Bill Text: IL SB0397 | 2011-2012 | 97th General Assembly | Chaptered

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Bill Title: Amends the Illinois Income Tax Act. Makes a technical change in a Section concerning income allocation.

Sponsorship: Moderate Partisan Bill (Democrat 5-1)

Status: (Passed) 2011-12-16 - Public Act . . . . . . . . . 97-0636 [SB0397 Detail]

Download: Illinois-2011-SB0397-Chaptered.html

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Public Act 097-0636
SB0397 Enrolled LRB097 04209 HLH 44248 b
AN ACT concerning revenue.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Article 1. Findings
Section 1-1. Legislative findings.
(1) The House of Representatives adopted House Resolution
110 on March 8, 2011, setting forth the estimates of general
funds the House expects to be available during State fiscal
year 2012.
(2) In determining the estimates of general funds expected
to be available during State fiscal year 2012, the House
Revenue & Finance Committee assumed that the State would not
collect approximately $600,000,000 of income tax revenues due
to the allowance of special bonus depreciation rules approved
by the federal government.
(3) The House of Representatives adopted House Resolution
158 on March 30, 2011, which provides that if the actual amount
of funds from State sources that become available during State
fiscal year 2012 exceeds the House's estimates set forth in
House Resolution 110, then that excess shall first be used to
reduce the backlog of unpaid State obligations to the extent
authorized by law.
(4) These concepts are prudent and should be continued for

State fiscal year 2013 and beyond.
(5) As the House Revenue & Finance Committee develops the
estimates of general funds expected to be available during
State fiscal year 2013, an estimated $250,000,000 of income tax
revenues in excess of the State fiscal year 2012 budgeted
amount will become available due to the phasing out of the
allowance of special bonus depreciation rules approved by the
federal government.
(6) Therefore, the General Assembly finds that a tax
incentive package that does not exceed $250,000,000 in State
fiscal year 2013 can be approved without any negative impact to
the State budget in State fiscal years 2012 and 2013 while
providing tax relief to a large number of Illinois individual
and business taxpayers.
Article 5. Illinois Independent Tax Tribunal Act
Section 5-1. Short title. This Article may be cited as the
Illinois Independent Tax Tribunal Act.
Section 5-5. Independent Tax Tribunal Board; Department of
Revenue.
(a) On and after July 1, 2013, the Department of Revenue,
or any successor agency, shall no longer hear and act upon any
protests of notices of tax liability or deficiencies for all
taxes administered by the Department of Revenue.

(b) Beginning July 1, 2013, an Independent Tax Tribunal
Board shall assume, exercise, and administer all rights,
powers, duties, and responsibilities pertaining to any
protests of notices of tax liability or deficiencies for all
taxes administered by the Department of Revenue. The
Independent Tax Tribunal Board shall be created by law and no
State agency shall assume the functions of the Board.
Article 10. Live Theater Production Tax Credit Act
Section 10-1. Short title. This Article may be cited as the
Live Theater Production Tax Credit Act. References in this
Article to "this Act" mean this Article.
Section 10-5. Purpose. The Illinois economy depends
heavily on the commercial for-profit live theater industry and
the pre-Broadway and long-run shows that are presented in
Illinois. As a result of intense competition from other
prominent theater cities in the United States and abroad in
attracting pre-Broadway and long-run shows, Illinois must move
aggressively with new business development investment tools so
that Illinois is more competitive in site location decision
making for show producers. In an increasingly global economy,
Illinois' long-term development will benefit from the
rational, strategic use of State resources in support of
pre-Broadway live theater and long-run show development and

growth. It is the purpose of this Act to preserve and expand
the existing work force used in live theater and enhance the
marketing of the presentation of live theater in Illinois. It
shall be the policy of this State to promote and encourage the
training and hiring of Illinois residents who represent the
diversity of the Illinois population through the creation and
implementation of training, education, and recruitment
programs organized in cooperation with Illinois colleges and
universities, labor organizations, and the commercial
for-profit live theater industry.
Section 10-10. Definitions. As used in this Act:
"Accredited theater production" means a for-profit live
stage presentation in a qualified production facility, as
defined in this Section, that is either (i) a pre-Broadway
production or (ii) a long-run production for which the
aggregate Illinois labor and marketing expenditures exceed
$100,000.
"Pre-Broadway production" means a live stage production
that, in its original or adaptive version, is performed in a
qualified production facility having a presentation scheduled
for Broadway's Theater District in New York City within 12
months after its Illinois presentation.
"Long-run production" means a live stage production that is
performed in a qualified production facility for longer than 8
weeks, with at least 6 performances per week, and includes a

production that spans the end of one tax year and the
commencement of a new tax year that, in combination, meets the
criteria set forth in this definition making it a long-run
production eligible for a theater tax credit award in each tax
year or portion thereof.
"Accredited theater production certificate" means a
certificate issued by the Department certifying that the
production is an accredited theater production that meets the
guidelines of this Act.
"Applicant" means a taxpayer that is a theater producer,
owner, licensee, operator, or presenter that is presenting or
has presented a live stage presentation located within the
State of Illinois who:
(1) owns or licenses the theatrical rights of the stage
presentation for the Illinois production period; or
(2) has contracted or will contract directly with the
owner or licensee of the theatrical rights or a person
acting on behalf of the owner or licensee to provide live
performances of the production.
An applicant that directly or indirectly owns, controls, or
operates multiple qualified production facilities shall be
presumed to be and considered for the purposes of this Act to
be a single applicant; provided, however, that as to each of
the applicant's qualified production facilities, the applicant
shall be eligible to separately and contemporaneously (i) apply
for and obtain accredited theater production certificates,

(ii) stage accredited theater productions, and (iii) apply for
and receive a tax credit award certificate for each of the
applicant's accredited theater productions performed at each
of the applicant's qualified production facilities.
"Department" means the Department of Commerce and Economic
Opportunity.
"Director" means the Director of the Department.
"Illinois labor expenditure" means gross salary or wages
including, but not limited to, taxes, benefits, and any other
consideration incurred or paid to non-talent employees of the
applicant for services rendered to and on behalf of the
accredited theater production. To qualify as an Illinois labor
expenditure, the expenditure must be:
(1) incurred or paid by the applicant on or after the
effective date of the Act for services related to any
portion of an accredited theater production from its
pre-production stages, including, but not limited to, the
writing of the script, casting, hiring of service
providers, purchases from vendors, marketing, advertising,
public relations, load in, rehearsals, performances, other
accredited theater production related activities, and load
out;
(2) directly attributable to the accredited theater
production;
(3) limited to the first $100,000 of wages incurred or
paid to each employee of an accredited theater production

in each tax year;
(4) included in the federal income tax basis of the
property;
(5) paid in the tax year for which the applicant is
claiming the tax credit award, or no later than 60 days
after the end of the tax year;
(6) paid to persons residing in Illinois at the time
payments were made; and
(7) reasonable in the circumstances.
"Illinois production spending" means any and all expenses
directly or indirectly incurred relating to an accredited
theater production presented in any qualified production
facility of the applicant, including, but not limited to,
expenditures for:
(1) national marketing, public relations, and the
creation and placement of print, electronic, television,
billboard, and other forms of advertising; and
(2) the construction and fabrication of scenic
materials and elements; provided, however, that the
maximum amount of expenditures attributable to the
construction and fabrication of scenic materials and
elements eligible for a tax credit award shall not exceed
$500,000 per applicant per production in any single tax
year.
"Qualified production facility" means a facility located
in the State in which live theatrical productions are, or are

intended to be, exclusively presented that contains at least
one stage, a seating capacity of 1,200 or more seats, and
dressing rooms, storage areas, and other ancillary amenities
necessary for the accredited theater production.
"Tax credit award" means the issuance to a taxpayer by the
Department of a tax credit award in conformance with Sections
10-40 and 10-45 of this Act.
"Tax year" means a calendar year for the period January 1
to and including December 31.
Section 10-15. Powers of the Department. The Department, in
addition to those powers granted under the Civil Administrative
Code of Illinois, is granted and has all the powers necessary
or convenient to carry out and effectuate the purposes and
provisions of this Act, including, but not limited to, the
power and authority to:
(1) adopt rules deemed necessary and appropriate for
the administration of the Tax Credit Award program;
establish forms for applications, notifications,
contracts, or any other agreements; and accept
applications at any time during the year;
(2) assist applicants pursuant to the provisions of
this Act to promote, foster, and support live theater
development and production and its related job creation or
retention within the State;
(3) gather information and conduct inquiries, in the

manner and by the methods set forth in this Act, required
for the Department to comply with Section 10-40 and,
without limitation, obtain information with respect to
applicants for the purpose of making any designations or
certifications necessary or desirable to assist the
Department with any recommendation or guidance in the
furtherance of the purposes of this Act and relating to
applicants' participation in training, education, and
recruitment programs that are organized in cooperation
with Illinois colleges and universities or labor
organizations designed to promote and encourage the
training and hiring of Illinois residents who represent the
diversity of the Illinois population;
(4) provide for sufficient personnel to permit
administrative, staffing, operating, and related support
required to adequately discharge its duties and
responsibilities described in this Act from funds as may be
appropriated by the General Assembly for the
administration of this Act; and
(5) require that the applicant at all times keep proper
books and records of accounts relating to the tax credit
award, in accordance with generally accepted accounting
principles consistently applied, and make, upon reasonable
written request by the Department, those books and records
available for reasonable Department inspection and audit
during the applicant's normal business hours. Any

documents or data made available to or received from the
applicant by any agent, employee, officer, or service
provider to the Department shall be deemed confidential and
shall not constitute public records to the extent that the
documents or data consist of commercial or financial
information regarding the operation by the applicant of any
theater or any accredited theater production, or any
recipient of any tax credit award under this Act.
Section 10-20. Tax credit award. Subject to the conditions
set forth in this Act, an applicant is entitled to a tax credit
award as approved by the Department for qualifying Illinois
labor expenditures and Illinois production spending for each
tax year in which the applicant is awarded an accredited
theater production certificate issued by the Department. The
amount of tax credits awarded pursuant to this Act shall not
exceed $2,000,000 in any fiscal year. Credits shall be awarded
on a first-come, first-served basis. Notwithstanding the
foregoing, if the amount of credits applied for in any fiscal
year exceeds the amount authorized to be awarded under this
Section, the excess credit amount shall be awarded in the next
fiscal year in which credits remain available for award and
shall be treated as having been applied for on the first day of
that fiscal year.
Section 10-25. Application for certification of accredited

theater production. Any applicant proposing an accredited
theater production located or planned to be located in Illinois
may request an accredited theater production certificate by
application to the Department.
Section 10-30. Review of application for accredited
theater production certificate.
(a) The Department shall issue an accredited theater
production certificate to an applicant if it finds that by a
preponderance the following conditions exist:
(1) the applicant intends to make the expenditure in
the State required for certification of the accredited
theater production;
(2) the applicant's accredited theater production is
economically sound and will benefit the people of the State
of Illinois by increasing opportunities for employment and
will strengthen the economy of Illinois;
(3) the following requirements related to the
implementation of a diversity plan have been met: (i) the
applicant has filed with the Department a diversity plan
outlining specific goals for hiring Illinois labor
expenditure eligible minority persons and females, as
defined in the Business Enterprise for Minorities,
Females, and Persons with Disabilities Act, and for using
vendors receiving certification under the Business
Enterprise for Minorities, Females, and Persons with

Disabilities Act; (ii) the Department has approved the plan
as meeting the requirements established by the Department
and verified that the applicant has met or made good faith
efforts in achieving those goals; and (iii) the Department
has adopted any rules that are necessary to ensure
compliance with the provisions set forth in this paragraph
and necessary to require that the applicant's plan reflects
the diversity of the population of this State;
(4) the applicant's accredited theater production
application indicates whether the applicant intends to
participate in training, education, and recruitment
programs that are organized in cooperation with Illinois
colleges and universities, labor organizations, and the
holders of accredited theater production certificates and
are designed to promote and encourage the training and
hiring of Illinois residents who represent the diversity of
Illinois;
(5) if not for the tax credit award, the applicant's
accredited theater production would not occur in Illinois,
which may be demonstrated by any means, including, but not
limited to, evidence that: (i) the applicant, presenter,
owner, or licensee of the production rights has other state
or international location options at which to present the
production and could reasonably and efficiently locate
outside of the State, (ii) at least one other state or
nation could be considered for the production, (iii) the

receipt of the tax award credit is a major factor in the
decision of the applicant, presenter, production owner or
licensee as to where the production will be presented and
that without the tax credit award the applicant likely
would not create or retain jobs in Illinois, or (iv)
receipt of the tax credit award is essential to the
applicant's decision to create or retain new jobs in the
State; and
(6) the tax credit award will result in an overall
positive impact to the State, as determined by the
Department using the best available data.
(b) If any of the provisions in this Section conflict with
any existing collective bargaining agreements, the terms and
conditions of those collective bargaining agreements shall
control.
(c) The Department shall act expeditiously regarding
approval of applications for accredited theater production
certificates so as to accommodate the pre-production work,
booking, commencement of ticket sales, determination of
performance dates, load in, and other matters relating to the
live theater productions for which approval is sought.
Section 10-35. Training programs for skills in critical
demand. To accomplish the purposes of this Act, the Department
may use the training programs provided under Section 605-800 of
the Department of Commerce and Economic Opportunity Law of the

Civil Administrative Code of Illinois.
Section 10-40. Issuance of Tax Credit Award Certificate.
(a) In order to qualify for a tax credit award under this
Act, an applicant must file an application for each accredited
theater production at each of the applicant's qualified
production facilities, on forms prescribed by the Department,
providing information necessary to calculate the tax credit
award and any additional information as reasonably required by
the Department.
(b) Upon satisfactory review of the application, the
Department shall issue a tax credit award certificate stating
the amount of the tax credit award to which the applicant is
entitled for that tax year and shall contemporaneously notify
the applicant and Illinois Department of Revenue in accordance
with Section 222 of the Illinois Income Tax Act.
Section 10-45. Amount and payment of the tax credit award.
The tax credit award shall be calculated each tax year based
upon the filing by the applicant on forms prescribed by the
Department containing information regarding qualifying and
quantified Illinois labor expenditures, as defined in Section
10-10, net of the limitation in that Section, and Illinois
production spending, as defined in Section 10-10, net of the
limitation in that Section. From the amount calculated, the
applicant shall be entitled to receive a tax credit award of up

to:
(1) 20% of the Illinois labor expenditures for each tax
year; plus
(2) 20% of the Illinois production spending for each
tax year; plus
(3) 15% of the Illinois labor expenditures generated by
the employment of Illinois residents in geographic areas of
high poverty or high unemployment in each tax year, as
determined by the Department.
Following the Department's determination of the tax credit
award, the Department shall issue the tax credit award to the
applicant.
Section 10-50. Live theater tax credit award program
evaluation and reports.
(a) The Department's live theater tax credit award
evaluation must include:
(i) an assessment of the effectiveness of the program
in creating and retaining new jobs in Illinois;
(ii) an assessment of the revenue impact of the
program;
(iii) in the discretion of the Department, a review of
the practices and experiences of other states or nations
with similar programs; and
(iv) an assessment of the overall success of the
program. The Department may make a recommendation to

extend, modify, or not extend the program based on the
evaluation.
(b) At the end of each fiscal quarter, the Department shall
submit to the General Assembly a report that includes, without
limitation:
(i) an assessment of the economic impact of the
program, including the number of jobs created and retained,
and whether the job positions are entry level, management,
vendor, or production related;
(ii) the amount of accredited theater production
spending brought to Illinois, including the amount of
spending and type of Illinois vendors hired in connection
with an accredited theater production; and
(iii) a determination of whether those receiving
qualifying Illinois labor expenditure salaries or wages
reflect the geographical, racial and ethnic, gender, and
income level diversity of the State of Illinois.
(c) At the end of each fiscal year, the Department shall
submit to the General Assembly a report that includes, without
limitation:
(i) the identification of each vendor that provided
goods or services that were included in an accredited
theater production's Illinois production spending;
(ii) a statement of the amount paid to each identified
vendor by the accredited theater production and whether the
vendor is a minority or female owned business as defined in

Section 2 of the Business Enterprise for Minorities,
Females, and Persons with Disabilities Act; and
(iii) a description of the steps taken by the
Department to encourage accredited theater productions to
use vendors who are minority or female owned businesses.
Section 10-55. Program terms and conditions. Any
documentary materials or data made available or received from
an applicant by any agent or employee of the Department are
confidential and are not public records to the extent that the
materials or data consist of commercial or financial
information regarding the operation of or the production of the
applicant or recipient of any tax credit award under this Act.
Section 10-80. The Illinois Income Tax Act is amended by
adding Section 222 as follows:
(35 ILCS 5/222 new)
Sec. 222. Live theater production credit.
(a) For tax years beginning on or after January 1, 2012, a
taxpayer who has received a tax credit award under the Live
Theater Production Tax Credit Act is entitled to a credit
against the taxes imposed under subsections (a) and (b) of
Section 201 of this Act in an amount determined under that Act
by the Department of Commerce and Economic Opportunity.
(b) If the taxpayer is a partnership, limited liability

partnership, limited liability company, or Subchapter S
corporation, the tax credit award is allowed to the partners,
unit holders, or shareholders 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.
(c) A sale, assignment, or transfer of the tax credit award
may be made by the taxpayer earning the credit within one year
after the credit is awarded in accordance with rules adopted by
the Department of Commerce and Economic Opportunity.
(d) The Department of Revenue, in cooperation with the
Department of Commerce and Economic Opportunity, shall adopt
rules to enforce and administer the provisions of this Section.
(e) The tax credit award may not be carried back. If the
amount of the credit exceeds the tax liability for the year,
the excess may be carried forward and applied to the tax
liability of the 5 tax years following the excess credit year.
The tax credit award shall be applied to the earliest year for
which there is a tax liability. If there are credits from more
than one tax year that are available to offset liability, the
earlier credit shall be applied first. In no event may a credit
under this Section reduce the taxpayer's liability to less than
zero.
Article 15. Amendatory Provisions

