Bill Text: IL HB5111 | 2011-2012 | 97th General Assembly | Enrolled

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Bill Title: Amends the Small Business Job Creation Tax Credit Act. Provides that an employee who is employed in the service of the applicant for a basic wage for at least 35 hours each week or who renders a standard of service to the applicant that is generally accepted as full-time employment is considered a full-time employee of the applicant regardless of whether a W-2 is issued for the employee by a professional employer organization. Requires the Department of Commerce and Economic Opportunity to make rules concerning applicants for which a professional employer organization has been contracted to issue W-2s and make payment of withholding taxes.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Passed) 2012-08-23 - Public Act . . . . . . . . . 97-1052 [HB5111 Detail]

Download: Illinois-2011-HB5111-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 Small Business Job Creation Tax Credit Act
is amended by changing Sections 10 and 25 as follows:
(35 ILCS 25/10)
(Text of Section before amendment by P.A. 97-636)
Sec. 10. Definitions. In this Act:
"Applicant" means a person that is operating a business
located within the State of Illinois that is engaged in
interstate or intrastate commerce and either:
(1) has no more than 50 full-time employees, without
regard to the location of employment of such employees at
the beginning of the incentive period; or
(2) hired within the incentive period an employee who
had participated as worker-trainee in the Put Illinois to
Work Program during 2010.
In the case of any person that is a member of a unitary
business group within the meaning of subdivision (a)(27) of
Section 1501 of the Illinois Income Tax Act, "applicant" refers
to the unitary business group.
"Certificate" means the tax credit certificate issued by
the Department under Section 35 of this Act.

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"Certificate of eligibility" means the certificate issued
by the Department under Section 20 of this Act.
"Credit" means the amount awarded by the Department to an
applicant by issuance of a certificate under Section 35 of this
Act for each new full-time equivalent employee hired or job
created.
"Department" means the Department of Commerce and Economic
Opportunity.
"Director" means the Director of the Department.
"Full-time employee" means an individual who is employed
for a basic wage for at least 35 hours each week or who renders
any other standard of service generally accepted by industry
custom or practice as full-time employment. An individual for
whom a W-2 is issued by a Professional Employer Organization is
a full-time employee if he or she is employed in the service of
the applicant for a basic wage for at least 35 hours each week
or renders any other standard of service generally accepted by
industry custom or practice as full-time employment. For the
purposes of this Act, such an individual shall be considered a
full-time employee of the applicant.
"Professional Employer Organization" (PEO) shall have the
same meaning as defined in Section 5-5 of the Economic
Development for a Growing Economy Tax Credit Act. As used in
this Section, "Professional Employer Organization" does not
include a day and temporary labor service agency regulated
under the Day and Temporary Labor Services Act.

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"Incentive period" means the period beginning July 1, 2010
and ending on June 30, 2011.
"Basic wage" means compensation for employment that is no
less than $10 per hour or the equivalent salary for a new
employee.
"New employee" means a full-time employee:
(1) who first became employed by an applicant with less
than 50 full-time employees within the incentive period
whose hire results in a net increase in the applicant's
full-time Illinois employees and who is receiving a basic
wage as compensation; or
(2) who participated as a worker-trainee in the Put
Illinois to Work Program during 2010 and who is
subsequently hired during the incentive period by an
applicant and who is receiving a basic wage as
compensation.
The term "new employee" does not include:
(1) a person who was previously employed in Illinois by
the applicant or a related member prior to the onset of the
incentive period; or
(2) any individual who has a direct or indirect
ownership interest of at least 5% in the profits, capital,
or value of the applicant or a related member.
"Noncompliance date" means, in the case of an applicant
that is not complying with the requirements of the provisions
of this Act, the day following the last date upon which the

