchaser to be used primarily for
photoprocessing, and including photoprocessing machinery and
equipment purchased for lease.
(12) Until July 1, 2003, coal exploration, mining,
offhighway hauling, processing, maintenance, and reclamation
equipment, including replacement parts and equipment, and
including equipment purchased for lease, but excluding motor
vehicles required to be registered under the Illinois Vehicle
Code.
(13) Semen used for artificial insemination of livestock
for direct agricultural production.
(14) Horses, or interests in horses, registered with and
meeting the requirements of any of the Arabian Horse Club
Registry of America, Appaloosa Horse Club, American Quarter
Horse Association, United States Trotting Association, or
Jockey Club, as appropriate, used for purposes of breeding or
racing for prizes. This item (14) is exempt from the provisions
of Section 3-75, and the exemption provided for under this item
(14) applies for all periods beginning May 30, 1995, but no
claim for credit or refund is allowed on or after the effective
date of this amendatory Act of the 95th General Assembly for
such taxes paid during the period beginning May 30, 2000 and
ending on the effective date of this amendatory Act of the 95th

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General Assembly.
(15) Computers and communications equipment utilized for
any hospital purpose and equipment used in the diagnosis,
analysis, or treatment of hospital patients purchased by a
lessor who leases the equipment, under a lease of one year or
longer executed or in effect at the time the lessor would
otherwise be subject to the tax imposed by this Act, to a
hospital that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act. If the equipment is leased in a
manner that does not qualify for this exemption or is used in
any other non-exempt manner, the lessor shall be liable for the
tax imposed under this Act or the Use Tax Act, as the case may
be, based on the fair market value of the property at the time
the non-qualifying use occurs. No lessor shall collect or
attempt to collect an amount (however designated) that purports
to reimburse that lessor for the tax imposed by this Act or the
Use Tax Act, as the case may be, if the tax has not been paid by
the lessor. If a lessor improperly collects any such amount
from the lessee, the lessee shall have a legal right to claim a
refund of that amount from the lessor. If, however, that amount
is not refunded to the lessee for any reason, the lessor is
liable to pay that amount to the Department.
(16) Personal property purchased by a lessor who leases the
property, under a lease of one year or longer executed or in
effect at the time the lessor would otherwise be subject to the

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tax imposed by this Act, to a governmental body that has been
issued an active tax exemption identification number by the
Department under Section 1g of the Retailers' Occupation Tax
Act. If the property is leased in a manner that does not
qualify for this exemption or is used in any other non-exempt
manner, the lessor shall be liable for the tax imposed under
this Act or the Use Tax Act, as the case may be, based on the
fair market value of the property at the time the
non-qualifying use occurs. No lessor shall collect or attempt
to collect an amount (however designated) that purports to
reimburse that lessor for the tax imposed by this Act or the
Use Tax Act, as the case may be, if the tax has not been paid by
the lessor. If a lessor improperly collects any such amount
from the lessee, the lessee shall have a legal right to claim a
refund of that amount from the lessor. If, however, that amount
is not refunded to the lessee for any reason, the lessor is
liable to pay that amount to the Department.
(17) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is donated for
disaster relief to be used in a State or federally declared
disaster area in Illinois or bordering Illinois by a
manufacturer or retailer that is registered in this State to a
corporation, society, association, foundation, or institution
that has been issued a sales tax exemption identification
number by the Department that assists victims of the disaster

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who reside within the declared disaster area.
(18) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is used in the
performance of infrastructure repairs in this State, including
but not limited to municipal roads and streets, access roads,
bridges, sidewalks, waste disposal systems, water and sewer
line extensions, water distribution and purification
facilities, storm water drainage and retention facilities, and
sewage treatment facilities, resulting from a State or
federally declared disaster in Illinois or bordering Illinois
when such repairs are initiated on facilities located in the
declared disaster area within 6 months after the disaster.
(19) Beginning July 1, 1999, game or game birds purchased
at a "game breeding and hunting preserve area" or an "exotic
game hunting area" as those terms are used in the Wildlife Code
or at a hunting enclosure approved through rules adopted by the
Department of Natural Resources. This paragraph is exempt from
the provisions of Section 3-75.
(20) A motor vehicle, as that term is defined in Section
1-146 of the Illinois Vehicle Code, that is donated to a
corporation, limited liability company, society, association,
foundation, or institution that is determined by the Department
to be organized and operated exclusively for educational
purposes. For purposes of this exemption, "a corporation,
limited liability company, society, association, foundation,

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or institution organized and operated exclusively for
educational purposes" means all tax-supported public schools,
private schools that offer systematic instruction in useful
branches of learning by methods common to public schools and
that compare favorably in their scope and intensity with the
course of study presented in tax-supported schools, and
vocational or technical schools or institutes organized and
operated exclusively to provide a course of study of not less
than 6 weeks duration and designed to prepare individuals to
follow a trade or to pursue a manual, technical, mechanical,
industrial, business, or commercial occupation.
(21) Beginning January 1, 2000, personal property,
including food, purchased through fundraising events for the
benefit of a public or private elementary or secondary school,
a group of those schools, or one or more school districts if
the events are sponsored by an entity recognized by the school
district that consists primarily of volunteers and includes
parents and teachers of the school children. This paragraph
does not apply to fundraising events (i) for the benefit of
private home instruction or (ii) for which the fundraising
entity purchases the personal property sold at the events from
another individual or entity that sold the property for the
purpose of resale by the fundraising entity and that profits
from the sale to the fundraising entity. This paragraph is
exempt from the provisions of Section 3-75.
(22) Beginning January 1, 2000 and through December 31,

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2001, new or used automatic vending machines that prepare and
serve hot food and beverages, including coffee, soup, and other
items, and replacement parts for these machines. Beginning
January 1, 2002 and through June 30, 2003, machines and parts
for machines used in commercial, coin-operated amusement and
vending business if a use or occupation tax is paid on the
gross receipts derived from the use of the commercial,
coin-operated amusement and vending machines. This paragraph
is exempt from the provisions of Section 3-75.
(23) Beginning August 23, 2001 and through June 30, 2011,
food for human consumption that is to be consumed off the
premises where it is sold (other than alcoholic beverages, soft
drinks, and food that has been prepared for immediate
consumption) and prescription and nonprescription medicines,
drugs, medical appliances, and insulin, urine testing
materials, syringes, and needles used by diabetics, for human
use, when purchased for use by a person receiving medical
assistance under Article 5 of the Illinois Public Aid Code who
resides in a licensed long-term care facility, as defined in
the Nursing Home Care Act.
(24) Beginning on the effective date of this amendatory Act
of the 92nd General Assembly, computers and communications
equipment utilized for any hospital purpose and equipment used
in the diagnosis, analysis, or treatment of hospital patients
purchased by a lessor who leases the equipment, under a lease
of one year or longer executed or in effect at the time the

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lessor would otherwise be subject to the tax imposed by this
Act, to a hospital that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act. If the equipment is leased in a
manner that does not qualify for this exemption or is used in
any other nonexempt manner, the lessor shall be liable for the
tax imposed under this Act or the Use Tax Act, as the case may
be, based on the fair market value of the property at the time
the nonqualifying use occurs. No lessor shall collect or
attempt to collect an amount (however designated) that purports
to reimburse that lessor for the tax imposed by this Act or the
Use Tax Act, as the case may be, if the tax has not been paid by
the lessor. If a lessor improperly collects any such amount
from the lessee, the lessee shall have a legal right to claim a
refund of that amount from the lessor. If, however, that amount
is not refunded to the lessee for any reason, the lessor is
liable to pay that amount to the Department. This paragraph is
exempt from the provisions of Section 3-75.
(25) Beginning on the effective date of this amendatory Act
of the 92nd General Assembly, personal property purchased by a
lessor who leases the property, under a lease of one year or
longer executed or in effect at the time the lessor would
otherwise be subject to the tax imposed by this Act, to a
governmental body that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act. If the property is leased in a