Section 15-5. The Economic Development Area Tax Increment
Allocation Act is amended by changing Sections 3, 4, 5, 8, 9,
and 11 and by adding Sections 4.5 and 4.7 as follows:
(20 ILCS 620/3) (from Ch. 67 1/2, par. 1003)
Sec. 3. Definitions. In this Act, words or terms shall have
the following meanings unless the context or usage clearly
indicates that another meaning is intended.
(a) "Department" means the Department of Commerce and
Economic Opportunity.
(b) "Economic development plan" means the written plan of a
municipality which sets forth an economic development program
for an economic development project area. Each economic
development plan shall include but not be limited to (1)
estimated economic development project costs, (2) the sources
of funds to pay such costs, (3) the nature and term of any
obligations to be issued by the municipality to pay such costs,
(4) the most recent equalized assessed valuation of the
economic development project area, (5) an estimate of the
equalized assessed valuation of the economic development
project area after completion of an economic development
project, (6) the estimated date of completion of any economic
development project proposed to be undertaken, (7) a general
description of any proposed developer, user, or tenant of any
property to be located or improved within the economic
development project area, (8) a description of the type,

structure and general character of the facilities to be
developed or improved in the economic development project area,
(9) a description of the general land uses to apply in the
economic development project area, (10) a description of the
type, class and number of employees to be employed in the
operation of the facilities to be developed or improved in the
economic development project area, and (11) a commitment by the
municipality to fair employment practices and an affirmative
action plan with respect to any economic development program to
be undertaken by the municipality.
(c) "Economic development project" means any development
project in furtherance of the objectives of this Act.
(d) "Economic development project area" means any improved
or vacant area which (1) is located within or partially within
or partially without the territorial limits of a municipality,
provided that no area without the territorial limits of a
municipality shall be included in an economic development
project area without the express consent of the Department,
acting as agent for the State, (2) is contiguous, (3) is not
less in the aggregate than three hundred twenty acres, (4) is
suitable for siting by any commercial, manufacturing,
industrial, research or transportation enterprise of
facilities to include but not be limited to commercial
businesses, offices, factories, mills, processing plants,
assembly plants, packing plants, fabricating plants,
industrial or commercial distribution centers, warehouses,

repair overhaul or service facilities, freight terminals,
research facilities, test facilities or transportation
facilities, whether or not such area has been used at any time
for such facilities and whether or not the area has been used
or is suitable for other uses, including commercial
agricultural purposes, and (5) which has been approved and
certified by the Department pursuant to this Act.
(e) "Economic development project costs" mean and include
the sum total of all reasonable or necessary costs incurred by
a municipality incidental to an economic development project,
including, without limitation, the following:
(1) Costs of studies, surveys, development of plans and
specifications, implementation and administration of an
economic development plan, personnel and professional service
costs for architectural, engineering, legal, marketing,
financial, planning, police, fire, public works or other
services, provided that no charges for professional services
may be based on a percentage of incremental tax revenues;
(2) Property assembly costs within an economic development
project area, including but not limited to acquisition of land
and other real or personal property or rights or interests
therein, and specifically including payments to developers or
other nongovernmental persons as reimbursement for property
assembly costs incurred by such developer or other
nongovernmental person;
(3) Site preparation costs, including but not limited to

clearance of any area within an economic development project
area by demolition or removal of any existing buildings,
structures, fixtures, utilities and improvements and clearing
and grading; and including installation, repair, construction,
reconstruction, or relocation of public streets, public
utilities, and other public site improvements within or without
an economic development project area which are essential to the
preparation of the economic development project area for use in
accordance with an economic development plan; and specifically
including payments to developers or other nongovernmental
persons as reimbursement for site preparation costs incurred by
such developer or nongovernmental person;
(4) Costs of renovation, rehabilitation, reconstruction,
relocation, repair or remodeling of any existing buildings,
improvements, and fixtures within an economic development
project area, and specifically including payments to
developers or other nongovernmental persons as reimbursement
for such costs incurred by such developer or nongovernmental
person;
(5) Costs of construction, acquisition, and operation
within an economic development project area of public
improvements, including but not limited to, publicly owned
buildings, structures, works, utilities or fixtures; provided
that no allocation made to the municipality pursuant to
subparagraph (A) of paragraph (2) of subsection (g) of Section
4 of this Act or subparagraph (A) of paragraph (4) of

subsection (g) of Section 4 of this Act shall be used to
operate a convention center or similar entertainment complex or
venue;
(6) Financing costs, including but not limited to all
necessary and incidental expenses related to the issuance of
obligations, payment of any interest on any obligations issued
hereunder which accrues during the estimated period of
construction of any economic development project for which such
obligations are issued and for not exceeding 36 months
thereafter, and any reasonable reserves related to the issuance
of such obligations;
(7) All or a portion of a taxing district's capital costs
resulting from an economic development project necessarily
incurred or estimated to be incurred by a taxing district in
the furtherance of the objectives of an economic development
project, to the extent that the municipality by written
agreement accepts and approves such costs;
(8) Relocation costs to the extent that a municipality
determines that relocation costs shall be paid or is required
to make payment of relocation costs by federal or State law;
(9) The estimated tax revenues from real property in an
economic development project area acquired by a municipality
which, according to the economic development plan, is to be
used for a private use and which any taxing district would have
received had the municipality not adopted tax increment
allocation financing for an economic development project area

and which would result from such taxing district's levies made
after the time of the adoption by the municipality of tax
increment allocation financing to the time the current
equalized assessed value of real property in the economic
development project area exceeds the total initial equalized
value of real property in said area;
(10) Costs of job training, advanced vocational or career
education, including but not limited to courses in
occupational, semi-technical or technical fields leading
directly to employment, incurred by one or more taxing
districts, provided that such costs are related to the
establishment and maintenance of additional job training,
advanced vocational education or career education programs for
persons employed or to be employed by employers located in an
economic development project area, and further provided that
when such costs are incurred by a taxing district or taxing
districts other than the municipality they shall be set forth
in a written agreement by or among the municipality and the
taxing district or taxing districts, which agreement describes
the program to be undertaken, including but not limited to the
number of employees to be trained, a description of the
training and services to be provided, the number and type of
positions available or to be available, itemized costs of the
program and sources of funds to pay the same, and the term of
the agreement. Such costs include, specifically, the payment by
community college districts of costs pursuant to Sections 3-37,

3-38, 3-40 and 3-40.1 of the Public Community College Act and
by school districts of costs pursuant to Sections 10-22.20a and
10-23.3a of The School Code;
(11) Private financing costs incurred by developers or
other nongovernmental persons in connection with an economic
development project, and specifically including payments to
developers or other nongovernmental persons as reimbursement
for such costs incurred by such developer or other
nongovernmental person, provided that:
(A) private financing costs shall be paid or reimbursed by
a municipality only pursuant to the prior official action of
the municipality evidencing an intent to pay or reimburse such
private financing costs;
(B) except as provided in subparagraph (D), the aggregate
amount of such costs paid or reimbursed by a municipality in
any one year shall not exceed 30% of such costs paid or
incurred by the developer or other nongovernmental person in
that year;
(C) private financing costs shall be paid or reimbursed by
a municipality solely from the special tax allocation fund
established pursuant to this Act and shall not be paid or
reimbursed from the proceeds of any obligations issued by a
municipality;
(D) if there are not sufficient funds available in the
special tax allocation fund in any year to make such payment or
reimbursement in full, any amount of such interest cost

remaining to be paid or reimbursed by a municipality shall
accrue and be payable when funds are available in the special
tax allocation fund to make such payment; and
(E) in connection with its approval and certification of an
economic development project pursuant to Section 5 of this Act,
the Department shall review any agreement authorizing the
payment or reimbursement by a municipality of private financing
costs in its consideration of the impact on the revenues of the
municipality and the affected taxing districts of the use of
tax increment allocation financing.
(f) "Municipality" means a city, village or incorporated
town.
(g) "Obligations" means any instrument evidencing the
obligation of a municipality to pay money, including without
limitation, bonds, notes, installment or financing contracts,
certificates, tax anticipation warrants or notes, vouchers,
and any other evidence of indebtedness.
(h) "Taxing districts" means counties, townships,
municipalities, and school, road, park, sanitary, mosquito
abatement, forest preserve, public health, fire protection,
river conservancy, tuberculosis sanitarium and any other
municipal corporations or districts with the power to levy
taxes upon property located within the economic development
project area.
(Source: P.A. 94-793, eff. 5-19-06.)

(20 ILCS 620/4) (from Ch. 67 1/2, par. 1004)
Sec. 4. Establishment of economic development project
areas; ordinance; notice; hearing; changes in economic
development plan. Economic development project areas shall be
established as follows:
(a) The corporate authorities of a municipality shall by
ordinance propose the establishment of an economic development
project area and fix a time and place for a public hearing, and
shall submit a certified copy of the ordinance as adopted to
the Department.
(b) (1) Notice of the public hearing shall be given by
publication and mailing. Notice by publication shall be given
by publication at least twice, the first publication to be not
more than 30 nor less than 10 days prior to the hearing in a
newspaper of general circulation within the taxing districts
having property in the proposed economic development project
area. Notice by mailing shall be given by depositing such
notice together with a copy of the proposed economic
development plan in the United States mails by certified mail
addressed to the person or persons in whose name the general
taxes for the last preceding year were paid on each lot, block,
tract, or parcel of land lying within the economic development
project area. The notice shall be mailed not less than 10 days
prior to the date set for the public hearing. In the event
taxes for the last preceding year were not paid, the notice
shall also be sent to the persons last listed on the tax rolls

within the preceding 3 years as the owners of such property.
(2) The notices issued pursuant to this Section shall
include the following:
(A) The time and place of public hearing;
(B) The boundaries of the proposed economic development
project area by legal description and by street location where
possible;
(C) A notification that all interested persons will be
given an opportunity to be heard at the public hearing;
(D) An invitation for any person to submit alternative
proposals or bids for any proposed conveyance, lease, mortgage
or other disposition of land within the proposed economic
development project area;
(E) A description of the economic development plan or
economic development project if a plan or project is a subject
matter of the hearing; and
(F) Such other matters as the municipality may deem
appropriate.
(3) Not less than 30 days prior to the date set for
hearing, the municipality shall give notice by mail as provided
in this subsection (b) to all taxing districts, of which
taxable property is included in the economic development
project area, and to the Department. In addition to the other
requirements under this subsection (b), the notice shall
include an invitation to the Department and each taxing
district to submit comments to the municipality concerning the

subject matter of the hearing prior to the date of hearing.
(c) At the public hearing any interested person, the
Department or any affected taxing district may file written
objections with the municipal clerk and may be heard orally
with respect to any issues embodied in the notice. The
municipality shall hear and determine all alternate proposals
or bids for any proposed conveyance, lease, mortgage or other
disposition of land and all protests and objections at the
hearing, and the hearing may be adjourned to another date
without further notice other than a motion to be entered upon
the minutes fixing the time and place of the adjourned hearing.
Public hearings with regard to an economic development plan,
economic development project area, or economic development
project may be held simultaneously.
(d) At the public hearing or at any time prior to the
adoption by the municipality of an ordinance approving an
economic development plan, the municipality may make changes in
the economic development plan. Changes which (1) alter the
exterior boundaries of the proposed economic development
project area, (2) substantially affect the general land uses
established in the proposed economic development plan, (3)
substantially change the nature of the proposed economic
development project, (4) change the general description of any
proposed developer, user or tenant of any property to be
located or improved within the economic development project
area, or (5) change the description of the type, class and

number of employees to be employed in the operation of the
facilities to be developed or improved within the economic
development project area shall be made only after notice and
hearing pursuant to the procedures set forth in this Section.
Changes which do not (1) alter the exterior boundaries of a
proposed economic development project area, (2) substantially
affect the general land uses established in the proposed
economic development plan, (3) substantially change the nature
of the proposed economic development project, (4) change the
general description of any proposed developer, user or tenant
of any property to be located or improved within the economic
development project area, or (5) change the description of the
type, class and number of employees to be employed in the
operation of the facilities to be developed or improved within
the economic development project area may be made without
further hearing, provided that the municipality shall give
notice of its changes by mail to the Department and to each
affected taxing district and by publication in a newspaper or
newspapers of general circulation within the affected taxing
districts. Such notice by mail and by publication shall each
occur not later than 10 days following the adoption by
ordinance of such changes.
(e) At any time within 30 days of the final adjournment of
the public hearing, a municipality may, by ordinance, approve
the economic development plan, establish the economic
development project area, and authorize tax increment

allocation financing for such economic development project
area. Any ordinance adopted which approves an economic
development plan shall contain findings that the developer or
any of its successor entities and its subsidiaries economic
development project shall create or retain not less than 4,250
2,000 full-time equivalent jobs, that private investment in an
amount not less than $100,000,000 shall occur in the economic
development project area, that the economic development
project will encourage the increase of commerce and industry
within the State, thereby reducing the evils attendant upon
unemployment and increasing opportunities for personal income,
and that the economic development project will increase or
maintain the property, sales and income tax bases of the
municipality and of the State. Any ordinance adopted which
establishes an economic development project area shall contain
the boundaries of such area by legal description and, where
possible, by street location. Any ordinance adopted which
authorizes tax increment allocation financing shall provide
that the ad valorem taxes, if any, arising from the levies upon
taxable real property in such economic development project area
by taxing districts and tax rates determined in the manner
provided in subsection (b) of Section 6 of this Act each year
after the effective date of the ordinance until economic
development project costs and all municipal obligations
financing economic development project costs incurred under
this Act have been paid shall be divided as follows:

(1) That portion of taxes levied upon each taxable lot,
block, tract or parcel of real property which is attributable
to the lower of the current equalized assessed value or the
initial equalized assessed value of each such taxable lot,
block, tract or parcel of real property in the economic
development project area shall be allocated to and when
collected shall be paid by the county collector to the
respective affected taxing districts in the manner required by
law in the absence of the adoption of tax increment allocation
financing.
(2) That portion, if any, of such taxes which is
attributable to the increase in the current equalized assessed
valuation of each taxable lot, block, tract or parcel of real
property in the economic development project area over and
above the initial equalized assessed value of each property in
the economic development project area shall be allocated to and
when collected shall be paid to the municipal treasurer who
shall deposit such taxes into a special fund called the special
tax allocation fund of the municipality for the purpose of
paying economic development project costs and obligations
incurred in the payment thereof.
(f) After a municipality has by ordinance approved an
economic development plan and established an economic
development project area, the plan may be amended and the
boundaries of the area may be altered only as herein provided.
Amendments which (1) alter the exterior boundaries of an

economic development project area, (2) substantially affect
the general land uses established pursuant to the economic
development plan, (3) substantially change the nature of the
economic development project, (4) change the general
description of any proposed developer, user, or tenant of any
property to be located or improved within the economic
development project area, or (5) change the description of the
type, class and number of employees to be employed in the
operation of the facilities to be developed or improved within
the economic development project area, shall be made only after
notice and hearing pursuant to the procedures set forth in this
Section. Amendments which do not (1) alter the boundaries of
the economic development project area, (2) substantially
affect the general land uses established in the economic
development plan, (3) substantially change the nature of the
economic development project, (4) change the general
description of any proposed developer, user, or tenant of any
property to be located or improved within the economic
development project area, or (5) change the description of the
type, class and number of employees to be employed in the
operation of the facilities to be developed or improved within
the economic development project area may be made without
further hearing, provided that the municipality shall give
notice of any amendment by mail to the Department and to each
taxing district and by publication in a newspaper or newspapers
of general circulation within the affected taxing districts.

Such notice by mail and by publication shall each occur not
later than 10 days following the adoption by ordinance of any
amendments.
(g) Extension of economic development project area;
allocations; payment of outstanding claims; changes in
equalized assessed valuation.
(1) Notwithstanding anything to the contrary set forth in
this Act, upon the effective date of this amendatory Act of the
97th General Assembly, the duration of any existing economic
development plan created pursuant to this Act is extended to
the duration permitted under this subsection, up to a maximum
duration of 15 years.
(2) For the purposes of this Section, real estate taxes
paid on property within the economic development project area
during calendar year 2013 and remitted to the developer and the
taxing districts in 2014 shall be the "base amount". Beginning
with real estate taxes remitted in 2014, for any economic
development plan extended by operation of item (1) of this
subsection (g), until such time as all existing obligations, as
that term is defined in item (5) of this subsection (g), have
been satisfied, the allocation of the special tax allocation
fund shall be as follows:
(A) All receipts up to the first $350,000 shall be
maintained by the municipality in an escrow account to be
used solely for (i) expenses relating to the reports
required by Section 4.7 of this Act and (ii) legal expenses

incurred in defense of any civil action brought against the
municipality relating to the economic development
agreement. The escrow account shall be within the scope of
the annual audit provided in Section 4.7 of this Act. Each
December 31 following a deposit into the escrow account,
any unobligated balance in the escrow account shall be
distributed to the taxing districts in the same manner and
proportion as the most recent distribution by the county
collector to the taxing districts in the economic
development project area.
(B) After the allocation required pursuant to
paragraph (A) of this item (2), the next $5,000,000 of the
receipts shall be allocated to the municipality.
(C) After the allocations required pursuant to
paragraphs (A) and (B) of this item (2), 55% of the
remaining receipts shall be allocated to the developer.
(D) After the allocations required pursuant to parts
(A) and (B) of this item (2), 45% of the remaining receipts
shall be allocated to the taxing districts located within
the economic development project area, excluding the
municipality.
(3) For real estate taxes paid in 2012 and remitted to the
developer and the taxing districts in 2013 and prior years, the
allocation formula contained in any economic development plan
in effect immediately prior to the effective date of this
amendatory Act of the 97th General Assembly shall apply.