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taxpayer was in compliance with the requirements of the
provisions of this Act, as determined by the Director, pursuant
to Section 45 of this Act.
"Put Illinois to Work Program" means a worker training and
employment program that was established by the State of
Illinois with funding from the United States Department of
Health and Human Services of Emergency Temporary Assistance to
Needy Families funds authorized by the American Recovery and
Reinvestment Act of 2009 (ARRA TANF Funds). These ARRA TANF
funds were in turn used by the State of Illinois to fund the
Put Illinois to Work Program.
"Related member" means a person that, with respect to the
applicant during any portion of the incentive period, is any
one of the following,
(1) An individual, if the individual and the members of
the individual's family (as defined in Section 318 of the
Internal Revenue Code) own directly, indirectly,
beneficially, or constructively, in the aggregate, at
least 50% of the value of the outstanding profits, capital,
stock, or other ownership interest in the applicant.
(2) A partnership, estate, or trust and any partner or
beneficiary, if the partnership, estate, or trust and its
partners or beneficiaries own directly, indirectly,
beneficially, or constructively, in the aggregate, at
least 50% of the profits, capital, stock, or other
ownership interest in the applicant.

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(3) A corporation, and any party related to the
corporation in a manner that would require an attribution
of stock from the corporation under the attribution rules
of Section 318 of the Internal Revenue Code, if the
applicant and any other related member own, in the
aggregate, directly, indirectly, beneficially, or
constructively, at least 50% of the value of the
corporation's outstanding stock.
(4) A corporation and any party related to that
corporation in a manner that would require an attribution
of stock from the corporation to the party or from the
party to the corporation under the attribution rules of
Section 318 of the Internal Revenue Code, if the
corporation and all such related parties own, in the
aggregate, at least 50% of the profits, capital, stock, or
other ownership interest in the applicant.
(5) A person to or from whom there is attribution of
stock ownership in accordance with Section 1563(e) of the
Internal Revenue Code, except that for purposes of
determining whether a person is a related member under this
paragraph, "20%" shall be substituted for "5%" whenever
"5%" appears in Section 1563(e) of the Internal Revenue
Code.
(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11.)
(Text of Section after amendment by P.A. 97-636)

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Sec. 10. Definitions. In this Act:
"Applicant" means a person that is operating a business
located within the State of Illinois that is engaged in
interstate or intrastate commerce and either:
(1) has no more than 50 full-time employees, without
regard to the location of employment of such employees at
the beginning of the incentive period; or
(2) hired within the incentive period an employee who
had participated as worker-trainee in the Put Illinois to
Work Program during 2010.
In the case of any person that is a member of a unitary
business group within the meaning of subdivision (a)(27) of
Section 1501 of the Illinois Income Tax Act, "applicant" refers
to the unitary business group.
"Certificate" means the tax credit certificate issued by
the Department under Section 35 of this Act.
"Certificate of eligibility" means the certificate issued
by the Department under Section 20 of this Act.
"Credit" means the amount awarded by the Department to an
applicant by issuance of a certificate under Section 35 of this
Act for each new full-time equivalent employee hired or job
created.
"Department" means the Department of Commerce and Economic
Opportunity.
"Director" means the Director of the Department.
"Full-time employee" means an individual who is employed

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for a basic wage for at least 35 hours each week or who renders
any other standard of service generally accepted by industry
custom or practice as full-time employment. An individual for
whom a W-2 is issued by a Professional Employer Organization is
a full-time employee if he or she is employed in the service of
the applicant for a basic wage for at least 35 hours each week
or renders any other standard of service generally accepted by
industry custom or practice as full-time employment. For the
purposes of this Act, such an individual shall be considered a
full-time employee of the applicant.
"Professional Employer Organization" (PEO) shall have the
same meaning as defined in Section 5-5 of the Economic
Development for a Growing Economy Tax Credit Act. As used in
this Section, "Professional Employer Organization" does not
include a day and temporary labor service agency regulated
under the Day and Temporary Labor Services Act.
"Incentive period" means the period beginning on July 1 and
ending on June 30 of the following year. The first incentive
period shall begin on July 1, 2010 and the last incentive
period shall end on June 30, 2016.
"Basic wage" means compensation for employment that is no
less than $10 per hour or the equivalent salary for a new
employee.
"New employee" means a full-time employee:
(1) who first became employed by an applicant with less
than 50 full-time employees within the incentive period