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manner that does not qualify for this exemption or is used in
any other nonexempt manner, the lessor shall be liable for the
tax imposed under this Act or the Use Tax Act, as the case may
be, based on the fair market value of the property at the time
the nonqualifying use occurs. No lessor shall collect or
attempt to collect an amount (however designated) that purports
to reimburse that lessor for the tax imposed by this Act or the
Use Tax Act, as the case may be, if the tax has not been paid by
the lessor. If a lessor improperly collects any such amount
from the lessee, the lessee shall have a legal right to claim a
refund of that amount from the lessor. If, however, that amount
is not refunded to the lessee for any reason, the lessor is
liable to pay that amount to the Department. This paragraph is
exempt from the provisions of Section 3-75.
(26) Beginning January 1, 2008, tangible personal property
used in the construction or maintenance of a community water
supply, as defined under Section 3.145 of the Environmental
Protection Act, that is operated by a not-for-profit
corporation that holds a valid water supply permit issued under
Title IV of the Environmental Protection Act. This paragraph is
exempt from the provisions of Section 3-75.
(Source: P.A. 94-1002, eff. 7-3-06; 95-88, eff. 1-1-08; 95-538,
eff. 1-1-08; 95-876, eff. 8-21-08.)
(35 ILCS 110/3-30) (from Ch. 120, par. 439.33-30)
Sec. 3-30. Graphic arts production. For the purposes of

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this Act, "graphic arts production" means the production of
tangible personal property for wholesale or retail sale or
lease by means of printing, including ink jet printing, by one
or more of the processes described in Groups 323110 through
323122 of Subsector 323, Groups 511110 through 511199 of
Subsector 511, and Group 512230 of Subsector 512 of the North
American Industry Classification System published by the U.S.
Office of Management and Budget, 1997 edition. Graphic arts
production does not include (i) the transfer of images onto
paper or other tangible personal property by means of
photocopying or (ii) final printed products in electronic or
audio form, including the production of software or
audio-books. For purposes of this Section, persons engaged
primarily in the business of printing or publishing newspapers
or magazines that qualify as newsprint and ink, by one or more
of the processes described in Groups 511110 through 511199 of
subsector 511 of the North American Industry Classification
System published by the U.S. Office of Management and Budget,
1997 edition, are deemed to be engaged in graphic arts
production.
(Source: P.A. 91-51, eff. 6-30-99; 91-541, eff. 8-13-99.)
(35 ILCS 110/3-70)
Sec. 3-70. Manufacturer's Purchase Credit. For purchases
of machinery and equipment made on and after January 1, 1995
and through June 30, 2003, and on and after September 1, 2004

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through August 30, 2014, a purchaser of manufacturing machinery
and equipment that qualifies for the exemption provided by
Section 2 of this Act earns a credit in an amount equal to a
fixed percentage of the tax which would have been incurred
under this Act on those purchases. For purchases of graphic
arts machinery and equipment made on or after July 1, 1996
through June 30, 2003, and on and after September 1, 2004
through August 30, 2014, a purchase of graphic arts machinery
and equipment that qualifies for the exemption provided by
paragraph (5) of Section 3-5 of this Act earns a credit in an
amount equal to a fixed percentage of the tax that would have
been incurred under this Act on those purchases. The credit
earned for the purchase of manufacturing machinery and
equipment and graphic arts machinery and equipment shall be
referred to as the Manufacturer's Purchase Credit. A graphic
arts producer is a person engaged in graphic arts production as
defined in Section 3-30 of the Service Occupation Tax Act.
Beginning July 1, 1996, all references in this Section to
manufacturers or manufacturing shall also refer to graphic arts
producers or graphic arts production.
The amount of credit shall be a percentage of the tax that
would have been incurred on the purchase of the manufacturing
machinery and equipment or graphic arts machinery and equipment
if the exemptions provided by Section 2 or paragraph (5) of
Section 3-5 of this Act had not been applicable.
All purchases prior to October 1, 2003 of manufacturing

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machinery and equipment and graphic arts machinery and
equipment that qualify for the exemptions provided by paragraph
(5) of Section 2 or paragraph (5) of Section 3-5 of this Act
qualify for the credit without regard to whether the serviceman
elected, or could have elected, under paragraph (7) of Section
2 of this Act to exclude the transaction from this Act. If the
serviceman's billing to the service customer separately states
a selling price for the exempt manufacturing machinery or
equipment or the exempt graphic arts machinery and equipment,
the credit shall be calculated, as otherwise provided herein,
based on that selling price. If the serviceman's billing does
not separately state a selling price for the exempt
manufacturing machinery and equipment or the exempt graphic
arts machinery and equipment, the credit shall be calculated,
as otherwise provided herein, based on 50% of the entire
billing. If the serviceman contracts to design, develop, and
produce special order manufacturing machinery and equipment or
special order graphic arts machinery and equipment, and the
billing does not separately state a selling price for such
special order machinery and equipment, the credit shall be
calculated, as otherwise provided herein, based on 50% of the
entire billing. The provisions of this paragraph are effective
for purchases made on or after January 1, 1995.
The percentage shall be as follows:
(1) 15% for purchases made on or before June 30, 1995.
(2) 25% for purchases made after June 30, 1995, and on

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or before June 30, 1996.
(3) 40% for purchases made after June 30, 1996, and on
or before June 30, 1997.
(4) 50% for purchases made on or after July 1, 1997.
(a) Manufacturer's Purchase Credit earned prior to July 1,
2003. This subsection (a) applies to Manufacturer's Purchase
Credit earned prior to July 1, 2003. A purchaser of production
related tangible personal property desiring to use the
Manufacturer's Purchase Credit shall certify to the seller
prior to October 1, 2003 that the purchaser is satisfying all
or part of the liability under the Use Tax Act or the Service
Use Tax Act that is due on the purchase of the production
related tangible personal property by use of a Manufacturer's
Purchase Credit. The Manufacturer's Purchase Credit
certification must be dated and shall include the name and
address of the purchaser, the purchaser's registration number,
if registered, the credit being applied, and a statement that
the State Use Tax or Service Use Tax liability is being
satisfied with the manufacturer's or graphic arts producer's
accumulated purchase credit. Certification may be incorporated
into the manufacturer's or graphic arts producer's purchase
order. Manufacturer's Purchase Credit certification provided
by the manufacturer or graphic arts producer prior to October
1, 2003 may be used to satisfy the retailer's or serviceman's
liability under the Retailers' Occupation Tax Act or Service
Occupation Tax Act for the credit claimed, not to exceed 6.25%

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of the receipts subject to tax from a qualifying purchase, but
only if the retailer or serviceman reports the Manufacturer's
Purchase Credit claimed as required by the Department. A
Manufacturer's Purchase Credit reported on any original or
amended return filed under this Act after October 20, 2003
shall be disallowed. The Manufacturer's Purchase Credit earned
by purchase of exempt manufacturing machinery and equipment or
graphic arts machinery and equipment is a non-transferable
credit. A manufacturer or graphic arts producer that enters
into a contract involving the installation of tangible personal
property into real estate within a manufacturing or graphic
arts production facility, prior to October 1, 2003, may
authorize a construction contractor to utilize credit
accumulated by the manufacturer or graphic arts producer to
purchase the tangible personal property. A manufacturer or
graphic arts producer intending to use accumulated credit to
purchase such tangible personal property shall execute a
written contract authorizing the contractor to utilize a
specified dollar amount of credit. The contractor shall
furnish, prior to October 1, 2003, the supplier with the
manufacturer's or graphic arts producer's name, registration
or resale number, and a statement that a specific amount of the
Use Tax or Service Use Tax liability, not to exceed 6.25% of
the selling price, is being satisfied with the credit. The
manufacturer or graphic arts producer shall remain liable to
timely report all information required by the annual Report of

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Manufacturer's Purchase Credit Used for credit utilized by a
construction contractor.
No Manufacturer's Purchase Credit earned prior to July 1,
2003 may be used after October 1, 2003. The Manufacturer's
Purchase Credit may be used to satisfy liability under the Use
Tax Act or the Service Use Tax Act due on the purchase of
production related tangible personal property (including
purchases by a manufacturer, by a graphic arts producer, or a
lessor who rents or leases the use of the property to a
manufacturer or graphic arts producer) that does not otherwise
qualify for the manufacturing machinery and equipment
exemption or the graphic arts machinery and equipment
exemption. "Production related tangible personal property"
means (i) all tangible personal property used or consumed by
the purchaser in a manufacturing facility in which a
manufacturing process described in Section 2-45 of the
Retailers' Occupation Tax Act takes place, including tangible
personal property purchased for incorporation into real estate
within a manufacturing facility and including, but not limited
to, tangible personal property used or consumed in activities
such as pre-production material handling, receiving, quality
control, inventory control, storage, staging, and packaging
for shipping and transportation purposes; (ii) all tangible
personal property used or consumed by the purchaser in a
graphic arts facility in which graphic arts production as
described in Section 2-30 of the Retailers' Occupation Tax Act