(4) Beginning with real estate taxes paid in 2014 and
remitted to the developer and the taxing districts in 2015 and
each year thereafter, if the taxes paid within the economic
development project area change from the base amount, the
allocation of the special tax allocation fund shall be as
follows:
(A) If the amount of current year taxes paid is less
than the base amount, then the administrative escrow
account shall receive the first $350,000 of receipts, the
municipality shall receive the next $5,000,000 of
receipts, the developer shall receive 55% of receipts over
$5,350,000, and the remaining 45% of receipts over
$5,350,000 shall be distributed to the taxing districts
(excluding the municipality) in the same manner and
proportion as the most recent distribution by the county
collector to those taxing districts in the economic
development project area.
(B) If the amount of current year taxes paid is greater
than the base amount, then 75% of the increase in real
estate tax receipts shall be payable to the developer and
the remaining 25% of the increase in real estate tax
receipts shall be distributed to the taxing districts
(including the municipality) pursuant to the formula in
this subsection.
(5) After (i) all existing obligations and interest thereon
have been satisfied, (ii) any excess moneys have been

distributed pursuant to this subsection, and (iii) final
closing of the books and records of the economic development
project area has occurred, the municipality shall adopt an
ordinance dissolving the special tax allocation fund for the
economic development project area and terminating the
designation of the economic development project area as an
economic development project area. All excess moneys in the
special tax allocation fund shall be distributed to the taxing
districts in the same manner and proportion as the most recent
distribution by the county collector to those taxing districts
in the economic development project area. For the purpose of
this subsection (g), "existing obligations" means (i) the
obligations of the developer that existed before the base year,
as certified by a sworn affidavit of the principal financial
officer of the developer attesting that the amounts set forth
are true and correct, (ii) obligations of the municipality
relating to the payment of the obligations of the developer,
and (iii) any amounts payable by taxing districts to the
developer for property taxes determined to have been overpaid,
to the extent that those amounts payable have been carried
forward as an interest bearing note due to the developer. All
obligations of the developer due and payable shall be processed
and paid in the order received, with the oldest notes to be
processed and paid first. Beginning January 1, 2012, all
outstanding interest bearing notes shall bear interest at the
rate of 4% until paid.

(h) Beginning on the effective date of this amendatory Act
of the 97th General Assembly, the taxing districts shall meet
annually 180 days after the close of the municipal fiscal year,
or as soon as the economic development project audit for that
fiscal year becomes available, to review the effectiveness and
status of the economic development project area up to that
date.
(Source: P.A. 86-38.)
(20 ILCS 620/4.5 new)
Sec. 4.5. Recapture.
(a) In the event that the developer terminates all of its
operations and vacates the redevelopment area within 60 months
after the effective date of this amendatory Act of the 97th
General Assembly, the developer shall be required to remit to
the Department an amount equal to the payments disbursed to the
developer in 2014 and subsequent years under the Agreement.
Within 30 days after receipt, the Department shall remit such
funds to the county collector. The county collector shall
thereafter make distribution to the respective taxing
districts in the same manner and proportion as the most recent
distribution by the county collector to those taxing districts
of real property taxes from real property in the economic
development project area.
(b) In the event the developer fails to maintain 4,250 jobs
at any time before the termination of the economic development

project area, except as provided in subsection (c), the
developer shall forfeit an amount of its allocations from the
special tax allocation fund for that time period in which the
developer failed to maintain 4,250 jobs. The amount forfeited
shall equal the percentage of the year that the developer
failed to maintain 4,250 jobs multiplied by the amount the
developer would have received if they maintained 4,250 jobs for
the entire year. Any funds that are forfeited shall be
distributed to the taxing districts in the same manner and
proportion as the most recent distribution by the county
collector to those taxing districts (inclusive of the
municipality) in the economic development project area.
(c) In the event that the developer maintains no jobs at
any time before the termination of the economic development
project area, the municipality shall adopt an ordinance
dissolving the special tax allocation fund for the economic
development project area and terminating the economic
development project area as an economic development project
area. That ordinance shall be adopted no later than one year
after the date that the developer maintains no jobs within the
economic development project area. All excess moneys in the
special tax allocation fund shall be distributed to the taxing
districts in the same manner and proportion as the most recent
distribution by the county collector to those taxing districts
in the economic development project area.

(20 ILCS 620/4.7 new)
Sec. 4.7. Municipal reports. After the effective date of
this amendatory Act of the 97th General Assembly, a
municipality shall submit in an electronic format all of the
following information for each economic development project
area (i) to the State Comptroller and (ii) to all taxing
districts overlapping the economic development project area no
later than 180 days after the close of each municipal fiscal
year or as soon thereafter as the audited financial statements
become available:
(1) Any amendments to the economic development plan or
the economic development project area.
(2) Audited financial statements of the special tax
allocation fund once a cumulative total of $100,000 has
been deposited into the fund.
(3) Certification of the Chief Executive Officer of the
municipality that the municipality has complied with all of
the requirements of this Act during the preceding fiscal
year.
(4) An opinion of legal counsel that the municipality
is in compliance with this Act.
(5) An analysis of the special tax allocation fund that
sets forth:
(A) the balance in the special tax allocation fund
at the beginning of the fiscal year;
(B) all amounts deposited in the special tax

allocation fund by source;
(C) an itemized list of all expenditures from the
special tax allocation fund by category of permissible
economic development project cost; and
(D) the balance in the special tax allocation fund
at the end of the fiscal year, including a breakdown of
that balance by source and a breakdown of that balance
identifying any portion of the balance that is
required, pledged, earmarked, or otherwise designated
for payment of or securing of obligations and
anticipated economic development project costs; any
portion of that ending balance that has not been
identified or is not identified as being required,
pledged, earmarked, or otherwise designated for
payment of or securing of obligations or anticipated
economic development project costs shall be designated
as surplus as set forth in Section 8 of this Act.
(6) A description of all property purchased by the
municipality within the economic development project area
including:
(A) street address;
(B) approximate size or description of property;
(C) purchase price; and
(D) the seller of the property.
(7) A statement setting forth all activities
undertaken in furtherance of the objectives of the economic

development plan, including:
(A) any project implemented in the preceding
fiscal year;
(B) a description of the economic development
activities undertaken;
(C) a description of any agreements entered into by
the municipality with regard to the disposition or
redevelopment of any property within the economic
development project area;
(D) additional information on the use of all funds
received under this Act and steps taken by the
municipality to achieve the objectives of the economic
development plan;
(E) information regarding contracts that the
municipality's tax increment advisors or consultants
have entered into with entities or persons that have
received, or are receiving, payments financed by tax
increment revenues produced by the same economic
development project area; and
(F) a review of public and, to the extent possible,
private investment actually undertaken on or after the
effective date of this amendatory Act of the 97th
General Assembly and prior to the date of the report
and estimated to be undertaken during the following
fiscal year; this review shall, on a project by project
basis, set forth the estimated amounts of public and

private investment incurred after the effective date
of this amendatory Act of the 97th General Assembly and
provide the ratio of private investment to public
investment to the date of the report and as estimated
to the completion of the economic development project.
(8) With regard to any obligations issued by the
municipality:
(A) copies of any official statements; and
(B) an analysis prepared by a financial advisor or
underwriter setting forth: (i) the nature and term of
those obligations; and (ii) projected debt service
including required reserves and debt coverage.
(9) For special tax allocation funds that have
experienced cumulative deposits of incremental tax
revenues of $100,000 or more, a certified audit report
reviewing compliance with this Act performed by an
independent certified public accountant licensed by the
authority of the State of Illinois. The financial portion
of the audit must be conducted in accordance with Standards
for Audits of Governmental Organizations, Programs,
Activities, and Functions adopted by the Comptroller
General of the United States (1981), as amended, or the
standards specified by Section 8-8-5 of the Illinois
Municipal Auditing Law of the Illinois Municipal Code. The
audit report shall contain a letter from the independent
certified public accountant indicating compliance or

noncompliance with the requirements of subsection (e) of
Section 3 of this Act.
(10) A list of all intergovernmental agreements in
effect during the fiscal year to which the municipality is
a party and an accounting of any moneys transferred or
received by the municipality during that fiscal year
pursuant to those intergovernmental agreements.
(20 ILCS 620/5) (from Ch. 67 1/2, par. 1005)
Sec. 5. Submission to Department; certification by
Department; limitation on number of permissible economic
development project areas. (a) The municipality shall submit
certified copies of any ordinances adopted approving an
economic development plan, establishing an economic
development project area, and authorizing tax increment
allocation financing for such economic development project
area to the Department, together with (1) a map of the economic
development project area, (2) a copy of the economic
development plan as approved, (3) an analysis, and any
supporting documents and statistics, demonstrating that the
developer or any of its successor entities and its subsidiaries
economic development project shall create or retain not less
than 4,250 2,000 full-time equivalent jobs and that private
investment in the amount of not less than $100,000,000 shall
occur in the economic development project area, (4) an estimate
of the economic impact of the economic development project and

the use of tax increment allocation financing upon the revenues
of the municipality and the affected taxing districts, (5) a
record of all public hearings had in connection with the
establishment of the economic development project area, and (6)
such other information as the Department by regulation may
require.
(b) Upon receipt of an application from a municipality the
Department shall review the application to determine whether
the economic development project area qualifies as an economic
development project area under this Act. At its discretion, the
Department may accept or reject the application or may request
such additional information as it deems necessary or advisable
to aid its review. If any such area is found to be qualified to
be an economic development project area, the Department shall
approve and certify such economic development project area and
shall provide written notice of its approval and certification
to the municipality and to the county clerk. In determining
whether an economic development project area shall be approved
and certified, the Department shall consider (1) whether,
without public intervention, the State would suffer
substantial economic dislocation, such as relocation of a
commercial business or industrial or manufacturing facility to
another state, territory or country, or would not otherwise
benefit from private investment offering substantial
employment opportunities and economic growth, and (2) the
impact on the revenues of the municipality and the affected

taxing districts of the use of tax increment allocation
financing in connection with the economic development project.
(c) On or before the date which is 18 months following the
date on which this Act becomes law, the Department shall submit
to the General Assembly a report detailing the number of
economic development project areas it has approved and
certified, the number and type of jobs created or retained
therein, the aggregate amount of private investment therein,
the impact on the revenues of municipalities and affected
taxing districts of the use of tax increment allocation
financing therein, and such additional information as the
Department may determine to be relevant. On or after the date
which is 20 months following the date on which this Act becomes
law the authority granted hereunder to municipalities to
establish economic development project areas and to adopt tax
increment allocation financing in connection therewith and to
the Department to approve and certify economic development
project areas shall expire unless the General Assembly shall
have authorized municipalities and the Department to continue
to exercise the powers granted to them hereunder.
(Source: P.A. 86-38.)
(20 ILCS 620/8) (from Ch. 67 1/2, par. 1008)
Sec. 8. Issuance of obligations for economic development
project costs. Obligations secured by the special tax
allocation fund provided for in Section 7 of this Act for an

economic development project area may be issued to provide for
economic development project costs. Those obligations, when so
issued, shall be retired in the manner provided in the
ordinance authorizing the issuance of the obligations by the
receipts of taxes levied as specified in Section 6 of this Act
against the taxable property included in the economic
development project area and by other revenue designated or
pledged by the municipality. A municipality may in the
ordinance pledge all or any part of the funds in and to be
deposited in the special tax allocation fund created pursuant
to Section 7 of this Act to the payment of the economic
development project costs and obligations. Whenever a
municipality pledges all of the funds to the credit of a
special tax allocation fund to secure obligations issued or to
be issued to pay economic development project costs, the
municipality may specifically provide that funds remaining to
the credit of such special tax allocation fund after the
payment of such obligations shall be accounted for annually and
shall be deemed to be "surplus" funds, and such "surplus" funds
shall be distributed as hereinafter provided. Whenever a
municipality pledges less than all of the monies to the credit
of a special tax allocation fund to secure obligations issued
or to be issued to pay economic development project costs, the
municipality shall provide that monies to the credit of the
special tax allocation fund and not subject to such pledge or
otherwise encumbered or required for payment of contractual

obligations for specific economic development project costs
shall be calculated annually and shall be deemed to be
"surplus" funds, and such "surplus" funds shall be distributed
as hereinafter provided. All funds to the credit of a special
tax allocation fund which are deemed to be "surplus" funds
shall be distributed annually within 180 days of the close of
the municipality's fiscal year by being paid by the municipal
treasurer to the county collector. The county collector shall
thereafter make distribution to the respective taxing
districts in the same manner and proportion as the most recent
distribution by the county collector to those taxing districts
of real property taxes from real property in the economic
development project area.
Without limiting the foregoing in this Section the
municipality may, in addition to obligations secured by the
special tax allocation fund, pledge for a period not greater
than the term of the obligations towards payment of those
obligations any part or any combination of the following: (i)
net revenues of all or part of any economic development
project; (ii) taxes levied and collected on any or all property
in the municipality, including, specifically, taxes levied or
imposed by the municipality in a special service area pursuant
to "An Act to provide the manner of levying or imposing taxes
for the provision of special services to areas within the
boundaries of home rule units and non-home rule municipalities
and counties", approved September 21, 1973, as now or hereafter

amended; (iii) the full faith and credit of the municipality;
(iv) a mortgage on part or all of the economic development
project; or (v) any other taxes or anticipated receipts that
the municipality may lawfully pledge.
Such obligations may be issued in one or more series
bearing interest at such rate or rates as the corporate
authorities of the municipality shall determine by ordinance,
which rate or rates may be variable or fixed, without regard to
any limitations contained in any law now in effect or hereafter
adopted. Such obligations shall bear such date or dates, mature
at such time or times not exceeding 38 20 years from their
respective dates, but in no event exceeding 38 23 years from
the date of establishment of the economic development project
area, be in such denomination, be in such form, whether coupon,
registered or book-entry, carry such registration, conversion
and exchange privileges, be executed in such manner, be payable
in such medium of payment at such place or places within or
without the State of Illinois, contain such covenants, terms
and conditions, be subject to redemption with or without
premium, be subject to defeasance upon such terms, and have
such rank or priority, as such ordinance shall provide.
Obligations issued pursuant to this Act may be sold at public
or private sale at such price as shall be determined by the
corporate authorities of the municipalities. Such obligations
may, but need not, be issued utilizing the provisions of any
one or more of the omnibus bond Acts specified in Section 1.33

of "An Act to revise the law in relation to the construction of
the statutes", approved March 5, 1874, as now or hereafter
amended. No referendum approval of the electors shall be
required as a condition to the issuance of obligations pursuant
to this Act except as provided in this Section.
Whenever a municipality issues bonds for the purpose of
financing economic development project costs, the municipality
may provide by ordinance for the appointment of a trustee,
which may be any trust company within the State, and for the
establishment of the funds or accounts to be maintained by such
trustee as the municipality shall deem necessary to provide for
the security and payment of the bonds. If the municipality
provides for the appointment of a trustee, the trustee shall be
considered the assignee of any payments assigned by the
municipality pursuant to the ordinance and this Section. Any
amounts paid to the trustee as assignee shall be deposited in
the funds or accounts established pursuant to the trust
agreement, and shall be held by the trustee in trust for the
benefit of the holders of the bonds, and the holders shall have
a lien on and a security interest in those bonds or accounts so
long as the bonds remain outstanding and unpaid. Upon
retirement of the bonds, the trustee shall pay over any excess
amounts held to the municipality for deposit in the special tax
allocation fund.
In the event the municipality authorizes the issuance of
obligations pursuant to the authority of this Act secured by

the full faith and credit of the municipality, or pledges ad
valorem taxes pursuant to clause (ii) of the second paragraph
of this Section, which obligations are other than obligations
which may be issued under home rule powers provided by Article
VII, Section 6 of the Illinois Constitution or which ad valorem
taxes are other than ad valorem taxes which may be pledged
under home rule powers provided by Article VII, Section 6 of
the Illinois Constitution or which are levied in a special
service area pursuant to "An Act to provide the manner of
levying or imposing taxes for the provision of special services
to areas within the boundaries of home rule units and non-home
rule municipalities and counties", approved September 21,
1973, as now or hereafter amended, the ordinance authorizing
the issuance of those obligations or pledging those taxes shall
be published within 10 days after the ordinance has been
adopted, in one or more newspapers having a general circulation
within the municipality. The publication of the ordinance shall
be accompanied by a notice of (1) the specific number of voters
required to sign a petition requesting the question of the
issuance of the obligations or pledging such ad valorem taxes
to be submitted to the electors; (2) the time within which the
petition must be filed; and (3) the date of the prospective
referendum. The municipal clerk shall provide a petition form
to any individual requesting one.
If no petition is filed with the municipal clerk, as
hereinafter provided in this Section, within 21 days after the

publication of the ordinance, the ordinance shall be in effect.
However, if within that 21 day period a petition is filed with
the municipal clerk, signed by electors numbering not less than
15% of the number of electors voting for the mayor or president
at the last general municipal election, asking that the
question of issuing obligations using full faith and credit of
the municipality as security for the cost of paying for
economic development project costs, or of pledging such ad
valorem taxes for the payment of those obligations, or both, be
submitted to the electors of the municipality, the municipality
shall not be authorized to issue obligations of the
municipality using the full faith and credit of the
municipality as security or pledging such ad valorem taxes for
the payment of those obligations, or both, until the
proposition has been submitted to and approved by a majority of
the voters voting on the proposition at a regularly scheduled
election. The municipality shall certify the proposition to the
proper election authorities for submission in accordance with
the general election law.
The ordinance authorizing the obligations may provide that
the obligations shall contain a recital that they are issued
pursuant to this Act, which recital shall be conclusive
evidence of their validity and of the regularity of their
issuance.
In the event the municipality authorizes issuance of
obligations pursuant to this Act secured by the full faith and