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whose hire results in a net increase in the applicant's
full-time Illinois employees and who is receiving a basic
wage as compensation; or
(2) who participated as a worker-trainee in the Put
Illinois to Work Program during 2010 and who is
subsequently hired during the incentive period by an
applicant and who is receiving a basic wage as
compensation.
The term "new employee" does not include:
(1) a person who was previously employed in Illinois by
the applicant or a related member prior to the onset of the
incentive period; or
(2) any individual who has a direct or indirect
ownership interest of at least 5% in the profits, capital,
or value of the applicant or a related member.
"Noncompliance date" means, in the case of an applicant
that is not complying with the requirements of the provisions
of this Act, the day following the last date upon which the
taxpayer was in compliance with the requirements of the
provisions of this Act, as determined by the Director, pursuant
to Section 45 of this Act.
"Put Illinois to Work Program" means a worker training and
employment program that was established by the State of
Illinois with funding from the United States Department of
Health and Human Services of Emergency Temporary Assistance to
Needy Families funds authorized by the American Recovery and

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Reinvestment Act of 2009 (ARRA TANF Funds). These ARRA TANF
funds were in turn used by the State of Illinois to fund the
Put Illinois to Work Program.
"Related member" means a person that, with respect to the
applicant during any portion of the incentive period, is any
one of the following,
(1) An individual, if the individual and the members of
the individual's family (as defined in Section 318 of the
Internal Revenue Code) own directly, indirectly,
beneficially, or constructively, in the aggregate, at
least 50% of the value of the outstanding profits, capital,
stock, or other ownership interest in the applicant.
(2) A partnership, estate, or trust and any partner or
beneficiary, if the partnership, estate, or trust and its
partners or beneficiaries own directly, indirectly,
beneficially, or constructively, in the aggregate, at
least 50% of the profits, capital, stock, or other
ownership interest in the applicant.
(3) A corporation, and any party related to the
corporation in a manner that would require an attribution
of stock from the corporation under the attribution rules
of Section 318 of the Internal Revenue Code, if the
applicant and any other related member own, in the
aggregate, directly, indirectly, beneficially, or
constructively, at least 50% of the value of the
corporation's outstanding stock.

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(4) A corporation and any party related to that
corporation in a manner that would require an attribution
of stock from the corporation to the party or from the
party to the corporation under the attribution rules of
Section 318 of the Internal Revenue Code, if the
corporation and all such related parties own, in the
aggregate, at least 50% of the profits, capital, stock, or
other ownership interest in the applicant.
(5) A person to or from whom there is attribution of
stock ownership in accordance with Section 1563(e) of the
Internal Revenue Code, except that for purposes of
determining whether a person is a related member under this
paragraph, "20%" shall be substituted for "5%" whenever
"5%" appears in Section 1563(e) of the Internal Revenue
Code.
(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11;
97-636, eff. 6-1-12.)
(35 ILCS 25/25)
(Text of Section before amendment by P.A. 97-636)
Sec. 25. Tax credit.
(a) Subject to the conditions set forth in this Act, an
applicant is entitled to a credit against payment of taxes
withheld under Section 704A of the Illinois Income Tax Act:
(1) for new employees who participated as
worker-trainees in the Put Illinois to Work Program during

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2010:
(A) in the first calendar year ending on or after
the date that is 6 months after December 31, 2010, or
the date of hire, whichever is later. Under this
subparagraph, the applicant is entitled to one-half of
the credit allowable for each new employee who is
employed for at least 6 months after the date of hire;
and
(B) in the first calendar year ending on or after
the date that is 12 months after December 31, 2010, or
the date of hire, whichever is later. Under this
subparagraph, the applicant is entitled to one-half of
the credit allowable for each new employee who is
employed for at least 12 months after the date of hire;
(2) for all other new employees, in the first calendar
year ending on or after the date that is 12 months after
the date of hire of a new employee. The credit shall be
allowed as a credit to an applicant for each full-time
employee hired during the incentive period that results in
a net increase in full-time Illinois employees, where the
net increase in the employer's full-time Illinois
employees is maintained for at least 12 months.
(b) The Department shall make credit awards under this Act
to further job creation.
(c) The credit shall be claimed for the first calendar year
ending on or after the date on which the certificate is issued