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takes place, including tangible personal property purchased
for incorporation into real estate within a graphic arts
facility and including, but not limited to, all tangible
personal property used or consumed in activities such as
graphic arts preliminary or pre-press production,
pre-production material handling, receiving, quality control,
inventory control, storage, staging, sorting, labeling,
mailing, tying, wrapping, and packaging; and (iii) all tangible
personal property used or consumed by the purchaser for
research and development. "Production related tangible
personal property" does not include (i) tangible personal
property used, within or without a manufacturing or graphic
arts facility, in sales, purchasing, accounting, fiscal
management, marketing, personnel recruitment or selection, or
landscaping or (ii) tangible personal property required to be
titled or registered with a department, agency, or unit of
federal, state, or local government. The Manufacturer's
Purchase Credit may be used, prior to October 1, 2003, to
satisfy the tax arising either from the purchase of machinery
and equipment on or after January 1, 1995 for which the
manufacturing machinery and equipment exemption provided by
Section 2 of this Act was erroneously claimed, or the purchase
of machinery and equipment on or after July 1, 1996 for which
the exemption provided by paragraph (5) of Section 3-5 of this
Act was erroneously claimed, but not in satisfaction of
penalty, if any, and interest for failure to pay the tax when

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due. A purchaser of production related tangible personal
property who is required to pay Illinois Use Tax or Service Use
Tax on the purchase directly to the Department may, prior to
October 1, 2003, utilize the Manufacturer's Purchase Credit in
satisfaction of the tax arising from that purchase, but not in
satisfaction of penalty and interest. A purchaser who uses the
Manufacturer's Purchase Credit to purchase property which is
later determined not to be production related tangible personal
property may be liable for tax, penalty, and interest on the
purchase of that property as of the date of purchase but shall
be entitled to use the disallowed Manufacturer's Purchase
Credit, so long as it has not expired and is used prior to
October 1, 2003, on qualifying purchases of production related
tangible personal property not previously subject to credit
usage. The Manufacturer's Purchase Credit earned by a
manufacturer or graphic arts producer expires the last day of
the second calendar year following the calendar year in which
the credit arose. No Manufacturer's Purchase Credit may be used
after September 30, 2003 regardless of when that credit was
earned.
A purchaser earning Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Earned for each calendar year no later than the last day
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is earned. A Report of
Manufacturer's Purchase Credit Earned shall be filed on forms

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as prescribed or approved by the Department and shall state,
for each month of the calendar year: (i) the total purchase
price of all purchases of exempt manufacturing or graphic arts
machinery on which the credit was earned; (ii) the total State
Use Tax or Service Use Tax which would have been due on those
items; (iii) the percentage used to calculate the amount of
credit earned; (iv) the amount of credit earned; and (v) such
other information as the Department may reasonably require. A
purchaser earning Manufacturer's Purchase Credit shall
maintain records which identify, as to each purchase of
manufacturing or graphic arts machinery and equipment on which
the purchaser earned Manufacturer's Purchase Credit, the
vendor (including, if applicable, either the vendor's
registration number or Federal Employer Identification
Number), the purchase price, and the amount of Manufacturer's
Purchase Credit earned on each purchase.
A purchaser using Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Used for each calendar year no later than the last day
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is used. A Report of
Manufacturer's Purchase Credit Used shall be filed on forms as
prescribed or approved by the Department and shall state, for
each month of the calendar year: (i) the total purchase price
of production related tangible personal property purchased
from Illinois suppliers; (ii) the total purchase price of

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production related tangible personal property purchased from
out-of-state suppliers; (iii) the total amount of credit used
during such month; and (iv) such other information as the
Department may reasonably require. A purchaser using
Manufacturer's Purchase Credit shall maintain records that
identify, as to each purchase of production related tangible
personal property on which the purchaser used Manufacturer's
Purchase Credit, the vendor (including, if applicable, either
the vendor's registration number or Federal Employer
Identification Number), the purchase price, and the amount of
Manufacturer's Purchase Credit used on each purchase.
No annual report shall be filed before May 1, 1996 or after
June 30, 2004. A purchaser that fails to file an annual Report
of Manufacturer's Purchase Credit Earned or an annual Report of
Manufacturer's Purchase Credit Used by the last day of the
sixth month following the end of the calendar year shall
forfeit all Manufacturer's Purchase Credit for that calendar
year unless it establishes that its failure to file was due to
reasonable cause. Manufacturer's Purchase Credit reports may
be amended to report and claim credit on qualifying purchases
not previously reported at any time before the credit would
have expired, unless both the Department and the purchaser have
agreed to an extension of the statute of limitations for the
issuance of a notice of tax liability as provided in Section 4
of the Retailers' Occupation Tax Act. If the time for
assessment or refund has been extended, then amended reports

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for a calendar year may be filed at any time prior to the date
to which the statute of limitations for the calendar year or
portion thereof has been extended. No Manufacturer's Purchase
Credit report filed with the Department for periods prior to
January 1, 1995 shall be approved. Manufacturer's Purchase
Credit claimed on an amended report may be used, prior to
October 1, 2003, to satisfy tax liability under the Use Tax Act
or the Service Use Tax Act (i) on qualifying purchases of
production related tangible personal property made after the
date the amended report is filed or (ii) assessed by the
Department on qualifying purchases of production related
tangible personal property made in the case of manufacturers on
or after January 1, 1995, or in the case of graphic arts
producers on or after July 1, 1996.
If the purchaser is not the manufacturer or a graphic arts
producer, but rents or leases the use of the property to a
manufacturer or a graphic arts producer, the purchaser may
earn, report, and use Manufacturer's Purchase Credit in the
same manner as a manufacturer or graphic arts producer.
A purchaser shall not be entitled to any Manufacturer's
Purchase Credit for a purchase that is required to be reported
and is not timely reported as provided in this Section. A
purchaser remains liable for (i) any tax that was satisfied by
use of a Manufacturer's Purchase Credit, as of the date of
purchase, if that use is not timely reported as required in
this Section and (ii) for any applicable penalties and interest

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for failing to pay the tax when due. No Manufacturer's Purchase
Credit may be used after September 30, 2003 to satisfy any tax
liability imposed under this Act, including any audit
liability.
(b) Manufacturer's Purchase Credit earned on and after
September 1, 2004. This subsection (b) applies to
Manufacturer's Purchase Credit earned on or after September 1,
2004. Manufacturer's Purchase Credit earned on or after
September 1, 2004 may only be used to satisfy the Use Tax or
Service Use Tax liability incurred on production related
tangible personal property purchased on or after September 1,
2004. A purchaser of production related tangible personal
property desiring to use the Manufacturer's Purchase Credit
shall certify to the seller that the purchaser is satisfying
all or part of the liability under the Use Tax Act or the
Service Use Tax Act that is due on the purchase of the
production related tangible personal property by use of a
Manufacturer's Purchase Credit. The Manufacturer's Purchase
Credit certification must be dated and shall include the name
and address of the purchaser, the purchaser's registration
number, if registered, the credit being applied, and a
statement that the State Use Tax or Service Use Tax liability
is being satisfied with the manufacturer's or graphic arts
producer's accumulated purchase credit. Certification may be
incorporated into the manufacturer's or graphic arts
producer's purchase order. Manufacturer's Purchase Credit

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certification provided by the manufacturer or graphic arts
producer may be used to satisfy the retailer's or serviceman's
liability under the Retailers' Occupation Tax Act or Service
Occupation Tax Act for the credit claimed, not to exceed 6.25%
of the receipts subject to tax from a qualifying purchase, but
only if the retailer or serviceman reports the Manufacturer's
Purchase Credit claimed as required by the Department. The
Manufacturer's Purchase Credit earned by purchase of exempt
manufacturing machinery and equipment or graphic arts
machinery and equipment is a non-transferable credit. A
manufacturer or graphic arts producer that enters into a
contract involving the installation of tangible personal
property into real estate within a manufacturing or graphic
arts production facility may, on or after September 1, 2004,
authorize a construction contractor to utilize credit
accumulated by the manufacturer or graphic arts producer to
purchase the tangible personal property. A manufacturer or
graphic arts producer intending to use accumulated credit to
purchase such tangible personal property shall execute a
written contract authorizing the contractor to utilize a
specified dollar amount of credit. The contractor shall furnish
the supplier with the manufacturer's or graphic arts producer's
name, registration or resale number, and a statement that a
specific amount of the Use Tax or Service Use Tax liability,
not to exceed 6.25% of the selling price, is being satisfied
with the credit. The manufacturer or graphic arts producer