credit of the municipality, the ordinance authorizing the
obligations may provide for the levy and collection of a direct
annual tax upon all taxable property within the municipality
sufficient to pay the principal thereof and interest thereon as
it matures, which levy may be in addition to and exclusive of
the maximum of all other taxes authorized to be levied by the
municipality, which levy, however, shall be abated to the
extent that monies from other sources are available for payment
of the obligations and the municipality certifies the amount of
those monies available to the county clerk.
A certified copy of the ordinance shall be filed with the
county clerk of each county in which any portion of the
municipality is situated, and shall constitute the authority
for the extension and collection of the taxes to be deposited
in the special tax allocation fund.
A municipality may also issue its obligations to refund, in
whole or in part, obligations theretofore issued by the
municipality under the authority of this Act, whether at or
prior to maturity. However, the last maturity of the refunding
obligations shall not be expressed to mature later than 38 23
years from the date of the ordinance establishing the economic
development project area.
In the event a municipality issues obligations under home
rule powers or other legislative authority, the proceeds of
which are pledged to pay for economic development project
costs, the municipality may, if it has followed the procedures

in conformance with this Act, retire those obligations from
funds in the special tax allocation fund in amounts and in such
manner as if those obligations had been issued pursuant to the
provisions of this Act.
No obligations issued pursuant to this Act shall be
regarded as indebtedness of the municipality issuing those
obligations or any other taxing district for the purpose of any
limitation imposed by law.
Obligations issued pursuant to this Act shall not be
subject to the provisions of "An Act to authorize public
corporations to issue bonds, other evidences of indebtedness
and tax anticipation warrants subject to interest rate
limitations set forth therein", approved May 26, 1970, as
amended.
(Source: P.A. 86-38.)
(20 ILCS 620/9) (from Ch. 67 1/2, par. 1009)
Sec. 9. Powers of municipalities. In addition to powers
which it may now have, any municipality has the power under
this Act:
(a) To make and enter into all contracts necessary or
incidental to the implementation and furtherance of an economic
development plan.
(b) Within an economic development project area, to acquire
by purchase, donation, lease or eminent domain, and to own,
convey, lease, mortgage or dispose of land and other real or

personal property or rights or interests therein; and to grant
or acquire licenses, easements and options with respect
thereto, all in the manner and at such price the municipality
determines is reasonably necessary to achieve the objectives of
the economic development project. No conveyance, lease,
mortgage, disposition of land or other property acquired by the
municipality, or agreement relating to the development of
property, shall be made or executed except pursuant to prior
official action of the municipality. No conveyance, lease,
mortgage or other disposition of land, and no agreement
relating to the development of property, shall be made without
making public disclosure of the terms and disposition of all
bids and proposals submitted to the municipality in connection
therewith.
(c) To clear any area within an economic development
project area by demolition or removal of any existing
buildings, structures, fixtures, utilities or improvements,
and to clear and grade land.
(d) To install, repair, construct, reconstruct or relocate
public streets, public utilities, and other public site
improvements within or without an economic development project
area which are essential to the preparation of an economic
development project area for use in accordance with an economic
development plan.
(e) To renovate, rehabilitate, reconstruct, relocate,
repair or remodel any existing buildings, improvements, and

fixtures within an economic development project area.
(f) To construct, acquire, and operate public
improvements, including but not limited to, publicly owned
buildings, structures, works, utilities or fixtures within any
economic development project area, subject to the restrictions
of item (5) of subsection (e) of Section 3 of this Act.
(g) To issue obligations as provided in this Act provided.
(h) To fix, charge and collect fees, rents and charges for
the use of any building, facility or property or any portion
thereof owned or leased by the municipality within an economic
development project area.
(i) To accept grants, guarantees, donations of property or
labor, or any other thing of value for use in connection with
an economic development project.
(j) To pay or cause to be paid economic development project
costs. Any payments to be made by the municipality to
developers or other nongovernmental persons for economic
development project costs incurred by such developer or other
nongovernmental person shall be made only pursuant to the prior
official action of the municipality evidencing an intent to pay
or cause to be paid such economic development project costs. A
municipality is not required to obtain any right, title or
interest in any real or personal property in order to pay
economic development project costs associated with such
property. The municipality shall adopt such accounting
procedures as may be necessary to determine that such economic

development project costs are properly paid.
(k) To exercise any and all other powers necessary to
effectuate the purposes of this Act.
(l) To create a commission of not less than 5 or more than
15 persons to be appointed by the mayor or president of the
municipality with the consent of the majority of the corporate
authorities of the municipality. Members of a commission shall
be appointed for initial terms of 1, 2, 3, 4, and 5 years,
respectively, in such numbers as to provide that the terms of
not more than 1/3 of all such members shall expire in any one
year. Their successors shall be appointed for a term of 5
years. The commission, subject to approval of the corporate
authorities, may exercise the powers enumerated in this
Section. The commission shall also have the power to hold the
public hearings required by this Act and make recommendations
to the corporate authorities concerning the approval of
economic development plans, the establishment of economic
development project areas, and the adoption of tax increment
allocation financing for economic development project areas.
(Source: P.A. 91-357, eff. 7-29-99.)
(20 ILCS 620/11) (from Ch. 67 1/2, par. 1011)
Sec. 11. Payment of project costs; revenues from
governmental municipal property. Revenues received by a taxing
district municipality from any property, building or facility
owned, leased or operated by the taxing district municipality

or any agency or authority established by the taxing district
municipality may be used to pay economic development project
costs, or reduce outstanding obligations of the taxing district
municipality incurred under this Act for economic development
project costs. The taxing district municipality may place those
revenues in the special tax allocation fund which shall be held
by the municipal treasurer of the taxing district or other
person designated by the taxing district municipality. Revenue
received by a taxing district the municipality from the sale or
other disposition of real or personal property or rights or
interests therein acquired by a taxing district the
municipality with the proceeds of obligations funded by tax
increment allocation financing may be used to acquire and
operate other governmental property that is within the economic
development project area or that provides services within the
economic development project area, subject to the restrictions
of item (5) of subsection (e) of Section 3 of this Act. shall
be deposited by the municipality in the special tax allocation
fund.
(Source: P.A. 86-38.)
Section 15-7. The New Markets Development Program Act is
amended by changing Section 50 as follows:
(20 ILCS 663/50)
Sec. 50. Sunset. For fiscal years following fiscal year

2017 2012, qualified equity investments shall not be made under
this Act unless reauthorization is made pursuant to this
Section. For all fiscal years following fiscal year 2017 2012,
unless the General Assembly adopts a joint resolution granting
authority to the Department to approve qualified equity
investments for the Illinois new markets development program
and clearly describing the amount of tax credits available for
the next fiscal year, or otherwise complies with the provisions
of this Section, no qualified equity investments may be
permitted to be made under this Act. The amount of available
tax credits contained in such a resolution shall not exceed the
limitation provided under Section 20. Nothing in this Section
precludes a taxpayer who makes a qualified equity investment
prior to the expiration of authority to make qualified equity
investments from claiming tax credits relating to that
qualified equity investment for each applicable credit
allowance date.
(Source: P.A. 95-1024, eff. 12-31-08.)
Section 15-10. The Illinois Income Tax Act is amended by
changing Sections 201, 207, 250, 304, 804, and 1501 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
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, and ending
prior to January 1, 2011, an amount equal to 3% of the
taxpayer's net income for the taxable year.
(4) In the case of an individual, trust, or estate, for
taxable years beginning prior to January 1, 2011, and
ending after December 31, 2010, an amount equal to the sum

of (i) 3% of the taxpayer's net income for the period prior
to January 1, 2011, as calculated under Section 202.5, and
(ii) 5% of the taxpayer's net income for the period after
December 31, 2010, as calculated under Section 202.5.
(5) In the case of an individual, trust, or estate, for
taxable years beginning on or after January 1, 2011, and
ending prior to January 1, 2015, an amount equal to 5% of
the taxpayer's net income for the taxable year.
(5.1) In the case of an individual, trust, or estate,
for taxable years beginning prior to January 1, 2015, and
ending after December 31, 2014, an amount equal to the sum
of (i) 5% of the taxpayer's net income for the period prior
to January 1, 2015, as calculated under Section 202.5, and
(ii) 3.75% of the taxpayer's net income for the period
after December 31, 2014, as calculated under Section 202.5.
(5.2) In the case of an individual, trust, or estate,
for taxable years beginning on or after January 1, 2015,
and ending prior to January 1, 2025, an amount equal to
3.75% of the taxpayer's net income for the taxable year.
(5.3) In the case of an individual, trust, or estate,
for taxable years beginning prior to January 1, 2025, and
ending after December 31, 2024, an amount equal to the sum
of (i) 3.75% of the taxpayer's net income for the period
prior to January 1, 2025, as calculated under Section
202.5, and (ii) 3.25% of the taxpayer's net income for the
period after December 31, 2024, as calculated under Section

202.5.
(5.4) In the case of an individual, trust, or estate,
for taxable years beginning on or after January 1, 2025, an
amount equal to 3.25% of the taxpayer's net income for the
taxable year.
(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, and ending prior to January
1, 2011, an amount equal to 4.8% of the taxpayer's net
income for the taxable year.
(9) In the case of a corporation, for taxable years
beginning prior to January 1, 2011, and ending after
December 31, 2010, an amount equal to the sum of (i) 4.8%
of the taxpayer's net income for the period prior to
January 1, 2011, as calculated under Section 202.5, and
(ii) 7% of the taxpayer's net income for the period after
December 31, 2010, as calculated under Section 202.5.

(10) In the case of a corporation, for taxable years
beginning on or after January 1, 2011, and ending prior to
January 1, 2015, an amount equal to 7% of the taxpayer's
net income for the taxable year.
(11) In the case of a corporation, for taxable years
beginning prior to January 1, 2015, and ending after
December 31, 2014, an amount equal to the sum of (i) 7% of
the taxpayer's net income for the period prior to January
1, 2015, as calculated under Section 202.5, and (ii) 5.25%
of the taxpayer's net income for the period after December
31, 2014, as calculated under Section 202.5.
(12) In the case of a corporation, for taxable years
beginning on or after January 1, 2015, and ending prior to
January 1, 2025, an amount equal to 5.25% of the taxpayer's
net income for the taxable year.
(13) In the case of a corporation, for taxable years
beginning prior to January 1, 2025, and ending after
December 31, 2024, an amount equal to the sum of (i) 5.25%
of the taxpayer's net income for the period prior to
January 1, 2025, as calculated under Section 202.5, and
(ii) 4.8% of the taxpayer's net income for the period after
December 31, 2024, as calculated under Section 202.5.
(14) In the case of a corporation, for taxable years
beginning on or after January 1, 2025, an amount equal to
4.8% of the taxpayer's net income for the taxable year.
The rates under this subsection (b) are subject to the

provisions of Section 201.5.
(c) Personal Property Tax Replacement Income Tax.
Beginning on July 1, 1979 and thereafter, in addition to such
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
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
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%
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
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
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
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 for use or consumption and not for resale, or
services rendered in conjunction with the sale of tangible
personal property for use or consumption and not for
resale. For purposes of this subsection (e), "tangible
personal property" has the same meaning as when that term
is used in the Retailers' Occupation Tax Act, and, for
taxable years ending after December 31, 2008, does not
include the generation, transmission, or distribution of

electricity.
(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
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, 2018 2013, except for costs
incurred pursuant to a binding contract entered into on or
before December 31, 2018 2013.
(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
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.
(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
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
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
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
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
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
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
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.
(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
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).
(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
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
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, and ending prior to January 1, 2016
January 1, 2011, 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
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, and no credit may be
carried forward to any taxable year ending on or after January
1, 2011.
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
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
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
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
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
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"
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
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).
(iii) For purposes of this Section, the term "site"
shall have the same meaning as under Section 58.2 of the
Environmental Protection Act.
(Source: P.A. 96-115, eff. 7-31-09; 96-116, eff. 7-31-09;
96-937, eff. 6-23-10; 96-1000, eff. 7-2-10; 96-1496, eff.
1-13-11; 97-2, eff. 5-6-11.)
(35 ILCS 5/207) (from Ch. 120, par. 2-207)
Sec. 207. Net Losses.
(a) If after applying all of the (i) modifications provided
for in paragraph (2) of Section 203(b), paragraph (2) of
Section 203(c) and paragraph (2) of Section 203(d) and (ii) the
allocation and apportionment provisions of Article 3 of this

Act and subsection (c) of this Section, the taxpayer's net
income results in a loss;
(1) for any taxable year ending prior to December 31,
1999, such loss shall be allowed as a carryover or
carryback deduction in the manner allowed under Section 172
of the Internal Revenue Code;
(2) for any taxable year ending on or after December
31, 1999 and prior to December 31, 2003, such loss shall be
allowed as a carryback to each of the 2 taxable years
preceding the taxable year of such loss and shall be a net
operating loss carryover to each of the 20 taxable years
following the taxable year of such loss; and
(3) for any taxable year ending on or after December
31, 2003, such loss shall be allowed as a net operating
loss carryover to each of the 12 taxable years following
the taxable year of such loss, except as provided in
subsection (d).
(a-5) Election to relinquish carryback and order of
application of losses.
(A) For losses incurred in tax years ending prior
to December 31, 2003, the taxpayer may elect to
relinquish the entire carryback period with respect to
such loss. Such election shall be made in the form and
manner prescribed by the Department and shall be made
by the due date (including extensions of time) for
filing the taxpayer's return for the taxable year in

which such loss is incurred, and such election, once
made, shall be irrevocable.
(B) The entire amount of such loss shall be carried
to the earliest taxable year to which such loss may be
carried. The amount of such loss which shall be carried
to each of the other taxable years shall be the excess,
if any, of the amount of such loss over the sum of the
deductions for carryback or carryover of such loss
allowable for each of the prior taxable years to which
such loss may be carried.
(b) Any loss determined under subsection (a) of this
Section must be carried back or carried forward in the same
manner for purposes of subsections (a) and (b) of Section 201
of this Act as for purposes of subsections (c) and (d) of
Section 201 of this Act.
(c) Notwithstanding any other provision of this Act, for
each taxable year ending on or after December 31, 2008, for
purposes of computing the loss for the taxable year under
subsection (a) of this Section and the deduction taken into
account for the taxable year for a net operating loss carryover
under paragraphs (1), (2), and (3) of subsection (a) of this
Section, the loss and net operating loss carryover shall be
reduced in an amount equal to the reduction to the net
operating loss and net operating loss carryover to the taxable
year, respectively, required under Section 108(b)(2)(A) of the
Internal Revenue Code, multiplied by a fraction, the numerator

of which is the amount of discharge of indebtedness income that
is excluded from gross income for the taxable year (but only if
the taxable year ends on or after December 31, 2008) under
Section 108(a) of the Internal Revenue Code and that would have
been allocated and apportioned to this State under Article 3 of
this Act but for that exclusion, and the denominator of which
is the total amount of discharge of indebtedness income
excluded from gross income under Section 108(a) of the Internal
Revenue Code for the taxable year. The reduction required under
this subsection (c) shall be made after the determination of
Illinois net income for the taxable year in which the
indebtedness is discharged.
(d) In the case of a corporation (other than a Subchapter S
corporation), no carryover deduction shall be allowed under
this Section for any taxable year ending after December 31,
2010 and prior to December 31, 2012, and no carryover deduction
shall exceed $100,000 for any taxable year ending on or after
December 31, 2012 and prior to December 31, 2014; provided
that, for purposes of determining the taxable years to which a
net loss may be carried under subsection (a) of this Section,
no taxable year for which a deduction is disallowed under this
subsection, or for which the deduction would exceed $100,000 if
not for this subsection, shall be counted.
(e) In the case of a residual interest holder in a real
estate mortgage investment conduit subject to Section 860E of
the Internal Revenue Code, the net loss in subsection (a) shall

be equal to:
(1) the amount computed under subsection (a), without
regard to this subsection (e), or if that amount is
positive, zero;
(2) minus an amount equal to the amount computed under
subsection (a), without regard to this subsection (e),
minus the amount that would be computed under subsection
(a) if the taxpayer's federal taxable income were computed
without regard to Section 860E of the Internal Revenue Code
and without regard to this subsection (e).
The modification in this subsection (e) is exempt from the
provisions of Section 250.
(Source: P.A. 96-1496, eff. 1-13-11; 97-507, eff. 8-23-11.)
(35 ILCS 5/250)
Sec. 250. Sunset of exemptions, credits, and deductions.
(a) The application of every exemption, credit, and
deduction against tax imposed by this Act that becomes law
after the effective date of this amendatory Act of 1994 shall
be limited by a reasonable and appropriate sunset date. A
taxpayer is not entitled to take the exemption, credit, or
deduction for tax years beginning on or after the sunset date.
Except as provided in subsection (b) of this Section, if If a
reasonable and appropriate sunset date is not specified in the
Public Act that creates the exemption, credit, or deduction, a
taxpayer shall not be entitled to take the exemption, credit,

or deduction for tax years beginning on or after 5 years after
the effective date of the Public Act creating the exemption,
credit, or deduction and thereafter; provided, however, that in
the case of any Public Act authorizing the issuance of
tax-exempt obligations that does not specify a sunset date for
the exemption or deduction of income derived from the
obligations, the exemption or deduction shall not terminate
until after the obligations have been paid by the issuer.
(b) Notwithstanding the provisions of subsection (a) of
this Section, the sunset date of any exemption, credit, or
deduction that is scheduled to expire in 2011, 2012, or 2013 by
operation of this Section shall be extended by 5 years.
(Source: P.A. 88-660, eff. 9-16-94; 89-460, eff. 5-24-96.)
(35 ILCS 5/304) (from Ch. 120, par. 3-304)
Sec. 304. Business income of persons other than residents.
(a) In general. The business income of a person other than
a resident shall be allocated to this State if such person's
business income is derived solely from this State. If a person
other than a resident derives business income from this State
and one or more other states, then, for tax years ending on or
before December 30, 1998, and except as otherwise provided by
this Section, such person's business income shall be
apportioned to this State by multiplying the income by a
fraction, the numerator of which is the sum of the property
factor (if any), the payroll factor (if any) and 200% of the