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by the Department.
(d) The credit shall not exceed $2,500 per new employee
hired.
(e) The net increase in full-time Illinois employees,
measured on an annual full-time equivalent basis, shall be the
total number of full-time Illinois employees of the applicant
on June 30, 2011, minus the number of full-time Illinois
employees employed by the employer on July 1, 2010. For
purposes of the calculation, an employer that begins doing
business in this State during the incentive period, as
determined by the Director, shall be treated as having zero
Illinois employees on July 1, 2010.
(f) The net increase in the number of full-time Illinois
employees of the applicant under subsection (e) must be
sustained continuously for at least 12 months, starting with
the date of hire of a new employee during the incentive period.
Eligibility for the credit does not depend on the continuous
employment of any particular individual. For purposes of this
subsection (f), if a new employee ceases to be employed before
the completion of the 12-month period for any reason, the net
increase in the number of full-time Illinois employees shall be
treated as continuous if a different new employee is hired as a
replacement within a reasonable time for the same position.
(g) The Department shall promulgate rules to enable an
applicant for which a PEO has been contracted to issue W-2s and
make payment of taxes withheld under Section 704A of the

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Illinois Income Tax Act for new employees to retain the benefit
of tax credits to which the applicant is otherwise entitled
under this Act.
(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11.)
(Text of Section after amendment by P.A. 97-636)
Sec. 25. Tax credit.
(a) Subject to the conditions set forth in this Act, an
applicant is entitled to a credit against payment of taxes
withheld under Section 704A of the Illinois Income Tax Act:
(1) for new employees who participated as
worker-trainees in the Put Illinois to Work Program during
2010:
(A) in the first calendar year ending on or after
the date that is 6 months after December 31, 2010, or
the date of hire, whichever is later. Under this
subparagraph, the applicant is entitled to one-half of
the credit allowable for each new employee who is
employed for at least 6 months after the date of hire;
and
(B) in the first calendar year ending on or after
the date that is 12 months after December 31, 2010, or
the date of hire, whichever is later. Under this
subparagraph, the applicant is entitled to one-half of
the credit allowable for each new employee who is
employed for at least 12 months after the date of hire;

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(2) for all other new employees, in the first calendar
year ending on or after the date that is 12 months after
the date of hire of a new employee. The credit shall be
allowed as a credit to an applicant for each full-time
employee hired during the incentive period that results in
a net increase in full-time Illinois employees, where the
net increase in the employer's full-time Illinois
employees is maintained for at least 12 months.
(b) The Department shall make credit awards under this Act
to further job creation.
(c) The credit shall be claimed for the first calendar year
ending on or after the date on which the certificate is issued
by the Department.
(d) The credit shall not exceed $2,500 per new employee
hired.
(e) The net increase in full-time Illinois employees,
measured on an annual full-time equivalent basis, shall be the
total number of full-time Illinois employees of the applicant
on the final day of the incentive period, minus the number of
full-time Illinois employees employed by the employer on the
first day of that same incentive period. For purposes of the
calculation, an employer that begins doing business in this
State during the incentive period, as determined by the
Director, shall be treated as having zero Illinois employees on
the first day of the incentive period.
(f) The net increase in the number of full-time Illinois

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employees of the applicant under subsection (e) must be
sustained continuously for at least 12 months, starting with
the date of hire of a new employee during the incentive period.
Eligibility for the credit does not depend on the continuous
employment of any particular individual. For purposes of this
subsection (f), if a new employee ceases to be employed before
the completion of the 12-month period for any reason, the net
increase in the number of full-time Illinois employees shall be
treated as continuous if a different new employee is hired as a
replacement within a reasonable time for the same position.
(g) The Department shall promulgate rules to enable an
applicant for which a PEO has been contracted to issue W-2s and
make payment of taxes withheld under Section 704A of the
Illinois Income Tax Act for new employees to retain the benefit
of tax credits to which the applicant is otherwise entitled
under this Act.
(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11;
97-636, eff. 6-1-12.)
Section 95. No acceleration or delay. Where this Act makes
changes in a statute that is represented in this Act by text
that is not yet or no longer in effect (for example, a Section
represented by multiple versions), the use of that text does
not accelerate or delay the taking effect of (i) the changes
made by this Act or (ii) provisions derived from any other
Public Act.

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Section 99. Effective date. This Act takes effect upon
becoming law.