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shall remain liable to timely report all information required
by the annual Report of Manufacturer's Purchase Credit Used for
credit utilized by a construction contractor.
The Manufacturer's Purchase Credit may be used to satisfy
liability under the Use Tax Act or the Service Use Tax Act due
on the purchase, made on or after September 1, 2004, of
production related tangible personal property (including
purchases by a manufacturer, by a graphic arts producer, or a
lessor who rents or leases the use of the property to a
manufacturer or graphic arts producer) that does not otherwise
qualify for the manufacturing machinery and equipment
exemption or the graphic arts machinery and equipment
exemption. "Production related tangible personal property"
means (i) all tangible personal property used or consumed by
the purchaser in a manufacturing facility in which a
manufacturing process described in Section 2-45 of the
Retailers' Occupation Tax Act takes place, including tangible
personal property purchased for incorporation into real estate
within a manufacturing facility and including, but not limited
to, tangible personal property used or consumed in activities
such as pre-production material handling, receiving, quality
control, inventory control, storage, staging, and packaging
for shipping and transportation purposes; (ii) all tangible
personal property used or consumed by the purchaser in a
graphic arts facility in which graphic arts production as
described in Section 2-30 of the Retailers' Occupation Tax Act

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takes place, including tangible personal property purchased
for incorporation into real estate within a graphic arts
facility and including, but not limited to, all tangible
personal property used or consumed in activities such as
graphic arts preliminary or pre-press production,
pre-production material handling, receiving, quality control,
inventory control, storage, staging, sorting, labeling,
mailing, tying, wrapping, and packaging; and (iii) all tangible
personal property used or consumed by the purchaser for
research and development. "Production related tangible
personal property" does not include (i) tangible personal
property used, within or without a manufacturing or graphic
arts facility, in sales, purchasing, accounting, fiscal
management, marketing, personnel recruitment or selection, or
landscaping or (ii) tangible personal property required to be
titled or registered with a department, agency, or unit of
federal, state, or local government. The Manufacturer's
Purchase Credit may be used to satisfy the tax arising either
from the purchase of machinery and equipment on or after
September 1, 2004 for which the manufacturing machinery and
equipment exemption provided by Section 2 of this Act was
erroneously claimed, or the purchase of machinery and equipment
on or after September 1, 2004 for which the exemption provided
by paragraph (5) of Section 3-5 of this Act was erroneously
claimed, but not in satisfaction of penalty, if any, and
interest for failure to pay the tax when due. A purchaser of

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production related tangible personal property that is
purchased on or after September 1, 2004 who is required to pay
Illinois Use Tax or Service Use Tax on the purchase directly to
the Department may utilize the Manufacturer's Purchase Credit
in satisfaction of the tax arising from that purchase, but not
in satisfaction of penalty and interest. A purchaser who uses
the Manufacturer's Purchase Credit to purchase property on and
after September 1, 2004 which is later determined not to be
production related tangible personal property may be liable for
tax, penalty, and interest on the purchase of that property as
of the date of purchase but shall be entitled to use the
disallowed Manufacturer's Purchase Credit, so long as it has
not expired, on qualifying purchases of production related
tangible personal property not previously subject to credit
usage. The Manufacturer's Purchase Credit earned by a
manufacturer or graphic arts producer expires the last day of
the second calendar year following the calendar year in which
the credit arose.
A purchaser earning Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Earned for each calendar year no later than the last day
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is earned. A Report of
Manufacturer's Purchase Credit Earned shall be filed on forms
as prescribed or approved by the Department and shall state,
for each month of the calendar year: (i) the total purchase

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price of all purchases of exempt manufacturing or graphic arts
machinery on which the credit was earned; (ii) the total State
Use Tax or Service Use Tax which would have been due on those
items; (iii) the percentage used to calculate the amount of
credit earned; (iv) the amount of credit earned; and (v) such
other information as the Department may reasonably require. A
purchaser earning Manufacturer's Purchase Credit shall
maintain records which identify, as to each purchase of
manufacturing or graphic arts machinery and equipment on which
the purchaser earned Manufacturer's Purchase Credit, the
vendor (including, if applicable, either the vendor's
registration number or Federal Employer Identification
Number), the purchase price, and the amount of Manufacturer's
Purchase Credit earned on each purchase.
A purchaser using Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Used for each calendar year no later than the last day
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is used. A Report of
Manufacturer's Purchase Credit Used shall be filed on forms as
prescribed or approved by the Department and shall state, for
each month of the calendar year: (i) the total purchase price
of production related tangible personal property purchased
from Illinois suppliers; (ii) the total purchase price of
production related tangible personal property purchased from
out-of-state suppliers; (iii) the total amount of credit used

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during such month; and (iv) such other information as the
Department may reasonably require. A purchaser using
Manufacturer's Purchase Credit shall maintain records that
identify, as to each purchase of production related tangible
personal property on which the purchaser used Manufacturer's
Purchase Credit, the vendor (including, if applicable, either
the vendor's registration number or Federal Employer
Identification Number), the purchase price, and the amount of
Manufacturer's Purchase Credit used on each purchase.
A purchaser that fails to file an annual Report of
Manufacturer's Purchase Credit Earned or an annual Report of
Manufacturer's Purchase Credit Used by the last day of the
sixth month following the end of the calendar year shall
forfeit all Manufacturer's Purchase Credit for that calendar
year unless it establishes that its failure to file was due to
reasonable cause. Manufacturer's Purchase Credit reports may
be amended to report and claim credit on qualifying purchases
not previously reported at any time before the credit would
have expired, unless both the Department and the purchaser have
agreed to an extension of the statute of limitations for the
issuance of a notice of tax liability as provided in Section 4
of the Retailers' Occupation Tax Act. If the time for
assessment or refund has been extended, then amended reports
for a calendar year may be filed at any time prior to the date
to which the statute of limitations for the calendar year or
portion thereof has been extended. Manufacturer's Purchase

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Credit claimed on an amended report may be used to satisfy tax
liability under the Use Tax Act or the Service Use Tax Act (i)
on qualifying purchases of production related tangible
personal property made after the date the amended report is
filed or (ii) assessed by the Department on qualifying
production related tangible personal property purchased on or
after September 1, 2004.
If the purchaser is not the manufacturer or a graphic arts
producer, but rents or leases the use of the property to a
manufacturer or a graphic arts producer, the purchaser may
earn, report, and use Manufacturer's Purchase Credit in the
same manner as a manufacturer or graphic arts producer. A
purchaser shall not be entitled to any Manufacturer's Purchase
Credit for a purchase that is required to be reported and is
not timely reported as provided in this Section. A purchaser
remains liable for (i) any tax that was satisfied by use of a
Manufacturer's Purchase Credit, as of the date of purchase, if
that use is not timely reported as required in this Section and
(ii) for any applicable penalties and interest for failing to
pay the tax when due.
(Source: P.A. 93-24, eff. 6-20-03; 93-840, eff. 7-30-04.)
Section 20. The Service Occupation Tax Act is amended by
changing Sections 3-5 and 3-30 as follows:
(35 ILCS 115/3-5) (from Ch. 120, par. 439.103-5)

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Sec. 3-5. Exemptions. The following tangible personal
property is exempt from the tax imposed by this Act:
(1) Personal property sold by a corporation, society,
association, foundation, institution, or organization, other
than a limited liability company, that is organized and
operated as a not-for-profit service enterprise for the benefit
of persons 65 years of age or older if the personal property
was not purchased by the enterprise for the purpose of resale
by the enterprise.
(2) Personal property purchased by a not-for-profit
Illinois county fair association for use in conducting,
operating, or promoting the county fair.
(3) Personal property purchased by any not-for-profit arts
or cultural organization that establishes, by proof required by
the Department by rule, that it has received an exemption under
Section 501(c)(3) of the Internal Revenue Code and that is
organized and operated primarily for the presentation or
support of arts or cultural programming, activities, or
services. These organizations include, but are not limited to,
music and dramatic arts organizations such as symphony
orchestras and theatrical groups, arts and cultural service
organizations, local arts councils, visual arts organizations,
and media arts organizations. On and after the effective date
of this amendatory Act of the 92nd General Assembly, however,
an entity otherwise eligible for this exemption shall not make
tax-free purchases unless it has an active identification