sales factor (if any), and the denominator of which is 4
reduced by the number of factors other than the sales factor
which have a denominator of zero and by an additional 2 if the
sales factor has a denominator of zero. For tax years ending on
or after December 31, 1998, and except as otherwise provided by
this Section, persons other than residents who derive business
income from this State and one or more other states shall
compute their apportionment factor by weighting their
property, payroll, and sales factors as provided in subsection
(h) of this Section.
(1) Property factor.
(A) The property factor is a fraction, the numerator of
which is the average value of the person's real and
tangible personal property owned or rented and used in the
trade or business in this State during the taxable year and
the denominator of which is the average value of all the
person's real and tangible personal property owned or
rented and used in the trade or business during the taxable
year.
(B) Property owned by the person is valued at its
original cost. Property rented by the person is valued at 8
times the net annual rental rate. Net annual rental rate is
the annual rental rate paid by the person less any annual
rental rate received by the person from sub-rentals.
(C) The average value of property shall be determined
by averaging the values at the beginning and ending of the

taxable year but the Director may require the averaging of
monthly values during the taxable year if reasonably
required to reflect properly the average value of the
person's property.
(2) Payroll factor.
(A) The payroll factor is a fraction, the numerator of
which is the total amount paid in this State during the
taxable year by the person for compensation, and the
denominator of which is the total compensation paid
everywhere during the taxable year.
(B) Compensation is paid in this State if:
(i) The individual's service is performed entirely
within this State;
(ii) The individual's service is performed both
within and without this State, but the service
performed without this State is incidental to the
individual's service performed within this State; or
(iii) Some of the service is performed within this
State and either the base of operations, or if there is
no base of operations, the place from which the service
is directed or controlled is within this State, or the
base of operations or the place from which the service
is directed or controlled is not in any state in which
some part of the service is performed, but the
individual's residence is in this State.
(iv) Compensation paid to nonresident professional

athletes.
(a) General. The Illinois source income of a
nonresident individual who is a member of a
professional athletic team includes the portion of the
individual's total compensation for services performed
as a member of a professional athletic team during the
taxable year which the number of duty days spent within
this State performing services for the team in any
manner during the taxable year bears to the total
number of duty days spent both within and without this
State during the taxable year.
(b) Travel days. Travel days that do not involve
either a game, practice, team meeting, or other similar
team event are not considered duty days spent in this
State. However, such travel days are considered in the
total duty days spent both within and without this
State.
(c) Definitions. For purposes of this subpart
(iv):
(1) The term "professional athletic team"
includes, but is not limited to, any professional
baseball, basketball, football, soccer, or hockey
team.
(2) The term "member of a professional
athletic team" includes those employees who are
active players, players on the disabled list, and

any other persons required to travel and who travel
with and perform services on behalf of a
professional athletic team on a regular basis.
This includes, but is not limited to, coaches,
managers, and trainers.
(3) Except as provided in items (C) and (D) of
this subpart (3), the term "duty days" means all
days during the taxable year from the beginning of
the professional athletic team's official
pre-season training period through the last game
in which the team competes or is scheduled to
compete. Duty days shall be counted for the year in
which they occur, including where a team's
official pre-season training period through the
last game in which the team competes or is
scheduled to compete, occurs during more than one
tax year.
(A) Duty days shall also include days on
which a member of a professional athletic team
performs service for a team on a date that does
not fall within the foregoing period (e.g.,
participation in instructional leagues, the
"All Star Game", or promotional "caravans").
Performing a service for a professional
athletic team includes conducting training and
rehabilitation activities, when such

activities are conducted at team facilities.
(B) Also included in duty days are game
days, practice days, days spent at team
meetings, promotional caravans, preseason
training camps, and days served with the team
through all post-season games in which the team
competes or is scheduled to compete.
(C) Duty days for any person who joins a
team during the period from the beginning of
the professional athletic team's official
pre-season training period through the last
game in which the team competes, or is
scheduled to compete, shall begin on the day
that person joins the team. Conversely, duty
days for any person who leaves a team during
this period shall end on the day that person
leaves the team. Where a person switches teams
during a taxable year, a separate duty-day
calculation shall be made for the period the
person was with each team.
(D) Days for which a member of a
professional athletic team is not compensated
and is not performing services for the team in
any manner, including days when such member of
a professional athletic team has been
suspended without pay and prohibited from

performing any services for the team, shall not
be treated as duty days.
(E) Days for which a member of a
professional athletic team is on the disabled
list and does not conduct rehabilitation
activities at facilities of the team, and is
not otherwise performing services for the team
in Illinois, shall not be considered duty days
spent in this State. All days on the disabled
list, however, are considered to be included in
total duty days spent both within and without
this State.
(4) The term "total compensation for services
performed as a member of a professional athletic
team" means the total compensation received during
the taxable year for services performed:
(A) from the beginning of the official
pre-season training period through the last
game in which the team competes or is scheduled
to compete during that taxable year; and
(B) during the taxable year on a date which
does not fall within the foregoing period
(e.g., participation in instructional leagues,
the "All Star Game", or promotional caravans).
This compensation shall include, but is not
limited to, salaries, wages, bonuses as described

in this subpart, and any other type of compensation
paid during the taxable year to a member of a
professional athletic team for services performed
in that year. This compensation does not include
strike benefits, severance pay, termination pay,
contract or option year buy-out payments,
expansion or relocation payments, or any other
payments not related to services performed for the
team.
For purposes of this subparagraph, "bonuses"
included in "total compensation for services
performed as a member of a professional athletic
team" subject to the allocation described in
Section 302(c)(1) are: bonuses earned as a result
of play (i.e., performance bonuses) during the
season, including bonuses paid for championship,
playoff or "bowl" games played by a team, or for
selection to all-star league or other honorary
positions; and bonuses paid for signing a
contract, unless the payment of the signing bonus
is not conditional upon the signee playing any
games for the team or performing any subsequent
services for the team or even making the team, the
signing bonus is payable separately from the
salary and any other compensation, and the signing
bonus is nonrefundable.

(3) Sales factor.
(A) The sales factor is a fraction, the numerator of
which is the total sales of the person in this State during
the taxable year, and the denominator of which is the total
sales of the person everywhere during the taxable year.
(B) Sales of tangible personal property are in this
State if:
(i) The property is delivered or shipped to a
purchaser, other than the United States government,
within this State regardless of the f. o. b. point or
other conditions of the sale; or
(ii) The property is shipped from an office, store,
warehouse, factory or other place of storage in this
State and either the purchaser is the United States
government or the person is not taxable in the state of
the purchaser; provided, however, that premises owned
or leased by a person who has independently contracted
with the seller for the printing of newspapers,
periodicals or books shall not be deemed to be an
office, store, warehouse, factory or other place of
storage for purposes of this Section. Sales of tangible
personal property are not in this State if the seller
and purchaser would be members of the same unitary
business group but for the fact that either the seller
or purchaser is a person with 80% or more of total
business activity outside of the United States and the

property is purchased for resale.
(B-1) Patents, copyrights, trademarks, and similar
items of intangible personal property.
(i) Gross receipts from the licensing, sale, or
other disposition of a patent, copyright, trademark,
or similar item of intangible personal property, other
than gross receipts governed by paragraph (B-7) of this
item (3), are in this State to the extent the item is
utilized in this State during the year the gross
receipts are included in gross income.
(ii) Place of utilization.
(I) A patent is utilized in a state to the
extent that it is employed in production,
fabrication, manufacturing, or other processing in
the state or to the extent that a patented product
is produced in the state. If a patent is utilized
in more than one state, the extent to which it is
utilized in any one state shall be a fraction equal
to the gross receipts of the licensee or purchaser
from sales or leases of items produced,
fabricated, manufactured, or processed within that
state using the patent and of patented items
produced within that state, divided by the total of
such gross receipts for all states in which the
patent is utilized.
(II) A copyright is utilized in a state to the

extent that printing or other publication
originates in the state. If a copyright is utilized
in more than one state, the extent to which it is
utilized in any one state shall be a fraction equal
to the gross receipts from sales or licenses of
materials printed or published in that state
divided by the total of such gross receipts for all
states in which the copyright is utilized.
(III) Trademarks and other items of intangible
personal property governed by this paragraph (B-1)
are utilized in the state in which the commercial
domicile of the licensee or purchaser is located.
(iii) If the state of utilization of an item of
property governed by this paragraph (B-1) cannot be
determined from the taxpayer's books and records or
from the books and records of any person related to the
taxpayer within the meaning of Section 267(b) of the
Internal Revenue Code, 26 U.S.C. 267, the gross
receipts attributable to that item shall be excluded
from both the numerator and the denominator of the
sales factor.
(B-2) Gross receipts from the license, sale, or other
disposition of patents, copyrights, trademarks, and
similar items of intangible personal property, other than
gross receipts governed by paragraph (B-7) of this item
(3), may be included in the numerator or denominator of the

sales factor only if gross receipts from licenses, sales,
or other disposition of such items comprise more than 50%
of the taxpayer's total gross receipts included in gross
income during the tax year and during each of the 2
immediately preceding tax years; provided that, when a
taxpayer is a member of a unitary business group, such
determination shall be made on the basis of the gross
receipts of the entire unitary business group.
(B-5) For taxable years ending on or after December 31,
2008, except as provided in subsections (ii) through (vii),
receipts from the sale of telecommunications service or
mobile telecommunications service are in this State if the
customer's service address is in this State.
(i) For purposes of this subparagraph (B-5), the
following terms have the following meanings:
"Ancillary services" means services that are
associated with or incidental to the provision of
"telecommunications services", including but not
limited to "detailed telecommunications billing",
"directory assistance", "vertical service", and "voice
mail services".
"Air-to-Ground Radiotelephone service" means a
radio service, as that term is defined in 47 CFR 22.99,
in which common carriers are authorized to offer and
provide radio telecommunications service for hire to
subscribers in aircraft.

"Call-by-call Basis" means any method of charging
for telecommunications services where the price is
measured by individual calls.
"Communications Channel" means a physical or
virtual path of communications over which signals are
transmitted between or among customer channel
termination points.
"Conference bridging service" means an "ancillary
service" that links two or more participants of an
audio or video conference call and may include the
provision of a telephone number. "Conference bridging
service" does not include the "telecommunications
services" used to reach the conference bridge.
"Customer Channel Termination Point" means the
location where the customer either inputs or receives
the communications.
"Detailed telecommunications billing service"
means an "ancillary service" of separately stating
information pertaining to individual calls on a
customer's billing statement.
"Directory assistance" means an "ancillary
service" of providing telephone number information,
and/or address information.
"Home service provider" means the facilities based
carrier or reseller with which the customer contracts
for the provision of mobile telecommunications

services.
"Mobile telecommunications service" means
commercial mobile radio service, as defined in Section
20.3 of Title 47 of the Code of Federal Regulations as
in effect on June 1, 1999.
"Place of primary use" means the street address
representative of where the customer's use of the
telecommunications service primarily occurs, which
must be the residential street address or the primary
business street address of the customer. In the case of
mobile telecommunications services, "place of primary
use" must be within the licensed service area of the
home service provider.
"Post-paid telecommunication service" means the
telecommunications service obtained by making a
payment on a call-by-call basis either through the use
of a credit card or payment mechanism such as a bank
card, travel card, credit card, or debit card, or by
charge made to a telephone number which is not
associated with the origination or termination of the
telecommunications service. A post-paid calling
service includes telecommunications service, except a
prepaid wireless calling service, that would be a
prepaid calling service except it is not exclusively a
telecommunication service.
"Prepaid telecommunication service" means the

right to access exclusively telecommunications
services, which must be paid for in advance and which
enables the origination of calls using an access number
or authorization code, whether manually or
electronically dialed, and that is sold in
predetermined units or dollars of which the number
declines with use in a known amount.
"Prepaid Mobile telecommunication service" means a
telecommunications service that provides the right to
utilize mobile wireless service as well as other
non-telecommunication services, including but not
limited to ancillary services, which must be paid for
in advance that is sold in predetermined units or
dollars of which the number declines with use in a
known amount.
"Private communication service" means a
telecommunication service that entitles the customer
to exclusive or priority use of a communications
channel or group of channels between or among
termination points, regardless of the manner in which
such channel or channels are connected, and includes
switching capacity, extension lines, stations, and any
other associated services that are provided in
connection with the use of such channel or channels.
"Service address" means:
(a) The location of the telecommunications

equipment to which a customer's call is charged and
from which the call originates or terminates,
regardless of where the call is billed or paid;
(b) If the location in line (a) is not known,
service address means the origination point of the
signal of the telecommunications services first
identified by either the seller's
telecommunications system or in information
received by the seller from its service provider
where the system used to transport such signals is
not that of the seller; and
(c) If the locations in line (a) and line (b)
are not known, the service address means the
location of the customer's place of primary use.
"Telecommunications service" means the electronic
transmission, conveyance, or routing of voice, data,
audio, video, or any other information or signals to a
point, or between or among points. The term
"telecommunications service" includes such
transmission, conveyance, or routing in which computer
processing applications are used to act on the form,
code or protocol of the content for purposes of
transmission, conveyance or routing without regard to
whether such service is referred to as voice over
Internet protocol services or is classified by the
Federal Communications Commission as enhanced or value

added. "Telecommunications service" does not include:
(a) Data processing and information services
that allow data to be generated, acquired, stored,
processed, or retrieved and delivered by an
electronic transmission to a purchaser when such
purchaser's primary purpose for the underlying
transaction is the processed data or information;
(b) Installation or maintenance of wiring or
equipment on a customer's premises;
(c) Tangible personal property;
(d) Advertising, including but not limited to
directory advertising.
(e) Billing and collection services provided
to third parties;
(f) Internet access service;
(g) Radio and television audio and video
programming services, regardless of the medium,
including the furnishing of transmission,
conveyance and routing of such services by the
programming service provider. Radio and television
audio and video programming services shall include
but not be limited to cable service as defined in
47 USC 522(6) and audio and video programming
services delivered by commercial mobile radio
service providers, as defined in 47 CFR 20.3;
(h) "Ancillary services"; or

(i) Digital products "delivered
electronically", including but not limited to
software, music, video, reading materials or ring
tones.
"Vertical service" means an "ancillary service"
that is offered in connection with one or more
"telecommunications services", which offers advanced
calling features that allow customers to identify
callers and to manage multiple calls and call
connections, including "conference bridging services".
"Voice mail service" means an "ancillary service"
that enables the customer to store, send or receive
recorded messages. "Voice mail service" does not
include any "vertical services" that the customer may
be required to have in order to utilize the "voice mail
service".
(ii) Receipts from the sale of telecommunications
service sold on an individual call-by-call basis are in
this State if either of the following applies:
(a) The call both originates and terminates in
this State.
(b) The call either originates or terminates
in this State and the service address is located in
this State.
(iii) Receipts from the sale of postpaid
telecommunications service at retail are in this State

if the origination point of the telecommunication
signal, as first identified by the service provider's
telecommunication system or as identified by
information received by the seller from its service
provider if the system used to transport
telecommunication signals is not the seller's, is
located in this State.
(iv) Receipts from the sale of prepaid
telecommunications service or prepaid mobile
telecommunications service at retail are in this State
if the purchaser obtains the prepaid card or similar
means of conveyance at a location in this State.
Receipts from recharging a prepaid telecommunications
service or mobile telecommunications service is in
this State if the purchaser's billing information
indicates a location in this State.
(v) Receipts from the sale of private
communication services are in this State as follows:
(a) 100% of receipts from charges imposed at
each channel termination point in this State.
(b) 100% of receipts from charges for the total
channel mileage between each channel termination
point in this State.
(c) 50% of the total receipts from charges for
service segments when those segments are between 2
customer channel termination points, 1 of which is

located in this State and the other is located
outside of this State, which segments are
separately charged.
(d) The receipts from charges for service
segments with a channel termination point located
in this State and in two or more other states, and
which segments are not separately billed, are in
this State based on a percentage determined by
dividing the number of customer channel
termination points in this State by the total
number of customer channel termination points.
(vi) Receipts from charges for ancillary services
for telecommunications service sold to customers at
retail are in this State if the customer's primary
place of use of telecommunications services associated
with those ancillary services is in this State. If the
seller of those ancillary services cannot determine
where the associated telecommunications are located,
then the ancillary services shall be based on the
location of the purchaser.
(vii) Receipts to access a carrier's network or
from the sale of telecommunication services or
ancillary services for resale are in this State as
follows:
(a) 100% of the receipts from access fees
attributable to intrastate telecommunications

service that both originates and terminates in
this State.
(b) 50% of the receipts from access fees
attributable to interstate telecommunications
service if the interstate call either originates
or terminates in this State.
(c) 100% of the receipts from interstate end
user access line charges, if the customer's
service address is in this State. As used in this
subdivision, "interstate end user access line
charges" includes, but is not limited to, the
surcharge approved by the federal communications
commission and levied pursuant to 47 CFR 69.
(d) Gross receipts from sales of
telecommunication services or from ancillary
services for telecommunications services sold to
other telecommunication service providers for
resale shall be sourced to this State using the
apportionment concepts used for non-resale
receipts of telecommunications services if the
information is readily available to make that
determination. If the information is not readily
available, then the taxpayer may use any other
reasonable and consistent method.
(B-7) For taxable years ending on or after December 31,
2008, receipts from the sale of broadcasting services are

in this State if the broadcasting services are received in
this State. For purposes of this paragraph (B-7), the
following terms have the following meanings:
"Advertising revenue" means consideration received
by the taxpayer in exchange for broadcasting services
or allowing the broadcasting of commercials or
announcements in connection with the broadcasting of
film or radio programming, from sponsorships of the
programming, or from product placements in the
programming.
"Audience factor" means the ratio that the
audience or subscribers located in this State of a
station, a network, or a cable system bears to the
total audience or total subscribers for that station,
network, or cable system. The audience factor for film
or radio programming shall be determined by reference
to the books and records of the taxpayer or by
reference to published rating statistics provided the
method used by the taxpayer is consistently used from
year to year for this purpose and fairly represents the
taxpayer's activity in this State.
"Broadcast" or "broadcasting" or "broadcasting
services" means the transmission or provision of film
or radio programming, whether through the public
airwaves, by cable, by direct or indirect satellite
transmission, or by any other means of communication,

either through a station, a network, or a cable system.
"Film" or "film programming" means the broadcast
on television of any and all performances, events, or
productions, including but not limited to news,
sporting events, plays, stories, or other literary,
commercial, educational, or artistic works, either
live or through the use of video tape, disc, or any
other type of format or medium. Each episode of a
series of films produced for television shall
constitute separate "film" notwithstanding that the
series relates to the same principal subject and is
produced during one or more tax periods.
"Radio" or "radio programming" means the broadcast
on radio of any and all performances, events, or
productions, including but not limited to news,
sporting events, plays, stories, or other literary,
commercial, educational, or artistic works, either
live or through the use of an audio tape, disc, or any
other format or medium. Each episode in a series of
radio programming produced for radio broadcast shall
constitute a separate "radio programming"
notwithstanding that the series relates to the same
principal subject and is produced during one or more
tax periods.
(i) In the case of advertising revenue from
broadcasting, the customer is the advertiser and

the service is received in this State if the
commercial domicile of the advertiser is in this
State.
(ii) In the case where film or radio
programming is broadcast by a station, a network,
or a cable system for a fee or other remuneration
received from the recipient of the broadcast, the
portion of the service that is received in this
State is measured by the portion of the recipients
of the broadcast located in this State.
Accordingly, the fee or other remuneration for
such service that is included in the Illinois
numerator of the sales factor is the total of those
fees or other remuneration received from
recipients in Illinois. For purposes of this
paragraph, a taxpayer may determine the location
of the recipients of its broadcast using the
address of the recipient shown in its contracts
with the recipient or using the billing address of
the recipient in the taxpayer's records.
(iii) In the case where film or radio
programming is broadcast by a station, a network,
or a cable system for a fee or other remuneration
from the person providing the programming, the
portion of the broadcast service that is received
by such station, network, or cable system in this

