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State and Local Tax

Illinois Legislature amends REV Illinois Act; Makes Other Tax Changes

by Margaret Eisler

The Illinois Legislature has adopted changes to the Reimagining Electric Vehicles in Illinois Act (REV Illinois Act), including allowing projects subject to existing agreements under the EDGE Tax Credit Act to be designated as REV Illinois projects, allowing projects to continue receiving EDGE tax credits if they cease to qualify as REV Illinois projects, providing for the renewal of certain agreements, and increasing the maximum amount of the REV Illinois credit for withholding for retained jobs. Additionally, the legislation adds a deduction for student loan forgiveness for taxable years beginning on or after January 1, 2021 and before January 1, 2026, extends the deduction for contributions to ABLE accounts to tax years beginning before January 1, 2028, and extends the live theater production tax credit to commercial Broadway touring shows and increases the amount of those credits for the fiscal year ending on June 30, 2023. The bill also provides that estimated first installment of unpaid taxes in Cook County, where the accelerated method of billing and paying property taxes is in effect, will be delinquent and bear interest after April 1, 2023. The bill has been sent to the governor, and will be effective upon his approval. (L. 2022, H5189, awaiting Governor approval.)

REV Illinois Act.

Designation as REV Illinois project: If a project that is subject to an existing agreement under the Economic Development for a Growing Economy (EDGE) Tax Credit Act meets the requirements to be designated as a REV Illinois project, including for actions undertaken prior to the effective date of the REV Illinois Act, the taxpayer that is subject to that existing agreement under the EDGE Tax Credit Act may apply to the Department of Commerce and Economic Opportunity (DCEO) to amend the agreement to allow the project to become a designated REV Illinois project. Following the amendment, time accrued during which the project was eligible for credits under the existing agreement under the EDGE Tax Credit Act will count toward the duration of the credit subject to limitations described in ILCS Ch. 20 § 686/40.

If, at any time following the designation of a project as a REV Illinois project by the DCEO, and prior to the termination or expiration of an agreement under the REV Illinois Act, the project ceases to qualify as a REV Illinois project because the taxpayer is no longer an electric vehicle manufacturer, an electric vehicle component manufacturer, an electric vehicle power supply equipment manufacturer, a battery recycling and reuse manufacturer, or a battery raw materials refining service provider, that project may receive EDGE tax credit awards, as long as the project continues to meet requirements to obtain those credits and remains compliant with terms contained in the agreement not related to their status as an electric vehicle manufacturer, an electric vehicle component manufacturer, an electric vehicle power supply equipment manufacturer, a battery recycling and reuse manufacturer, or a battery raw materials refining service provider. Time accrued during which the project was eligible for credits under an agreement under the REV Illinois Act will count toward the duration of the credit subject to limitations described in ILCS Ch. 35 § 10/5-45.

Renewal of REV Illinois credits: The DCEO is granted the power and authority to determine the conditions and procedures for renewing REV Illinois credits.

For a project that qualified under  ILCS Ch. 20 § 686/20(c)(1)ILCS Ch. 20 § 686/20(c)(2), or ILCS Ch. 20 § 686/20(c)(4) Tier 2 investment and job creation eligibility, the duration of the credit may not exceed 15 taxable years, with an option to renew the agreement for no more than one term not to exceed an additional 15 taxable years.

For project that qualified under ILCS Ch. 20 § 686/20(c)(3) Tier 1 investment and job creation eligibility, the duration of the credit may not exceed 10 taxable years, with an option to renew the agreement for no more than one term not to exceed an additional 10 taxable years.

Increase in REV Illinois credit for withholding for retained jobs: If an applicant agrees to hire the required number of new employees, then the maximum amount of the credit for that applicant may be increased by an amount not to exceed 75% (was 25%) of the incremental income tax attributable to retained employees at the applicant’s project. If the project is in an underserved area or an energy transition area, the maximum amount of the credit attributable to retained employees for the applicant may be increased to an amount not to exceed 100% (was 50%). In both instances in order to receive the increase for retained employees, the applicant must meet or exceed the statewide baseline.

Definitons amended: The term “electric vehicle component parts manufacturer” has been amended to mean a new or existing manufacturer that is focused on reequipping, expanding, or establishing a manufacturing facility in Illinois that produces parts or accessories used in electric vehicles, as defined by the law, including advanced battery component parts. The changes to this definition apply to agreements that are entered into on or after the effective date of this bill.

The term “retained employee” means a full-time employee employed by the taxpayer prior to the term of the agreement who continues to be employed during the term of the agreement whose job duties are directly related to the project. Previously, the term meant a full-time employee employed by the taxpayer prior to the term of the agreement who continued to be employed during the term of the agreement whose job duties were directly and substantially related to the project; “directly and substantially related to the project” meant at least two-thirds of the employee’s job duties had to be directly related to the project and the employee had to devote at least two-thirds of his or her time to the project. The changes to this definition of “retained employee” apply to agreements for credits under this Act that are entered into on or after the effective date of this bill.

Deductions from adjusted gross income.

For taxable years beginning before January 1, 2028, a maximum of $10,000 contributed in the taxable year to a qualified ABLE account under Section 16.6 of the State Treasurer Act may be deducted from adjusted gross income, except that amounts excluded from gross income under IRC § 529(c)(3)(C)(i) or IRC § 529A(c)(1)(C) wil not be considered moneys contributed under this provision.

For taxable years that begin on or after January 1, 2021 and before January 1, 2026, the amount that is included in the taxpayer’s federal adjusted gross income pursuant to IRC § 61 as discharge of indebtedness attributable to student loan forgiveness and that is not excluded from the taxpayer’s federal adjusted gross income pursuant to IRC § 108(f)(5)may be deducted from adjusted gross income.

Live theater production tax credit.

For credits awarded in fiscal year 2023, the term “accredited theater production” includes any commercial Broadway touring show. The amount of tax credits awarded for the state fiscal year ending on June 30, 2023 cannot exceed $4,000,000, with no more than $2,000,000 in credits awarded to accredited theater productions that are not commercial Broadway touring shows, and no more than $2,000,000 in credits awarded to commercial Broadway touring shows.

“Commercial Broadway touring show” means a production that is performed in a qualified production facility and plays in more than two other markets in North America outside of Illinois within 12 months of its Illinois presentation, and has Illinois production spending of not less than $100,000, as shown on the applicant’s application for the credit.

Interest on delinquent accelerated property tax payments.

In counties with 3,000,000 or more inhabitants (Cook County) in which the accelerated method of billing and paying property taxes is in effect, for tax year 2022, the estimated first installment of unpaid taxes will be deemed delinquent and will bear interest after April 1, 2023 at the rate of 1.5% per month or portion thereof until paid or forfeited.

 

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