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number issued by the Department.
(4) Legal tender, currency, medallions, or gold or silver
coinage issued by the State of Illinois, the government of the
United States of America, or the government of any foreign
country, and bullion.
(5) Until July 1, 2003 and beginning again on September 1,
2004 through August 30, 2014, graphic arts machinery and
equipment, including repair and replacement parts, both new and
used, and including that manufactured on special order or
purchased for lease, certified by the purchaser to be used
primarily for graphic arts production. Equipment includes
chemicals or chemicals acting as catalysts but only if the
chemicals or chemicals acting as catalysts effect a direct and
immediate change upon a graphic arts product.
(6) Personal property sold by a teacher-sponsored student
organization affiliated with an elementary or secondary school
located in Illinois.
(7) Farm machinery and equipment, both new and used,
including that manufactured on special order, certified by the
purchaser to be used primarily for production agriculture or
State or federal agricultural programs, including individual
replacement parts for the machinery and equipment, including
machinery and equipment purchased for lease, and including
implements of husbandry defined in Section 1-130 of the
Illinois Vehicle Code, farm machinery and agricultural
chemical and fertilizer spreaders, and nurse wagons required to

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be registered under Section 3-809 of the Illinois Vehicle Code,
but excluding other motor vehicles required to be registered
under the Illinois Vehicle Code. Horticultural polyhouses or
hoop houses used for propagating, growing, or overwintering
plants shall be considered farm machinery and equipment under
this item (7). Agricultural chemical tender tanks and dry boxes
shall include units sold separately from a motor vehicle
required to be licensed and units sold mounted on a motor
vehicle required to be licensed if the selling price of the
tender is separately stated.
Farm machinery and equipment shall include precision
farming equipment that is installed or purchased to be
installed on farm machinery and equipment including, but not
limited to, tractors, harvesters, sprayers, planters, seeders,
or spreaders. Precision farming equipment includes, but is not
limited to, soil testing sensors, computers, monitors,
software, global positioning and mapping systems, and other
such equipment.
Farm machinery and equipment also includes computers,
sensors, software, and related equipment used primarily in the
computer-assisted operation of production agriculture
facilities, equipment, and activities such as, but not limited
to, the collection, monitoring, and correlation of animal and
crop data for the purpose of formulating animal diets and
agricultural chemicals. This item (7) is exempt from the
provisions of Section 3-55.

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(8) Fuel and petroleum products sold to or used by an air
common carrier, certified by the carrier to be used for
consumption, shipment, or storage in the conduct of its
business as an air common carrier, for a flight destined for or
returning from a location or locations outside the United
States without regard to previous or subsequent domestic
stopovers.
(9) Proceeds of mandatory service charges separately
stated on customers' bills for the purchase and consumption of
food and beverages, to the extent that the proceeds of the
service charge are in fact turned over as tips or as a
substitute for tips to the employees who participate directly
in preparing, serving, hosting or cleaning up the food or
beverage function with respect to which the service charge is
imposed.
(10) Until July 1, 2003, oil field exploration, drilling,
and production equipment, including (i) rigs and parts of rigs,
rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
tubular goods, including casing and drill strings, (iii) pumps
and pump-jack units, (iv) storage tanks and flow lines, (v) any
individual replacement part for oil field exploration,
drilling, and production equipment, and (vi) machinery and
equipment purchased for lease; but excluding motor vehicles
required to be registered under the Illinois Vehicle Code.
(11) Photoprocessing machinery and equipment, including
repair and replacement parts, both new and used, including that

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manufactured on special order, certified by the purchaser to be
used primarily for photoprocessing, and including
photoprocessing machinery and equipment purchased for lease.
(12) Until July 1, 2003, coal exploration, mining,
offhighway hauling, processing, maintenance, and reclamation
equipment, including replacement parts and equipment, and
including equipment purchased for lease, but excluding motor
vehicles required to be registered under the Illinois Vehicle
Code.
(13) Beginning January 1, 1992 and through June 30, 2011,
food for human consumption that is to be consumed off the
premises where it is sold (other than alcoholic beverages, soft
drinks and food that has been prepared for immediate
consumption) and prescription and non-prescription medicines,
drugs, medical appliances, and insulin, urine testing
materials, syringes, and needles used by diabetics, for human
use, when purchased for use by a person receiving medical
assistance under Article 5 of the Illinois Public Aid Code who
resides in a licensed long-term care facility, as defined in
the Nursing Home Care Act.
(14) Semen used for artificial insemination of livestock
for direct agricultural production.
(15) Horses, or interests in horses, registered with and
meeting the requirements of any of the Arabian Horse Club
Registry of America, Appaloosa Horse Club, American Quarter
Horse Association, United States Trotting Association, or

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Jockey Club, as appropriate, used for purposes of breeding or
racing for prizes. This item (15) is exempt from the provisions
of Section 3-55, and the exemption provided for under this item
(15) applies for all periods beginning May 30, 1995, but no
claim for credit or refund is allowed on or after January 1,
2008 (the effective date of Public Act 95-88) for such taxes
paid during the period beginning May 30, 2000 and ending on
January 1, 2008 (the effective date of Public Act 95-88).
(16) Computers and communications equipment utilized for
any hospital purpose and equipment used in the diagnosis,
analysis, or treatment of hospital patients sold to a lessor
who leases the equipment, under a lease of one year or longer
executed or in effect at the time of the purchase, to a
hospital that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act.
(17) Personal property sold to a lessor who leases the
property, under a lease of one year or longer executed or in
effect at the time of the purchase, to a governmental body that
has been issued an active tax exemption identification number
by the Department under Section 1g of the Retailers' Occupation
Tax Act.
(18) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is donated for
disaster relief to be used in a State or federally declared

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disaster area in Illinois or bordering Illinois by a
manufacturer or retailer that is registered in this State to a
corporation, society, association, foundation, or institution
that has been issued a sales tax exemption identification
number by the Department that assists victims of the disaster
who reside within the declared disaster area.
(19) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is used in the
performance of infrastructure repairs in this State, including
but not limited to municipal roads and streets, access roads,
bridges, sidewalks, waste disposal systems, water and sewer
line extensions, water distribution and purification
facilities, storm water drainage and retention facilities, and
sewage treatment facilities, resulting from a State or
federally declared disaster in Illinois or bordering Illinois
when such repairs are initiated on facilities located in the
declared disaster area within 6 months after the disaster.
(20) Beginning July 1, 1999, game or game birds sold at a
"game breeding and hunting preserve area" or an "exotic game
hunting area" as those terms are used in the Wildlife Code or
at a hunting enclosure approved through rules adopted by the
Department of Natural Resources. This paragraph is exempt from
the provisions of Section 3-55.
(21) A motor vehicle, as that term is defined in Section
1-146 of the Illinois Vehicle Code, that is donated to a

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corporation, limited liability company, society, association,
foundation, or institution that is determined by the Department
to be organized and operated exclusively for educational
purposes. For purposes of this exemption, "a corporation,
limited liability company, society, association, foundation,
or institution organized and operated exclusively for
educational purposes" means all tax-supported public schools,
private schools that offer systematic instruction in useful
branches of learning by methods common to public schools and
that compare favorably in their scope and intensity with the
course of study presented in tax-supported schools, and
vocational or technical schools or institutes organized and
operated exclusively to provide a course of study of not less
than 6 weeks duration and designed to prepare individuals to
follow a trade or to pursue a manual, technical, mechanical,
industrial, business, or commercial occupation.
(22) Beginning January 1, 2000, personal property,
including food, purchased through fundraising events for the
benefit of a public or private elementary or secondary school,
a group of those schools, or one or more school districts if
the events are sponsored by an entity recognized by the school
district that consists primarily of volunteers and includes
parents and teachers of the school children. This paragraph
does not apply to fundraising events (i) for the benefit of
private home instruction or (ii) for which the fundraising
entity purchases the personal property sold at the events from