State is measured by the portion of recipients of
the broadcast located in this State. Accordingly,
the amount of revenue related to such an
arrangement that is included in the Illinois
numerator of the sales factor is the total fee or
other total remuneration from the person providing
the programming related to that broadcast
multiplied by the Illinois audience factor for
that broadcast.
(iv) In the case where film or radio
programming is provided by a taxpayer that is a
network or station to a customer for broadcast in
exchange for a fee or other remuneration from that
customer the broadcasting service is received at
the location of the office of the customer from
which the services were ordered in the regular
course of the customer's trade or business.
Accordingly, in such a case the revenue derived by
the taxpayer that is included in the taxpayer's
Illinois numerator of the sales factor is the
revenue from such customers who receive the
broadcasting service in Illinois.
(v) In the case where film or radio programming
is provided by a taxpayer that is not a network or
station to another person for broadcasting in
exchange for a fee or other remuneration from that

person, the broadcasting service is received at
the location of the office of the customer from
which the services were ordered in the regular
course of the customer's trade or business.
Accordingly, in such a case the revenue derived by
the taxpayer that is included in the taxpayer's
Illinois numerator of the sales factor is the
revenue from such customers who receive the
broadcasting service in Illinois.
(C) For taxable years ending before December 31, 2008,
sales, other than sales governed by paragraphs (B), (B-1),
and (B-2), are in this State if:
(i) The income-producing activity is performed in
this State; or
(ii) The income-producing activity is performed
both within and without this State and a greater
proportion of the income-producing activity is
performed within this State than without this State,
based on performance costs.
(C-5) For taxable years ending on or after December 31,
2008, sales, other than sales governed by paragraphs (B),
(B-1), (B-2), (B-5), and (B-7), are in this State if any of
the following criteria are met:
(i) Sales from the sale or lease of real property
are in this State if the property is located in this
State.

(ii) Sales from the lease or rental of tangible
personal property are in this State if the property is
located in this State during the rental period. Sales
from the lease or rental of tangible personal property
that is characteristically moving property, including,
but not limited to, motor vehicles, rolling stock,
aircraft, vessels, or mobile equipment are in this
State to the extent that the property is used in this
State.
(iii) In the case of interest, net gains (but not
less than zero) and other items of income from
intangible personal property, the sale is in this State
if:
(a) in the case of a taxpayer who is a dealer
in the item of intangible personal property within
the meaning of Section 475 of the Internal Revenue
Code, the income or gain is received from a
customer in this State. For purposes of this
subparagraph, a customer is in this State if the
customer is an individual, trust or estate who is a
resident of this State and, for all other
customers, if the customer's commercial domicile
is in this State. Unless the dealer has actual
knowledge of the residence or commercial domicile
of a customer during a taxable year, the customer
shall be deemed to be a customer in this State if

the billing address of the customer, as shown in
the records of the dealer, is in this State; or
(b) in all other cases, if the
income-producing activity of the taxpayer is
performed in this State or, if the
income-producing activity of the taxpayer is
performed both within and without this State, if a
greater proportion of the income-producing
activity of the taxpayer is performed within this
State than in any other state, based on performance
costs.
(iv) Sales of services are in this State if the
services are received in this State. For the purposes
of this section, gross receipts from the performance of
services provided to a corporation, partnership, or
trust may only be attributed to a state where that
corporation, partnership, or trust has a fixed place of
business. If the state where the services are received
is not readily determinable or is a state where the
corporation, partnership, or trust receiving the
service does not have a fixed place of business, the
services shall be deemed to be received at the location
of the office of the customer from which the services
were ordered in the regular course of the customer's
trade or business. If the ordering office cannot be
determined, the services shall be deemed to be received

at the office of the customer to which the services are
billed. If the taxpayer is not taxable in the state in
which the services are received, the sale must be
excluded from both the numerator and the denominator of
the sales factor. The Department shall adopt rules
prescribing where specific types of service are
received, including, but not limited to, publishing,
and utility service.
(D) For taxable years ending on or after December 31,
1995, the following items of income shall not be included
in the numerator or denominator of the sales factor:
dividends; amounts included under Section 78 of the
Internal Revenue Code; and Subpart F income as defined in
Section 952 of the Internal Revenue Code. No inference
shall be drawn from the enactment of this paragraph (D) in
construing this Section for taxable years ending before
December 31, 1995.
(E) Paragraphs (B-1) and (B-2) shall apply to tax years
ending on or after December 31, 1999, provided that a
taxpayer may elect to apply the provisions of these
paragraphs to prior tax years. Such election shall be made
in the form and manner prescribed by the Department, shall
be irrevocable, and shall apply to all tax years; provided
that, if a taxpayer's Illinois income tax liability for any
tax year, as assessed under Section 903 prior to January 1,
1999, was computed in a manner contrary to the provisions

of paragraphs (B-1) or (B-2), no refund shall be payable to
the taxpayer for that tax year to the extent such refund is
the result of applying the provisions of paragraph (B-1) or
(B-2) retroactively. In the case of a unitary business
group, such election shall apply to all members of such
group for every tax year such group is in existence, but
shall not apply to any taxpayer for any period during which
that taxpayer is not a member of such group.
(b) Insurance companies.
(1) In general. Except as otherwise provided by
paragraph (2), business income of an insurance company for
a taxable year shall be apportioned to this State by
multiplying such income by a fraction, the numerator of
which is the direct premiums written for insurance upon
property or risk in this State, and the denominator of
which is the direct premiums written for insurance upon
property or risk everywhere. For purposes of this
subsection, the term "direct premiums written" means the
total amount of direct premiums written, assessments and
annuity considerations as reported for the taxable year on
the annual statement filed by the company with the Illinois
Director of Insurance in the form approved by the National
Convention of Insurance Commissioners or such other form as
may be prescribed in lieu thereof.
(2) Reinsurance. If the principal source of premiums
written by an insurance company consists of premiums for

reinsurance accepted by it, the business income of such
company shall be apportioned to this State by multiplying
such income by a fraction, the numerator of which is the
sum of (i) direct premiums written for insurance upon
property or risk in this State, plus (ii) premiums written
for reinsurance accepted in respect of property or risk in
this State, and the denominator of which is the sum of
(iii) direct premiums written for insurance upon property
or risk everywhere, plus (iv) premiums written for
reinsurance accepted in respect of property or risk
everywhere. For purposes of this paragraph, premiums
written for reinsurance accepted in respect of property or
risk in this State, whether or not otherwise determinable,
may, at the election of the company, be determined on the
basis of the proportion which premiums written for
reinsurance accepted from companies commercially domiciled
in Illinois bears to premiums written for reinsurance
accepted from all sources, or, alternatively, in the
proportion which the sum of the direct premiums written for
insurance upon property or risk in this State by each
ceding company from which reinsurance is accepted bears to
the sum of the total direct premiums written by each such
ceding company for the taxable year. The election made by a
company under this paragraph for its first taxable year
ending on or after December 31, 2011, shall be binding for
that company for that taxable year and for all subsequent

taxable years, and may be altered only with the written
permission of the Department, which shall not be
unreasonably withheld.
(c) Financial organizations.
(1) In general. For taxable years ending before
December 31, 2008, business income of a financial
organization shall be apportioned to this State by
multiplying such income by a fraction, the numerator of
which is its business income from sources within this
State, and the denominator of which is its business income
from all sources. For the purposes of this subsection, the
business income of a financial organization from sources
within this State is the sum of the amounts referred to in
subparagraphs (A) through (E) following, but excluding the
adjusted income of an international banking facility as
determined in paragraph (2):
(A) Fees, commissions or other compensation for
financial services rendered within this State;
(B) Gross profits from trading in stocks, bonds or
other securities managed within this State;
(C) Dividends, and interest from Illinois
customers, which are received within this State;
(D) Interest charged to customers at places of
business maintained within this State for carrying
debit balances of margin accounts, without deduction
of any costs incurred in carrying such accounts; and

(E) Any other gross income resulting from the
operation as a financial organization within this
State. In computing the amounts referred to in
paragraphs (A) through (E) of this subsection, any
amount received by a member of an affiliated group
(determined under Section 1504(a) of the Internal
Revenue Code but without reference to whether any such
corporation is an "includible corporation" under
Section 1504(b) of the Internal Revenue Code) from
another member of such group shall be included only to
the extent such amount exceeds expenses of the
recipient directly related thereto.
(2) International Banking Facility. For taxable years
ending before December 31, 2008:
(A) Adjusted Income. The adjusted income of an
international banking facility is its income reduced
by the amount of the floor amount.
(B) Floor Amount. The floor amount shall be the
amount, if any, determined by multiplying the income of
the international banking facility by a fraction, not
greater than one, which is determined as follows:
(i) The numerator shall be:
The average aggregate, determined on a
quarterly basis, of the financial organization's
loans to banks in foreign countries, to foreign
domiciled borrowers (except where secured

primarily by real estate) and to foreign
governments and other foreign official
institutions, as reported for its branches,
agencies and offices within the state on its
"Consolidated Report of Condition", Schedule A,
Lines 2.c., 5.b., and 7.a., which was filed with
the Federal Deposit Insurance Corporation and
other regulatory authorities, for the year 1980,
minus
The average aggregate, determined on a
quarterly basis, of such loans (other than loans of
an international banking facility), as reported by
the financial institution for its branches,
agencies and offices within the state, on the
corresponding Schedule and lines of the
Consolidated Report of Condition for the current
taxable year, provided, however, that in no case
shall the amount determined in this clause (the
subtrahend) exceed the amount determined in the
preceding clause (the minuend); and
(ii) the denominator shall be the average
aggregate, determined on a quarterly basis, of the
international banking facility's loans to banks in
foreign countries, to foreign domiciled borrowers
(except where secured primarily by real estate)
and to foreign governments and other foreign

official institutions, which were recorded in its
financial accounts for the current taxable year.
(C) Change to Consolidated Report of Condition and
in Qualification. In the event the Consolidated Report
of Condition which is filed with the Federal Deposit
Insurance Corporation and other regulatory authorities
is altered so that the information required for
determining the floor amount is not found on Schedule
A, lines 2.c., 5.b. and 7.a., the financial institution
shall notify the Department and the Department may, by
regulations or otherwise, prescribe or authorize the
use of an alternative source for such information. The
financial institution shall also notify the Department
should its international banking facility fail to
qualify as such, in whole or in part, or should there
be any amendment or change to the Consolidated Report
of Condition, as originally filed, to the extent such
amendment or change alters the information used in
determining the floor amount.
(3) For taxable years ending on or after December 31,
2008, the business income of a financial organization shall
be apportioned to this State by multiplying such income by
a fraction, the numerator of which is its gross receipts
from sources in this State or otherwise attributable to
this State's marketplace and the denominator of which is
its gross receipts everywhere during the taxable year.

"Gross receipts" for purposes of this subparagraph (3)
means gross income, including net taxable gain on
disposition of assets, including securities and money
market instruments, when derived from transactions and
activities in the regular course of the financial
organization's trade or business. The following examples
are illustrative:
(i) Receipts from the lease or rental of real or
tangible personal property are in this State if the
property is located in this State during the rental
period. Receipts from the lease or rental of tangible
personal property that is characteristically moving
property, including, but not limited to, motor
vehicles, rolling stock, aircraft, vessels, or mobile
equipment are from sources in this State to the extent
that the property is used in this State.
(ii) Interest income, commissions, fees, gains on
disposition, and other receipts from assets in the
nature of loans that are secured primarily by real
estate or tangible personal property are from sources
in this State if the security is located in this State.
(iii) Interest income, commissions, fees, gains on
disposition, and other receipts from consumer loans
that are not secured by real or tangible personal
property are from sources in this State if the debtor
is a resident of this State.

(iv) Interest income, commissions, fees, gains on
disposition, and other receipts from commercial loans
and installment obligations that are not secured by
real or tangible personal property are from sources in
this State if the proceeds of the loan are to be
applied in this State. If it cannot be determined where
the funds are to be applied, the income and receipts
are from sources in this State if the office of the
borrower from which the loan was negotiated in the
regular course of business is located in this State. If
the location of this office cannot be determined, the
income and receipts shall be excluded from the
numerator and denominator of the sales factor.
(v) Interest income, fees, gains on disposition,
service charges, merchant discount income, and other
receipts from credit card receivables are from sources
in this State if the card charges are regularly billed
to a customer in this State.
(vi) Receipts from the performance of services,
including, but not limited to, fiduciary, advisory,
and brokerage services, are in this State if the
services are received in this State within the meaning
of subparagraph (a)(3)(C-5)(iv) of this Section.
(vii) Receipts from the issuance of travelers
checks and money orders are from sources in this State
if the checks and money orders are issued from a

location within this State.
(viii) Receipts from investment assets and
activities and trading assets and activities are
included in the receipts factor as follows:
(1) Interest, dividends, net gains (but not
less than zero) and other income from investment
assets and activities from trading assets and
activities shall be included in the receipts
factor. Investment assets and activities and
trading assets and activities include but are not
limited to: investment securities; trading account
assets; federal funds; securities purchased and
sold under agreements to resell or repurchase;
options; futures contracts; forward contracts;
notional principal contracts such as swaps;
equities; and foreign currency transactions. With
respect to the investment and trading assets and
activities described in subparagraphs (A) and (B)
of this paragraph, the receipts factor shall
include the amounts described in such
subparagraphs.
(A) The receipts factor shall include the
amount by which interest from federal funds
sold and securities purchased under resale
agreements exceeds interest expense on federal
funds purchased and securities sold under

repurchase agreements.
(B) The receipts factor shall include the
amount by which interest, dividends, gains and
other income from trading assets and
activities, including but not limited to
assets and activities in the matched book, in
the arbitrage book, and foreign currency
transactions, exceed amounts paid in lieu of
interest, amounts paid in lieu of dividends,
and losses from such assets and activities.
(2) The numerator of the receipts factor
includes interest, dividends, net gains (but not
less than zero), and other income from investment
assets and activities and from trading assets and
activities described in paragraph (1) of this
subsection that are attributable to this State.
(A) The amount of interest, dividends, net
gains (but not less than zero), and other
income from investment assets and activities
in the investment account to be attributed to
this State and included in the numerator is
determined by multiplying all such income from
such assets and activities by a fraction, the
numerator of which is the gross income from
such assets and activities which are properly
assigned to a fixed place of business of the

taxpayer within this State and the denominator
of which is the gross income from all such
assets and activities.
(B) The amount of interest from federal
funds sold and purchased and from securities
purchased under resale agreements and
securities sold under repurchase agreements
attributable to this State and included in the
numerator is determined by multiplying the
amount described in subparagraph (A) of
paragraph (1) of this subsection from such
funds and such securities by a fraction, the
numerator of which is the gross income from
such funds and such securities which are
properly assigned to a fixed place of business
of the taxpayer within this State and the
denominator of which is the gross income from
all such funds and such securities.
(C) The amount of interest, dividends,
gains, and other income from trading assets and
activities, including but not limited to
assets and activities in the matched book, in
the arbitrage book and foreign currency
transactions (but excluding amounts described
in subparagraphs (A) or (B) of this paragraph),
attributable to this State and included in the

numerator is determined by multiplying the
amount described in subparagraph (B) of
paragraph (1) of this subsection by a fraction,
the numerator of which is the gross income from
such trading assets and activities which are
properly assigned to a fixed place of business
of the taxpayer within this State and the
denominator of which is the gross income from
all such assets and activities.
(D) Properly assigned, for purposes of
this paragraph (2) of this subsection, means
the investment or trading asset or activity is
assigned to the fixed place of business with
which it has a preponderance of substantive
contacts. An investment or trading asset or
activity assigned by the taxpayer to a fixed
place of business without the State shall be
presumed to have been properly assigned if:
(i) the taxpayer has assigned, in the
regular course of its business, such asset
or activity on its records to a fixed place
of business consistent with federal or
state regulatory requirements;
(ii) such assignment on its records is
based upon substantive contacts of the
asset or activity to such fixed place of

business; and
(iii) the taxpayer uses such records
reflecting assignment of such assets or
activities for the filing of all state and
local tax returns for which an assignment
of such assets or activities to a fixed
place of business is required.
(E) The presumption of proper assignment
of an investment or trading asset or activity
provided in subparagraph (D) of paragraph (2)
of this subsection may be rebutted upon a
showing by the Department, supported by a
preponderance of the evidence, that the
preponderance of substantive contacts
regarding such asset or activity did not occur
at the fixed place of business to which it was
assigned on the taxpayer's records. If the
fixed place of business that has a
preponderance of substantive contacts cannot
be determined for an investment or trading
asset or activity to which the presumption in
subparagraph (D) of paragraph (2) of this
subsection does not apply or with respect to
which that presumption has been rebutted, that
asset or activity is properly assigned to the
state in which the taxpayer's commercial

domicile is located. For purposes of this
subparagraph (E), it shall be presumed,
subject to rebuttal, that taxpayer's
commercial domicile is in the state of the
United States or the District of Columbia to
which the greatest number of employees are
regularly connected with the management of the
investment or trading income or out of which
they are working, irrespective of where the
services of such employees are performed, as of
the last day of the taxable year.
(4) (Blank).
(5) (Blank).
(c-1) Federally regulated exchanges. For taxable years
ending on or after December 31, 2012, business income of a
federally regulated exchange shall, at the option of the
federally regulated exchange, be apportioned to this State by
multiplying such income by a fraction, the numerator of which
is its business income from sources within this State, and the
denominator of which is its business income from all sources.
For purposes of this subsection, the business income within
this State of a federally regulated exchange is the sum of the
following:
(1) Receipts attributable to transactions executed on
a physical trading floor if that physical trading floor is
located in this State.

(2) Receipts attributable to all other matching,
execution, or clearing transactions, including without
limitation receipts from the provision of matching,
execution, or clearing services to another entity,
multiplied by (i) for taxable years ending on or after
December 31, 2012 but before December 31, 2013, 63.77%; and
(ii) for taxable years ending on or after December 31,
2013, 27.54%.
(3) All other receipts not governed by subparagraphs
(1) or (2) of this subsection (c-1), to the extent the
receipts would be characterized as "sales in this State"
under item (3) of subsection (a) of this Section.
"Federally regulated exchange" means (i) a "registered
entity" within the meaning of 7 U.S.C. Section 1a(40)(A), (B),
or (C), (ii) an "exchange" or "clearing agency" within the
meaning of 15 U.S.C. Section 78c (a)(1) or (23), (iii) any such
entities regulated under any successor regulatory structure to
the foregoing, and (iv) all taxpayers who are members of the
same unitary business group as a federally regulated exchange,
determined without regard to the prohibition in Section
1501(a)(27) of this Act against including in a unitary business
group taxpayers who are ordinarily required to apportion
business income under different subsections of this Section;
provided that this subparagraph (iv) shall apply only if 50% or
more of the business receipts of the unitary business group
determined by application of this subparagraph (iv) for the

taxable year are attributable to the matching, execution, or
clearing of transactions conducted by an entity described in
subparagraph (i), (ii), or (iii) of this paragraph.
In no event shall the Illinois apportionment percentage
computed in accordance with this subsection (c-1) for any
taxpayer for any tax year be less than the Illinois
apportionment percentage computed under this subsection (c-1)
for that taxpayer for the first full tax year ending on or
after December 31, 2013 for which this subsection (c-1) applied
to the taxpayer.
(d) Transportation services. For taxable years ending
before December 31, 2008, business income derived from
furnishing transportation services shall be apportioned to
this State in accordance with paragraphs (1) and (2):
(1) Such business income (other than that derived from
transportation by pipeline) shall be apportioned to this
State by multiplying such income by a fraction, the
numerator of which is the revenue miles of the person in
this State, and the denominator of which is the revenue
miles of the person everywhere. For purposes of this
paragraph, a revenue mile is the transportation of 1
passenger or 1 net ton of freight the distance of 1 mile
for a consideration. Where a person is engaged in the
transportation of both passengers and freight, the
fraction above referred to shall be determined by means of
an average of the passenger revenue mile fraction and the

freight revenue mile fraction, weighted to reflect the
person's
(A) relative railway operating income from total
passenger and total freight service, as reported to the
Interstate Commerce Commission, in the case of
transportation by railroad, and
(B) relative gross receipts from passenger and
freight transportation, in case of transportation
other than by railroad.
(2) Such business income derived from transportation
by pipeline shall be apportioned to this State by
multiplying such income by a fraction, the numerator of
which is the revenue miles of the person in this State, and
the denominator of which is the revenue miles of the person
everywhere. For the purposes of this paragraph, a revenue
mile is the transportation by pipeline of 1 barrel of oil,
1,000 cubic feet of gas, or of any specified quantity of
any other substance, the distance of 1 mile for a
consideration.
(3) For taxable years ending on or after December 31,
2008, business income derived from providing
transportation services other than airline services shall
be apportioned to this State by using a fraction, (a) the
numerator of which shall be (i) all receipts from any
movement or shipment of people, goods, mail, oil, gas, or
any other substance (other than by airline) that both

originates and terminates in this State, plus (ii) that
portion of the person's gross receipts from movements or
shipments of people, goods, mail, oil, gas, or any other
substance (other than by airline) that originates in one
state or jurisdiction and terminates in another state or
jurisdiction, that is determined by the ratio that the
miles traveled in this State bears to total miles
everywhere and (b) the denominator of which shall be all
revenue derived from the movement or shipment of people,
goods, mail, oil, gas, or any other substance (other than
by airline). Where a taxpayer is engaged in the
transportation of both passengers and freight, the
fraction above referred to shall first be determined
separately for passenger miles and freight miles. Then an
average of the passenger miles fraction and the freight
miles fraction shall be weighted to reflect the taxpayer's:
(A) relative railway operating income from total
passenger and total freight service, as reported to the
Surface Transportation Board, in the case of
transportation by railroad; and
(B) relative gross receipts from passenger and
freight transportation, in case of transportation
other than by railroad.
(4) For taxable years ending on or after December 31,
2008, business income derived from furnishing airline
transportation services shall be apportioned to this State

by multiplying such income by a fraction, the numerator of
which is the revenue miles of the person in this State, and
the denominator of which is the revenue miles of the person
everywhere. For purposes of this paragraph, a revenue mile
is the transportation of one passenger or one net ton of
freight the distance of one mile for a consideration. If a
person is engaged in the transportation of both passengers
and freight, the fraction above referred to shall be
determined by means of an average of the passenger revenue
mile fraction and the freight revenue mile fraction,
weighted to reflect the person's relative gross receipts
from passenger and freight airline transportation.
(e) Combined apportionment. Where 2 or more persons are
engaged in a unitary business as described in subsection
(a)(27) of Section 1501, a part of which is conducted in this
State by one or more members of the group, the business income
attributable to this State by any such member or members shall
be apportioned by means of the combined apportionment method.
(f) Alternative allocation. If the allocation and
apportionment provisions of subsections (a) through (e) and of
subsection (h) do not fairly represent the extent of a person's
business activity in this State, the person may petition for,
or the Director may, without a petition, permit or require, in
respect of all or any part of the person's business activity,
if reasonable:
(1) Separate accounting;

(2) The exclusion of any one or more factors;
(3) The inclusion of one or more additional factors
which will fairly represent the person's business
activities in this State; or
(4) The employment of any other method to effectuate an
equitable allocation and apportionment of the person's
business income.
(g) Cross reference. For allocation of business income by
residents, see Section 301(a).
(h) For tax years ending on or after December 31, 1998, the
apportionment factor of persons who apportion their business
income to this State under subsection (a) shall be equal to:
(1) for tax years ending on or after December 31, 1998
and before December 31, 1999, 16 2/3% of the property
factor plus 16 2/3% of the payroll factor plus 66 2/3% of
the sales factor;
(2) for tax years ending on or after December 31, 1999
and before December 31, 2000, 8 1/3% of the property factor
plus 8 1/3% of the payroll factor plus 83 1/3% of the sales
factor;
(3) for tax years ending on or after December 31, 2000,
the sales factor.
If, in any tax year ending on or after December 31, 1998 and
before December 31, 2000, the denominator of the payroll,
property, or sales factor is zero, the apportionment factor
computed in paragraph (1) or (2) of this subsection for that

year shall be divided by an amount equal to 100% minus the
percentage weight given to each factor whose denominator is
equal to zero.
(Source: P.A. 96-763, eff. 8-25-09; 97-507, eff. 8-23-11.)
(35 ILCS 5/804) (from Ch. 120, par. 8-804)
Sec. 804. Failure to Pay Estimated Tax.
(a) In general. In case of any underpayment of estimated
tax by a taxpayer, except as provided in subsection (d) or (e),
the taxpayer shall be liable to a penalty in an amount
determined at the rate prescribed by Section 3-3 of the Uniform
Penalty and Interest Act upon the amount of the underpayment
(determined under subsection (b)) for each required
installment.
(b) Amount of underpayment. For purposes of subsection (a),
the amount of the underpayment shall be the excess of:
(1) the amount of the installment which would be
required to be paid under subsection (c), over
(2) the amount, if any, of the installment paid on or
before the last date prescribed for payment.
(c) Amount of Required Installments.
(1) Amount.
(A) In General. Except as provided in paragraphs
paragraph (2) and (3), the amount of any required
installment shall be 25% of the required annual
payment.

(B) Required Annual Payment. For purposes of
subparagraph (A), the term "required annual payment"
means the lesser of:
(i) 90% of the tax shown on the return for the
taxable year, or if no return is filed, 90% of the
tax for such year; ,
(ii) for installments due prior to February 1,
2011, and after January 31, 2012, 100% of the tax
shown on the return of the taxpayer for the
preceding taxable year if a return showing a
liability for tax was filed by the taxpayer for the
preceding taxable year and such preceding year was
a taxable year of 12 months; or
(iii) for installments due after January 31,
2011, and prior to February 1, 2012, 150% of the
tax shown on the return of the taxpayer for the
preceding taxable year if a return showing a
liability for tax was filed by the taxpayer for the
preceding taxable year and such preceding year was
a taxable year of 12 months.
(2) Lower Required Installment where Annualized Income
Installment is Less Than Amount Determined Under Paragraph
(1).
(A) In General. In the case of any required
installment if a taxpayer establishes that the
annualized income installment is less than the amount

determined under paragraph (1),
(i) the amount of such required installment
shall be the annualized income installment, and
(ii) any reduction in a required installment
resulting from the application of this
subparagraph shall be recaptured by increasing the
amount of the next required installment determined
under paragraph (1) by the amount of such
reduction, and by increasing subsequent required
installments to the extent that the reduction has
not previously been recaptured under this clause.
(B) Determination of Annualized Income
Installment. In the case of any required installment,
the annualized income installment is the excess, if
any, of:
(i) an amount equal to the applicable
percentage of the tax for the taxable year computed
by placing on an annualized basis the net income
for months in the taxable year ending before the
due date for the installment, over
(ii) the aggregate amount of any prior
required installments for the taxable year.
(C) Applicable Percentage.
In the case of the following The applicable
required installments: percentage is:
1st ............................... 22.5%

2nd ............................... 45%
3rd ............................... 67.5%
4th ............................... 90%
(D) Annualized Net Income; Individuals. For
individuals, net income shall be placed on an
annualized basis by:
(i) multiplying by 12, or in the case of a
taxable year of less than 12 months, by the number
of months in the taxable year, the net income
computed without regard to the standard exemption
for the months in the taxable year ending before
the month in which the installment is required to
be paid;
(ii) dividing the resulting amount by the
number of months in the taxable year ending before
the month in which such installment date falls; and
(iii) deducting from such amount the standard
exemption allowable for the taxable year, such
standard exemption being determined as of the last
date prescribed for payment of the installment.
(E) Annualized Net Income; Corporations. For
corporations, net income shall be placed on an
annualized basis by multiplying by 12 the taxable
income
(i) for the first 3 months of the taxable year,
in the case of the installment required to be paid

in the 4th month,
(ii) for the first 3 months or for the first 5
months of the taxable year, in the case of the
installment required to be paid in the 6th month,
(iii) for the first 6 months or for the first 8
months of the taxable year, in the case of the
installment required to be paid in the 9th month,
and
(iv) for the first 9 months or for the first 11
months of the taxable year, in the case of the
installment required to be paid in the 12th month
of the taxable year,
then dividing the resulting amount by the number of
months in the taxable year (3, 5, 6, 8, 9, or 11 as the
case may be).
(3) Notwithstanding any other provision of this
subsection (c), in the case of a federally regulated
exchange that elects to apportion its income under Section
304(c-1) of this Act, the amount of each required
installment due prior to June 30 of the first taxable year
to which the election applies shall be 25% of the tax that
would have been shown on the return for that taxable year
if the taxpayer had not made such election.
(d) Exceptions. Notwithstanding the provisions of the
preceding subsections, the penalty imposed by subsection (a)
shall not be imposed if the taxpayer was not required to file

an Illinois income tax return for the preceding taxable year,
or, for individuals, if the taxpayer had no tax liability for
the preceding taxable year and such year was a taxable year of
12 months. The penalty imposed by subsection (a) shall also not
be imposed on any underpayments of estimated tax due before the
effective date of this amendatory Act of 1998 which
underpayments are solely attributable to the change in
apportionment from subsection (a) to subsection (h) of Section
304. The provisions of this amendatory Act of 1998 apply to tax
years ending on or after December 31, 1998.
(e) The penalty imposed for underpayment of estimated tax
by subsection (a) of this Section shall not be imposed to the
extent that the Director or his or her designate determines,
pursuant to Section 3-8 of the Uniform Penalty and Interest Act
that the penalty should not be imposed.
(f) Definition of tax. For purposes of subsections (b) and
(c), the term "tax" means the excess of the tax imposed under
Article 2 of this Act, over the amounts credited against such
tax under Sections 601(b) (3) and (4).
(g) Application of Section in case of tax withheld under
Article 7. For purposes of applying this Section:
(1) tax withheld from compensation for the taxable year
shall be deemed a payment of estimated tax, and an equal
part of such amount shall be deemed paid on each
installment date for such taxable year, unless the taxpayer
establishes the dates on which all amounts were actually

withheld, in which case the amounts so withheld shall be
deemed payments of estimated tax on the dates on which such
amounts were actually withheld;
(2) amounts timely paid by a partnership, Subchapter S
corporation, or trust on behalf of a partner, shareholder,
or beneficiary pursuant to subsection (f) of Section 502 or
Section 709.5 and claimed as a payment of estimated tax
shall be deemed a payment of estimated tax made on the last
day of the taxable year of the partnership, Subchapter S
corporation, or trust for which the income from the
withholding is made was computed; and
(3) all other amounts pursuant to Article 7 shall be
deemed a payment of estimated tax on the date the payment
is made to the taxpayer of the amount from which the tax is
withheld.
(g-5) Amounts withheld under the State Salary and Annuity
Withholding Act. An individual who has amounts withheld under
paragraph (10) of Section 4 of the State Salary and Annuity
Withholding Act may elect to have those amounts treated as
payments of estimated tax made on the dates on which those
amounts are actually withheld.
(i) Short taxable year. The application of this Section to
taxable years of less than 12 months shall be in accordance
with regulations prescribed by the Department.
The changes in this Section made by Public Act 84-127 shall
apply to taxable years ending on or after January 1, 1986.