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another individual or entity that sold the property for the
purpose of resale by the fundraising entity and that profits
from the sale to the fundraising entity. This paragraph is
exempt from the provisions of Section 3-55.
(23) Beginning January 1, 2000 and through December 31,
2001, new or used automatic vending machines that prepare and
serve hot food and beverages, including coffee, soup, and other
items, and replacement parts for these machines. Beginning
January 1, 2002 and through June 30, 2003, machines and parts
for machines used in commercial, coin-operated amusement and
vending business if a use or occupation tax is paid on the
gross receipts derived from the use of the commercial,
coin-operated amusement and vending machines. This paragraph
is exempt from the provisions of Section 3-55.
(24) Beginning on the effective date of this amendatory Act
of the 92nd General Assembly, computers and communications
equipment utilized for any hospital purpose and equipment used
in the diagnosis, analysis, or treatment of hospital patients
sold to a lessor who leases the equipment, under a lease of one
year or longer executed or in effect at the time of the
purchase, to a hospital that has been issued an active tax
exemption identification number by the Department under
Section 1g of the Retailers' Occupation Tax Act. This paragraph
is exempt from the provisions of Section 3-55.
(25) Beginning on the effective date of this amendatory Act
of the 92nd General Assembly, personal property sold to a

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lessor who leases the property, under a lease of one year or
longer executed or in effect at the time of the purchase, to a
governmental body that has been issued an active tax exemption
identification number by the Department under Section 1g of the
Retailers' Occupation Tax Act. This paragraph is exempt from
the provisions of Section 3-55.
(26) Beginning on January 1, 2002 and through June 30,
2011, tangible personal property purchased from an Illinois
retailer by a taxpayer engaged in centralized purchasing
activities in Illinois who will, upon receipt of the property
in Illinois, temporarily store the property in Illinois (i) for
the purpose of subsequently transporting it outside this State
for use or consumption thereafter solely outside this State or
(ii) for the purpose of being processed, fabricated, or
manufactured into, attached to, or incorporated into other
tangible personal property to be transported outside this State
and thereafter used or consumed solely outside this State. The
Director of Revenue shall, pursuant to rules adopted in
accordance with the Illinois Administrative Procedure Act,
issue a permit to any taxpayer in good standing with the
Department who is eligible for the exemption under this
paragraph (26). The permit issued under this paragraph (26)
shall authorize the holder, to the extent and in the manner
specified in the rules adopted under this Act, to purchase
tangible personal property from a retailer exempt from the
taxes imposed by this Act. Taxpayers shall maintain all

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necessary books and records to substantiate the use and
consumption of all such tangible personal property outside of
the State of Illinois.
(27) Beginning January 1, 2008, tangible personal property
used in the construction or maintenance of a community water
supply, as defined under Section 3.145 of the Environmental
Protection Act, that is operated by a not-for-profit
corporation that holds a valid water supply permit issued under
Title IV of the Environmental Protection Act. This paragraph is
exempt from the provisions of Section 3-55.
(Source: P.A. 94-1002, eff. 7-3-06; 95-88, eff. 1-1-08; 95-538,
eff. 1-1-08; 95-876, eff. 8-21-08.)
(35 ILCS 115/3-30) (from Ch. 120, par. 439.103-30)
Sec. 3-30. Graphic arts production. For purposes of this
Act, "graphic arts production" means the production of tangible
personal property for wholesale or retail sale or lease by
means of printing, including ink jet printing, by one or more
of the processes described in Groups 323110 through 323122 of
Subsector 323, Groups 511110 through 511199 of Subsector 511,
and Group 512230 of Subsector 512 of the North American
Industry Classification System published by the U.S. Office of
Management and Budget, 1997 edition. Graphic arts production
does not include (i) the transfer of images onto paper or other
tangible personal property by means of photocopying or (ii)
final printed products in electronic or audio form, including

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the production of software or audio-books. For the purpose of
this Section, persons engaged primarily in the business of
printing or publishing newspapers or magazines that qualify as
newsprint and ink, by one or more of the processes described in
Groups 511110 through 511199 of subsector 511 of the North
American Industry Classification System published by the U.S.
Office of Management and Budget, 1997 edition, are deemed to be
engaged in graphic arts production.
(Source: P.A. 91-51, eff. 6-30-99; 91-541, eff. 8-13-99.)
Section 25. The Retailers' Occupation Tax Act is amended by
changing Sections 2-5 and 2-30 as follows:
(35 ILCS 120/2-5) (from Ch. 120, par. 441-5)
Sec. 2-5. Exemptions. Gross receipts from proceeds from the
sale of the following tangible personal property are exempt
from the tax imposed by this Act:
(1) Farm chemicals.
(2) Farm machinery and equipment, both new and used,
including that manufactured on special order, certified by the
purchaser to be used primarily for production agriculture or
State or federal agricultural programs, including individual
replacement parts for the machinery and equipment, including
machinery and equipment purchased for lease, and including
implements of husbandry defined in Section 1-130 of the
Illinois Vehicle Code, farm machinery and agricultural

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chemical and fertilizer spreaders, and nurse wagons required to
be registered under Section 3-809 of the Illinois Vehicle Code,
but excluding other motor vehicles required to be registered
under the Illinois Vehicle Code. Horticultural polyhouses or
hoop houses used for propagating, growing, or overwintering
plants shall be considered farm machinery and equipment under
this item (2). Agricultural chemical tender tanks and dry boxes
shall include units sold separately from a motor vehicle
required to be licensed and units sold mounted on a motor
vehicle required to be licensed, if the selling price of the
tender is separately stated.
Farm machinery and equipment shall include precision
farming equipment that is installed or purchased to be
installed on farm machinery and equipment including, but not
limited to, tractors, harvesters, sprayers, planters, seeders,
or spreaders. Precision farming equipment includes, but is not
limited to, soil testing sensors, computers, monitors,
software, global positioning and mapping systems, and other
such equipment.
Farm machinery and equipment also includes computers,
sensors, software, and related equipment used primarily in the
computer-assisted operation of production agriculture
facilities, equipment, and activities such as, but not limited
to, the collection, monitoring, and correlation of animal and
crop data for the purpose of formulating animal diets and
agricultural chemicals. This item (7) is exempt from the

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provisions of Section 2-70.
(3) Until July 1, 2003, distillation machinery and
equipment, sold as a unit or kit, assembled or installed by the
retailer, certified by the user to be used only for the
production of ethyl alcohol that will be used for consumption
as motor fuel or as a component of motor fuel for the personal
use of the user, and not subject to sale or resale.
(4) Until July 1, 2003 and beginning again September 1,
2004 through August 30, 2014, graphic arts machinery and
equipment, including repair and replacement parts, both new and
used, and including that manufactured on special order or
purchased for lease, certified by the purchaser to be used
primarily for graphic arts production. Equipment includes
chemicals or chemicals acting as catalysts but only if the
chemicals or chemicals acting as catalysts effect a direct and
immediate change upon a graphic arts product.
(5) A motor vehicle of the first division, a motor vehicle
of the second division that is a self contained motor vehicle
designed or permanently converted to provide living quarters
for recreational, camping, or travel use, with direct walk
through access to the living quarters from the driver's seat,
or a motor vehicle of the second division that is of the van
configuration designed for the transportation of not less than
7 nor more than 16 passengers, as defined in Section 1-146 of
the Illinois Vehicle Code, that is used for automobile renting,
as defined in the Automobile Renting Occupation and Use Tax

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Act. This paragraph is exempt from the provisions of Section
2-70.
(6) Personal property sold by a teacher-sponsored student
organization affiliated with an elementary or secondary school
located in Illinois.
(7) Until July 1, 2003, proceeds of that portion of the
selling price of a passenger car the sale of which is subject
to the Replacement Vehicle Tax.
(8) Personal property sold to an Illinois county fair
association for use in conducting, operating, or promoting the
county fair.
(9) Personal property sold to a not-for-profit arts or
cultural organization that establishes, by proof required by
the Department by rule, that it has received an exemption under
Section 501(c)(3) of the Internal Revenue Code and that is
organized and operated primarily for the presentation or
support of arts or cultural programming, activities, or
services. These organizations include, but are not limited to,
music and dramatic arts organizations such as symphony
orchestras and theatrical groups, arts and cultural service
organizations, local arts councils, visual arts organizations,
and media arts organizations. On and after the effective date
of this amendatory Act of the 92nd General Assembly, however,
an entity otherwise eligible for this exemption shall not make
tax-free purchases unless it has an active identification
number issued by the Department.

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(10) Personal property sold by a corporation, society,
association, foundation, institution, or organization, other
than a limited liability company, that is organized and
operated as a not-for-profit service enterprise for the benefit
of persons 65 years of age or older if the personal property
was not purchased by the enterprise for the purpose of resale
by the enterprise.
(11) Personal property sold to a governmental body, to a
corporation, society, association, foundation, or institution
organized and operated exclusively for charitable, religious,
or educational purposes, or to a not-for-profit corporation,
society, association, foundation, institution, or organization
that has no compensated officers or employees and that is
organized and operated primarily for the recreation of persons
55 years of age or older. A limited liability company may
qualify for the exemption under this paragraph only if the
limited liability company is organized and operated
exclusively for educational purposes. On and after July 1,
1987, however, no entity otherwise eligible for this exemption
shall make tax-free purchases unless it has an active
identification number issued by the Department.
(12) Tangible personal property sold to interstate
carriers for hire for use as rolling stock moving in interstate
commerce or to lessors under leases of one year or longer
executed or in effect at the time of purchase by interstate
carriers for hire for use as rolling stock moving in interstate

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commerce and equipment operated by a telecommunications
provider, licensed as a common carrier by the Federal
Communications Commission, which is permanently installed in
or affixed to aircraft moving in interstate commerce.
(12-5) On and after July 1, 2003 and through June 30, 2004,
motor vehicles of the second division with a gross vehicle
weight in excess of 8,000 pounds that are subject to the
commercial distribution fee imposed under Section 3-815.1 of
the Illinois Vehicle Code. Beginning on July 1, 2004 and
through June 30, 2005, the use in this State of motor vehicles
of the second division: (i) with a gross vehicle weight rating
in excess of 8,000 pounds; (ii) that are subject to the
commercial distribution fee imposed under Section 3-815.1 of
the Illinois Vehicle Code; and (iii) that are primarily used
for commercial purposes. Through June 30, 2005, this exemption
applies to repair and replacement parts added after the initial
purchase of such a motor vehicle if that motor vehicle is used
in a manner that would qualify for the rolling stock exemption
otherwise provided for in this Act. For purposes of this
paragraph, "used for commercial purposes" means the
transportation of persons or property in furtherance of any
commercial or industrial enterprise whether for-hire or not.
(13) Proceeds from sales to owners, lessors, or shippers of
tangible personal property that is utilized by interstate
carriers for hire for use as rolling stock moving in interstate
commerce and equipment operated by a telecommunications

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provider, licensed as a common carrier by the Federal
Communications Commission, which is permanently installed in
or affixed to aircraft moving in interstate commerce.
(14) Machinery and equipment that will be used by the
purchaser, or a lessee of the purchaser, primarily in the
process of manufacturing or assembling tangible personal
property for wholesale or retail sale or lease, whether the
sale or lease is made directly by the manufacturer or by some
other person, whether the materials used in the process are
owned by the manufacturer or some other person, or whether the
sale or lease is made apart from or as an incident to the
seller's engaging in the service occupation of producing
machines, tools, dies, jigs, patterns, gauges, or other similar
items of no commercial value on special order for a particular
purchaser.
(15) Proceeds of mandatory service charges separately
stated on customers' bills for purchase and consumption of food
and beverages, to the extent that the proceeds of the service
charge are in fact turned over as tips or as a substitute for
tips to the employees who participate directly in preparing,
serving, hosting or cleaning up the food or beverage function
with respect to which the service charge is imposed.
(16) Petroleum products sold to a purchaser if the seller
is prohibited by federal law from charging tax to the
purchaser.
(17) Tangible personal property sold to a common carrier by

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rail or motor that receives the physical possession of the
property in Illinois and that transports the property, or
shares with another common carrier in the transportation of the
property, out of Illinois on a standard uniform bill of lading
showing the seller of the property as the shipper or consignor
of the property to a destination outside Illinois, for use
outside Illinois.
(18) Legal tender, currency, medallions, or gold or silver
coinage issued by the State of Illinois, the government of the
United States of America, or the government of any foreign
country, and bullion.
(19) Until July 1 2003, oil field exploration, drilling,
and production equipment, including (i) rigs and parts of rigs,
rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
tubular goods, including casing and drill strings, (iii) pumps
and pump-jack units, (iv) storage tanks and flow lines, (v) any
individual replacement part for oil field exploration,
drilling, and production equipment, and (vi) machinery and
equipment purchased for lease; but excluding motor vehicles
required to be registered under the Illinois Vehicle Code.
(20) Photoprocessing machinery and equipment, including
repair and replacement parts, both new and used, including that
manufactured on special order, certified by the purchaser to be
used primarily for photoprocessing, and including
photoprocessing machinery and equipment purchased for lease.
(21) Until July 1, 2003, coal exploration, mining,

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offhighway hauling, processing, maintenance, and reclamation
equipment, including replacement parts and equipment, and
including equipment purchased for lease, but excluding motor
vehicles required to be registered under the Illinois Vehicle
Code.
(22) Fuel and petroleum products sold to or used by an air
carrier, certified by the carrier to be used for consumption,
shipment, or storage in the conduct of its business as an air
common carrier, for a flight destined for or returning from a
location or locations outside the United States without regard
to previous or subsequent domestic stopovers.
(23) A transaction in which the purchase order is received
by a florist who is located outside Illinois, but who has a
florist located in Illinois deliver the property to the
purchaser or the purchaser's donee in Illinois.
(24) Fuel consumed or used in the operation of ships,
barges, or vessels that are used primarily in or for the
transportation of property or the conveyance of persons for
hire on rivers bordering on this State if the fuel is delivered
by the seller to the purchaser's barge, ship, or vessel while
it is afloat upon that bordering river.
(25) Except as provided in item (25-5) of this Section, a
motor vehicle sold in this State to a nonresident even though
the motor vehicle is delivered to the nonresident in this
State, if the motor vehicle is not to be titled in this State,
and if a drive-away permit is issued to the motor vehicle as

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provided in Section 3-603 of the Illinois Vehicle Code or if
the nonresident purchaser has vehicle registration plates to
transfer to the motor vehicle upon returning to his or her home
state. The issuance of the drive-away permit or having the
out-of-state registration plates to be transferred is prima
facie evidence that the motor vehicle will not be titled in
this State.
(25-5) The exemption under item (25) does not apply if the
state in which the motor vehicle will be titled does not allow
a reciprocal exemption for a motor vehicle sold and delivered
in that state to an Illinois resident but titled in Illinois.
The tax collected under this Act on the sale of a motor vehicle
in this State to a resident of another state that does not
allow a reciprocal exemption shall be imposed at a rate equal
to the state's rate of tax on taxable property in the state in
which the purchaser is a resident, except that the tax shall
not exceed the tax that would otherwise be imposed under this
Act. At the time of the sale, the purchaser shall execute a
statement, signed under penalty of perjury, of his or her
intent to title the vehicle in the state in which the purchaser
is a resident within 30 days after the sale and of the fact of
the payment to the State of Illinois of tax in an amount
equivalent to the state's rate of tax on taxable property in
his or her state of residence and shall submit the statement to
the appropriate tax collection agency in his or her state of
residence. In addition, the retailer must retain a signed copy

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of the statement in his or her records. Nothing in this item
shall be construed to require the removal of the vehicle from
this state following the filing of an intent to title the
vehicle in the purchaser's state of residence if the purchaser
titles the vehicle in his or her state of residence within 30
days after the date of sale. The tax collected under this Act
in accordance with this item (25-5) shall be proportionately
distributed as if the tax were collected at the 6.25% general
rate imposed under this Act.
(25-7) Beginning on July 1, 2007, no tax is imposed under
this Act on the sale of an aircraft, as defined in Section 3 of
the Illinois Aeronautics Act, if all of the following
conditions are met:
(1) the aircraft leaves this State within 15 days after
the later of either the issuance of the final billing for
the sale of the aircraft, or the authorized approval for
return to service, completion of the maintenance record
entry, and completion of the test flight and ground test
for inspection, as required by 14 C.F.R. 91.407;
(2) the aircraft is not based or registered in this
State after the sale of the aircraft; and
(3) the seller retains in his or her books and records
and provides to the Department a signed and dated
certification from the purchaser, on a form prescribed by
the Department, certifying that the requirements of this
item (25-7) are met. The certificate must also include the

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name and address of the purchaser, the address of the
location where the aircraft is to be titled or registered,
the address of the primary physical location of the
aircraft, and other information that the Department may
reasonably require.
For purposes of this item (25-7):
"Based in this State" means hangared, stored, or otherwise
used, excluding post-sale customizations as defined in this
Section, for 10 or more days in each 12-month period
immediately following the date of the sale of the aircraft.
"Registered in this State" means an aircraft registered
with the Department of Transportation, Aeronautics Division,
or titled or registered with the Federal Aviation
Administration to an address located in this State.
This paragraph (25-7) is exempt from the provisions of
Section 2-70.
(26) Semen used for artificial insemination of livestock
for direct agricultural production.
(27) Horses, or interests in horses, registered with and
meeting the requirements of any of the Arabian Horse Club
Registry of America, Appaloosa Horse Club, American Quarter
Horse Association, United States Trotting Association, or
Jockey Club, as appropriate, used for purposes of breeding or
racing for prizes. This item (27) is exempt from the provisions
of Section 2-70, and the exemption provided for under this item
(27) applies for all periods beginning May 30, 1995, but no

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claim for credit or refund is allowed on or after January 1,
2008 (the effective date of Public Act 95-88) for such taxes
paid during the period beginning May 30, 2000 and ending on
January 1, 2008 (the effective date of Public Act 95-88) .
(28) Computers and communications equipment utilized for
any hospital purpose and equipment used in the diagnosis,
analysis, or treatment of hospital patients sold to a lessor
who leases the equipment, under a lease of one year or longer
executed or in effect at the time of the purchase, to a
hospital that has been issued an active tax exemption
identification number by the Department under Section 1g of
this Act.
(29) Personal property sold to a lessor who leases the
property, under a lease of one year or longer executed or in
effect at the time of the purchase, to a governmental body that
has been issued an active tax exemption identification number
by the Department under Section 1g of this Act.
(30) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is donated for
disaster relief to be used in a State or federally declared
disaster area in Illinois or bordering Illinois by a
manufacturer or retailer that is registered in this State to a
corporation, society, association, foundation, or institution
that has been issued a sales tax exemption identification
number by the Department that assists victims of the disaster

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who reside within the declared disaster area.
(31) Beginning with taxable years ending on or after
December 31, 1995 and ending with taxable years ending on or
before December 31, 2004, personal property that is used in the
performance of infrastructure repairs in this State, including
but not limited to municipal roads and streets, access roads,
bridges, sidewalks, waste disposal systems, water and sewer
line extensions, water distribution and purification
facilities, storm water drainage and retention facilities, and
sewage treatment facilities, resulting from a State or
federally declared disaster in Illinois or bordering Illinois
when such repairs are initiated on facilities located in the
declared disaster area within 6 months after the disaster.
(32) Beginning July 1, 1999, game or game birds sold at a
"game breeding and hunting preserve area" or an "exotic game
hunting area" as those terms are used in the Wildlife Code or
at a hunting enclosure approved through rules adopted by the
Department of Natural Resources. This paragraph is exempt from
the provisions of Section 2-70.
(33) A motor vehicle, as that term is defined in Section
1-146 of the Illinois Vehicle Code, that is donated to a
corporation, limited liability company, society, association,
foundation, or institution that is determined by the Department
to be organized and operated exclusively for educational
purposes. For purposes of this exemption, "a corporation,
limited liability company, society, association, foundation,

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or institution organized and operated exclusively for
educational purposes" means all tax-supported public schools,
private schools that offer systematic instruction in useful
branches of learning by methods common to public schools and
that compare favorably in their scope and intensity with the
course of study presented in tax-supported schools, and
vocational or technical schools or institutes organized and
operated exclusively to provide a course of study of not less
than 6 weeks duration and designed to prepare individuals to
follow a trade or to pursue a manual, technical, mechanical,
industrial, business, or commercial occupation.
(34) Beginning January 1, 2000, personal property,
including food, purchased through fundraising events for the
benefit of a public or private elementary or secondary school,
a group of those schools, or one or more school districts if
the events are sponsored by an entity recognized by the school
district that consists primarily of volunteers and includes
parents and teachers of the school children. This paragraph
does not apply to fundraising events (i) for the benefit of
private home instruction or (ii) for which the fundraising
entity purchases the personal property sold at the events from
another individual or entity that sold the property for the
purpose of resale by the fundraising entity and that profits
from the sale to the fundraising entity. This paragraph is
exempt from the provisions of Section 2-70.
(35) Beginning January 1, 2000 and through December 31,

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2001, new or used automatic vending machines that prepare and
serve hot food and beverages, including coffee, soup, and other
items, and replacement parts for these machines. Beginning
January 1, 2002 and through June 30, 2003, machines and parts
for machines used in commercial, coin-operated amusement and
vending business if a use or occupation tax is paid on the
gross receipts derived from the use of the commercial,
coin-operated amusement and vending machines. This paragraph
is exempt from the provisions of Section 2-70.
(35-5) Beginning August 23, 2001 and through June 30, 2011,
food for human consumption that is to be consumed off the
premises where it is sold (other than alcoholic beverages, soft
drinks, and food that has been prepared for immediate
consumption) and prescription and nonprescription medicines,
drugs, medical appliances, and insulin, urine testing
materials, syringes, and needles used by diabetics, for human
use, when purchased for use by a person receiving medical
assistance under Article 5 of the Illinois Public Aid Code who
resides in a licensed long-term care facility, as defined in
the Nursing Home Care Act.
(36) Beginning August 2, 2001, computers and
communications equipment utilized for any hospital purpose and
equipment used in the diagnosis, analysis, or treatment of
hospital patients sold to a lessor who leases the equipment,
under a lease of one year or longer executed or in effect at
the time of the purchase, to a hospital that has been issued an

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active tax exemption identification number by the Department
under Section 1g of this Act. This paragraph is exempt from the
provisions of Section 2-70.
(37) Beginning August 2, 2001, personal property sold to a
lessor who leases the property, under a lease of one year or
longer executed or in effect at the time of the purchase, to a
governmental body that has been issued an active tax exemption
identification number by the Department under Section 1g of
this Act. This paragraph is exempt from the provisions of
Section 2-70.
(38) Beginning on January 1, 2002 and through June 30,
2011, tangible personal property purchased from an Illinois
retailer by a taxpayer engaged in centralized purchasing
activities in Illinois who will, upon receipt of the property
in Illinois, temporarily store the property in Illinois (i) for
the purpose of subsequently transporting it outside this State
for use or consumption thereafter solely outside this State or
(ii) for the purpose of being processed, fabricated, or
manufactured into, attached to, or incorporated into other
tangible personal property to be transported outside this State
and thereafter used or consumed solely outside this State. The
Director of Revenue shall, pursuant to rules adopted in
accordance with the Illinois Administrative Procedure Act,
issue a permit to any taxpayer in good standing with the
Department who is eligible for the exemption under this
paragraph (38). The permit issued under this paragraph (38)

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shall authorize the holder, to the extent and in the manner
specified in the rules adopted under this Act, to purchase
tangible personal property from a retailer exempt from the
taxes imposed by this Act. Taxpayers shall maintain all
necessary books and records to substantiate the use and
consumption of all such tangible personal property outside of
the State of Illinois.
(39) Beginning January 1, 2008, tangible personal property
used in the construction or maintenance of a community water
supply, as defined under Section 3.145 of the Environmental
Protection Act, that is operated by a not-for-profit
corporation that holds a valid water supply permit issued under
Title IV of the Environmental Protection Act. This paragraph is
exempt from the provisions of Section 2-70.
(Source: P.A. 94-1002, eff. 7-3-06; 95-88, eff. 1-1-08; 95-233,
eff. 8-16-07; 95-304, eff. 8-20-07; 95-538, eff. 1-1-08;
95-707, eff. 1-11-08; 95-876, eff. 8-21-08.)
(35 ILCS 120/2-30) (from Ch. 120, par. 441-30)
Sec. 2-30. Graphic arts production. For purposes of this
Act, "graphic arts production" means the production of tangible
personal property for wholesale or retail sale or lease by
means of printing, including ink jet printing, by one or more
of the processes described in Groups 323110 through 323122 of
Subsector 323, Groups 511110 through 511199 of Subsector 511,
and Group 512230 of Subsector 512 of the North American

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Industry Classification System published by the U.S. Office of
Management and Budget, 1997 edition. Graphic arts production
does not include (i) the transfer of images onto paper or other
tangible personal property by means of photocopying or (ii)
final printed products in electronic or audio form, including
the production of software or audio-books. For purposes of this
Section, persons engaged primarily in the business of printing
or publishing newspapers or magazines that qualify as newsprint
and ink, by one or more of the processes described in Groups
511110 through 511199 of subsector 511 of the North American
Industry Classification System published by the U.S. Office of
Management and Budget, 1997 edition, are deemed to be engaged
in graphic arts production.
(Source: P.A. 91-51, eff. 6-30-99; 91-541, eff. 8-13-99.)
Section 99. Effective date. This Act takes effect upon
becoming law.