(Source: P.A. 96-1496, eff. 1-13-11; 97-507, eff. 8-23-11;
revised 11-18-11.)
(35 ILCS 5/1501) (from Ch. 120, par. 15-1501)
Sec. 1501. Definitions.
(a) In general. When used in this Act, where not otherwise
distinctly expressed or manifestly incompatible with the
intent thereof:
(1) Business income. The term "business income" means
all income that may be treated as apportionable business
income under the Constitution of the United States.
Business income is net of the deductions allocable thereto.
Such term does not include compensation or the deductions
allocable thereto. For each taxable year beginning on or
after January 1, 2003, a taxpayer may elect to treat all
income other than compensation as business income. This
election shall be made in accordance with rules adopted by
the Department and, once made, shall be irrevocable.
(1.5) Captive real estate investment trust:
(A) The term "captive real estate investment
trust" means a corporation, trust, or association:
(i) that is considered a real estate
investment trust for the taxable year under
Section 856 of the Internal Revenue Code;
(ii) the certificates of beneficial interest
or shares of which are not regularly traded on an

established securities market; and
(iii) of which more than 50% of the voting
power or value of the beneficial interest or
shares, at any time during the last half of the
taxable year, is owned or controlled, directly,
indirectly, or constructively, by a single
corporation.
(B) The term "captive real estate investment
trust" does not include:
(i) a real estate investment trust of which
more than 50% of the voting power or value of the
beneficial interest or shares is owned or
controlled, directly, indirectly, or
constructively, by:
(a) a real estate investment trust, other
than a captive real estate investment trust;
(b) a person who is exempt from taxation
under Section 501 of the Internal Revenue Code,
and who is not required to treat income
received from the real estate investment trust
as unrelated business taxable income under
Section 512 of the Internal Revenue Code;
(c) a listed Australian property trust, if
no more than 50% of the voting power or value
of the beneficial interest or shares of that
trust, at any time during the last half of the

taxable year, is owned or controlled, directly
or indirectly, by a single person;
(d) an entity organized as a trust,
provided a listed Australian property trust
described in subparagraph (c) owns or
controls, directly or indirectly, or
constructively, 75% or more of the voting power
or value of the beneficial interests or shares
of such entity; or
(e) an entity that is organized outside of
the laws of the United States and that
satisfies all of the following criteria:
(1) at least 75% of the entity's total
asset value at the close of its taxable
year is represented by real estate assets
(as defined in Section 856(c)(5)(B) of the
Internal Revenue Code, thereby including
shares or certificates of beneficial
interest in any real estate investment
trust), cash and cash equivalents, and
U.S. Government securities;
(2) the entity is not subject to tax on
amounts that are distributed to its
beneficial owners or is exempt from
entity-level taxation;
(3) the entity distributes at least

85% of its taxable income (as computed in
the jurisdiction in which it is organized)
to the holders of its shares or
certificates of beneficial interest on an
annual basis;
(4) either (i) the shares or
beneficial interests of the entity are
regularly traded on an established
securities market or (ii) not more than 10%
of the voting power or value in the entity
is held, directly, indirectly, or
constructively, by a single entity or
individual; and
(5) the entity is organized in a
country that has entered into a tax treaty
with the United States; or
(ii) during its first taxable year for which it
elects to be treated as a real estate investment
trust under Section 856(c)(1) of the Internal
Revenue Code, a real estate investment trust the
certificates of beneficial interest or shares of
which are not regularly traded on an established
securities market, but only if the certificates of
beneficial interest or shares of the real estate
investment trust are regularly traded on an
established securities market prior to the earlier

of the due date (including extensions) for filing
its return under this Act for that first taxable
year or the date it actually files that return.
(C) For the purposes of this subsection (1.5), the
constructive ownership rules prescribed under Section
318(a) of the Internal Revenue Code, as modified by
Section 856(d)(5) of the Internal Revenue Code, apply
in determining the ownership of stock, assets, or net
profits of any person.
(2) Commercial domicile. The term "commercial
domicile" means the principal place from which the trade or
business of the taxpayer is directed or managed.
(3) Compensation. The term "compensation" means wages,
salaries, commissions and any other form of remuneration
paid to employees for personal services.
(4) Corporation. The term "corporation" includes
associations, joint-stock companies, insurance companies
and cooperatives. Any entity, including a limited
liability company formed under the Illinois Limited
Liability Company Act, shall be treated as a corporation if
it is so classified for federal income tax purposes.
(5) Department. The term "Department" means the
Department of Revenue of this State.
(6) Director. The term "Director" means the Director of
Revenue of this State.
(7) Fiduciary. The term "fiduciary" means a guardian,

trustee, executor, administrator, receiver, or any person
acting in any fiduciary capacity for any person.
(8) Financial organization.
(A) The term "financial organization" means any
bank, bank holding company, trust company, savings
bank, industrial bank, land bank, safe deposit
company, private banker, savings and loan association,
building and loan association, credit union, currency
exchange, cooperative bank, small loan company, sales
finance company, investment company, or any person
which is owned by a bank or bank holding company. For
the purpose of this Section a "person" will include
only those persons which a bank holding company may
acquire and hold an interest in, directly or
indirectly, under the provisions of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841, et seq.), except
where interests in any person must be disposed of
within certain required time limits under the Bank
Holding Company Act of 1956.
(B) For purposes of subparagraph (A) of this
paragraph, the term "bank" includes (i) any entity that
is regulated by the Comptroller of the Currency under
the National Bank Act, or by the Federal Reserve Board,
or by the Federal Deposit Insurance Corporation and
(ii) any federally or State chartered bank operating as
a credit card bank.

(C) For purposes of subparagraph (A) of this
paragraph, the term "sales finance company" has the
meaning provided in the following item (i) or (ii):
(i) A person primarily engaged in one or more
of the following businesses: the business of
purchasing customer receivables, the business of
making loans upon the security of customer
receivables, the business of making loans for the
express purpose of funding purchases of tangible
personal property or services by the borrower, or
the business of finance leasing. For purposes of
this item (i), "customer receivable" means:
(a) a retail installment contract or
retail charge agreement within the meaning of
the Sales Finance Agency Act, the Retail
Installment Sales Act, or the Motor Vehicle
Retail Installment Sales Act;
(b) an installment, charge, credit, or
similar contract or agreement arising from the
sale of tangible personal property or services
in a transaction involving a deferred payment
price payable in one or more installments
subsequent to the sale; or
(c) the outstanding balance of a contract
or agreement described in provisions (a) or (b)
of this item (i).

A customer receivable need not provide for
payment of interest on deferred payments. A sales
finance company may purchase a customer receivable
from, or make a loan secured by a customer
receivable to, the seller in the original
transaction or to a person who purchased the
customer receivable directly or indirectly from
that seller.
(ii) A corporation meeting each of the
following criteria:
(a) the corporation must be a member of an
"affiliated group" within the meaning of
Section 1504(a) of the Internal Revenue Code,
determined without regard to Section 1504(b)
of the Internal Revenue Code;
(b) more than 50% of the gross income of
the corporation for the taxable year must be
interest income derived from qualifying loans.
A "qualifying loan" is a loan made to a member
of the corporation's affiliated group that
originates customer receivables (within the
meaning of item (i)) or to whom customer
receivables originated by a member of the
affiliated group have been transferred, to the
extent the average outstanding balance of
loans from that corporation to members of its

affiliated group during the taxable year do not
exceed the limitation amount for that
corporation. The "limitation amount" for a
corporation is the average outstanding
balances during the taxable year of customer
receivables (within the meaning of item (i))
originated by all members of the affiliated
group. If the average outstanding balances of
the loans made by a corporation to members of
its affiliated group exceed the limitation
amount, the interest income of that
corporation from qualifying loans shall be
equal to its interest income from loans to
members of its affiliated groups times a
fraction equal to the limitation amount
divided by the average outstanding balances of
the loans made by that corporation to members
of its affiliated group;
(c) the total of all shareholder's equity
(including, without limitation, paid-in
capital on common and preferred stock and
retained earnings) of the corporation plus the
total of all of its loans, advances, and other
obligations payable or owed to members of its
affiliated group may not exceed 20% of the
total assets of the corporation at any time

during the tax year; and
(d) more than 50% of all interest-bearing
obligations of the affiliated group payable to
persons outside the group determined in
accordance with generally accepted accounting
principles must be obligations of the
corporation.
This amendatory Act of the 91st General Assembly is
declaratory of existing law.
(D) Subparagraphs (B) and (C) of this paragraph are
declaratory of existing law and apply retroactively,
for all tax years beginning on or before December 31,
1996, to all original returns, to all amended returns
filed no later than 30 days after the effective date of
this amendatory Act of 1996, and to all notices issued
on or before the effective date of this amendatory Act
of 1996 under subsection (a) of Section 903, subsection
(a) of Section 904, subsection (e) of Section 909, or
Section 912. A taxpayer that is a "financial
organization" that engages in any transaction with an
affiliate shall be a "financial organization" for all
purposes of this Act.
(E) For all tax years beginning on or before
December 31, 1996, a taxpayer that falls within the
definition of a "financial organization" under
subparagraphs (B) or (C) of this paragraph, but who

does not fall within the definition of a "financial
organization" under the Proposed Regulations issued by
the Department of Revenue on July 19, 1996, may
irrevocably elect to apply the Proposed Regulations
for all of those years as though the Proposed
Regulations had been lawfully promulgated, adopted,
and in effect for all of those years. For purposes of
applying subparagraphs (B) or (C) of this paragraph to
all of those years, the election allowed by this
subparagraph applies only to the taxpayer making the
election and to those members of the taxpayer's unitary
business group who are ordinarily required to
apportion business income under the same subsection of
Section 304 of this Act as the taxpayer making the
election. No election allowed by this subparagraph
shall be made under a claim filed under subsection (d)
of Section 909 more than 30 days after the effective
date of this amendatory Act of 1996.
(F) Finance Leases. For purposes of this
subsection, a finance lease shall be treated as a loan
or other extension of credit, rather than as a lease,
regardless of how the transaction is characterized for
any other purpose, including the purposes of any
regulatory agency to which the lessor is subject. A
finance lease is any transaction in the form of a lease
in which the lessee is treated as the owner of the

leased asset entitled to any deduction for
depreciation allowed under Section 167 of the Internal
Revenue Code.
(9) Fiscal year. The term "fiscal year" means an
accounting period of 12 months ending on the last day of
any month other than December.
(9.5) Fixed place of business. The term "fixed place of
business" has the same meaning as that term is given in
Section 864 of the Internal Revenue Code and the related
Treasury regulations.
(10) Includes and including. The terms "includes" and
"including" when used in a definition contained in this Act
shall not be deemed to exclude other things otherwise
within the meaning of the term defined.
(11) Internal Revenue Code. The term "Internal Revenue
Code" means the United States Internal Revenue Code of 1954
or any successor law or laws relating to federal income
taxes in effect for the taxable year.
(11.5) Investment partnership.
(A) The term "investment partnership" means any
entity that is treated as a partnership for federal
income tax purposes that meets the following
requirements:
(i) no less than 90% of the partnership's cost
of its total assets consists of qualifying
investment securities, deposits at banks or other

financial institutions, and office space and
equipment reasonably necessary to carry on its
activities as an investment partnership;
(ii) no less than 90% of its gross income
consists of interest, dividends, and gains from
the sale or exchange of qualifying investment
securities; and
(iii) the partnership is not a dealer in
qualifying investment securities.
(B) For purposes of this paragraph (11.5), the term
"qualifying investment securities" includes all of the
following:
(i) common stock, including preferred or debt
securities convertible into common stock, and
preferred stock;
(ii) bonds, debentures, and other debt
securities;
(iii) foreign and domestic currency deposits
secured by federal, state, or local governmental
agencies;
(iv) mortgage or asset-backed securities
secured by federal, state, or local governmental
agencies;
(v) repurchase agreements and loan
participations;
(vi) foreign currency exchange contracts and

forward and futures contracts on foreign
currencies;
(vii) stock and bond index securities and
futures contracts and other similar financial
securities and futures contracts on those
securities;
(viii) options for the purchase or sale of any
of the securities, currencies, contracts, or
financial instruments described in items (i) to
(vii), inclusive;
(ix) regulated futures contracts;
(x) commodities (not described in Section
1221(a)(1) of the Internal Revenue Code) or
futures, forwards, and options with respect to
such commodities, provided, however, that any item
of a physical commodity to which title is actually
acquired in the partnership's capacity as a dealer
in such commodity shall not be a qualifying
investment security;
(xi) derivatives; and
(xii) a partnership interest in another
partnership that is an investment partnership.
(12) Mathematical error. The term "mathematical error"
includes the following types of errors, omissions, or
defects in a return filed by a taxpayer which prevents
acceptance of the return as filed for processing:

(A) arithmetic errors or incorrect computations on
the return or supporting schedules;
(B) entries on the wrong lines;
(C) omission of required supporting forms or
schedules or the omission of the information in whole
or in part called for thereon; and
(D) an attempt to claim, exclude, deduct, or
improperly report, in a manner directly contrary to the
provisions of the Act and regulations thereunder any
item of income, exemption, deduction, or credit.
(13) Nonbusiness income. The term "nonbusiness income"
means all income other than business income or
compensation.
(14) Nonresident. The term "nonresident" means a
person who is not a resident.
(15) Paid, incurred and accrued. The terms "paid",
"incurred" and "accrued" shall be construed according to
the method of accounting upon the basis of which the
person's base income is computed under this Act.
(16) Partnership and partner. The term "partnership"
includes a syndicate, group, pool, joint venture or other
unincorporated organization, through or by means of which
any business, financial operation, or venture is carried
on, and which is not, within the meaning of this Act, a
trust or estate or a corporation; and the term "partner"
includes a member in such syndicate, group, pool, joint

venture or organization.
The term "partnership" includes any entity, including
a limited liability company formed under the Illinois
Limited Liability Company Act, classified as a partnership
for federal income tax purposes.
The term "partnership" does not include a syndicate,
group, pool, joint venture, or other unincorporated
organization established for the sole purpose of playing
the Illinois State Lottery.
(17) Part-year resident. The term "part-year resident"
means an individual who became a resident during the
taxable year or ceased to be a resident during the taxable
year. Under Section 1501(a)(20)(A)(i) residence commences
with presence in this State for other than a temporary or
transitory purpose and ceases with absence from this State
for other than a temporary or transitory purpose. Under
Section 1501(a)(20)(A)(ii) residence commences with the
establishment of domicile in this State and ceases with the
establishment of domicile in another State.
(18) Person. The term "person" shall be construed to
mean and include an individual, a trust, estate,
partnership, association, firm, company, corporation,
limited liability company, or fiduciary. For purposes of
Section 1301 and 1302 of this Act, a "person" means (i) an
individual, (ii) a corporation, (iii) an officer, agent, or
employee of a corporation, (iv) a member, agent or employee

of a partnership, or (v) a member, manager, employee,
officer, director, or agent of a limited liability company
who in such capacity commits an offense specified in
Section 1301 and 1302.
(18A) Records. The term "records" includes all data
maintained by the taxpayer, whether on paper, microfilm,
microfiche, or any type of machine-sensible data
compilation.
(19) Regulations. The term "regulations" includes
rules promulgated and forms prescribed by the Department.
(20) Resident. The term "resident" means:
(A) an individual (i) who is in this State for
other than a temporary or transitory purpose during the
taxable year; or (ii) who is domiciled in this State
but is absent from the State for a temporary or
transitory purpose during the taxable year;
(B) The estate of a decedent who at his or her
death was domiciled in this State;
(C) A trust created by a will of a decedent who at
his death was domiciled in this State; and
(D) An irrevocable trust, the grantor of which was
domiciled in this State at the time such trust became
irrevocable. For purpose of this subparagraph, a trust
shall be considered irrevocable to the extent that the
grantor is not treated as the owner thereof under
Sections 671 through 678 of the Internal Revenue Code.

(21) Sales. The term "sales" means all gross receipts
of the taxpayer not allocated under Sections 301, 302 and
303.
(22) State. The term "state" when applied to a
jurisdiction other than this State means any state of the
United States, the District of Columbia, the Commonwealth
of Puerto Rico, any Territory or Possession of the United
States, and any foreign country, or any political
subdivision of any of the foregoing. For purposes of the
foreign tax credit under Section 601, the term "state"
means any state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, and any
territory or possession of the United States, or any
political subdivision of any of the foregoing, effective
for tax years ending on or after December 31, 1989.
(23) Taxable year. The term "taxable year" means the
calendar year, or the fiscal year ending during such
calendar year, upon the basis of which the base income is
computed under this Act. "Taxable year" means, in the case
of a return made for a fractional part of a year under the
provisions of this Act, the period for which such return is
made.
(24) Taxpayer. The term "taxpayer" means any person
subject to the tax imposed by this Act.
(25) International banking facility. The term
international banking facility shall have the same meaning

as is set forth in the Illinois Banking Act or as is set
forth in the laws of the United States or regulations of
the Board of Governors of the Federal Reserve System.
(26) Income Tax Return Preparer.
(A) The term "income tax return preparer" means any
person who prepares for compensation, or who employs
one or more persons to prepare for compensation, any
return of tax imposed by this Act or any claim for
refund of tax imposed by this Act. The preparation of a
substantial portion of a return or claim for refund
shall be treated as the preparation of that return or
claim for refund.
(B) A person is not an income tax return preparer
if all he or she does is
(i) furnish typing, reproducing, or other
mechanical assistance;
(ii) prepare returns or claims for refunds for
the employer by whom he or she is regularly and
continuously employed;
(iii) prepare as a fiduciary returns or claims
for refunds for any person; or
(iv) prepare claims for refunds for a taxpayer
in response to any notice of deficiency issued to
that taxpayer or in response to any waiver of
restriction after the commencement of an audit of
that taxpayer or of another taxpayer if a

determination in the audit of the other taxpayer
directly or indirectly affects the tax liability
of the taxpayer whose claims he or she is
preparing.
(27) Unitary business group.
(A) The term "unitary business group" means a group
of persons related through common ownership whose
business activities are integrated with, dependent
upon and contribute to each other. The group will not
include those members whose business activity outside
the United States is 80% or more of any such member's
total business activity; for purposes of this
paragraph and clause (a)(3)(B)(ii) of Section 304,
business activity within the United States shall be
measured by means of the factors ordinarily applicable
under subsections (a), (b), (c), (d), or (h) of Section
304 except that, in the case of members ordinarily
required to apportion business income by means of the 3
factor formula of property, payroll and sales
specified in subsection (a) of Section 304, including
the formula as weighted in subsection (h) of Section
304, such members shall not use the sales factor in the
computation and the results of the property and payroll
factor computations of subsection (a) of Section 304
shall be divided by 2 (by one if either the property or
payroll factor has a denominator of zero). The

computation required by the preceding sentence shall,
in each case, involve the division of the member's
property, payroll, or revenue miles in the United
States, insurance premiums on property or risk in the
United States, or financial organization business
income from sources within the United States, as the
case may be, by the respective worldwide figures for
such items. Common ownership in the case of
corporations is the direct or indirect control or
ownership of more than 50% of the outstanding voting
stock of the persons carrying on unitary business
activity. Unitary business activity can ordinarily be
illustrated where the activities of the members are:
(1) in the same general line (such as manufacturing,
wholesaling, retailing of tangible personal property,
insurance, transportation or finance); or (2) are
steps in a vertically structured enterprise or process
(such as the steps involved in the production of
natural resources, which might include exploration,
mining, refining, and marketing); and, in either
instance, the members are functionally integrated
through the exercise of strong centralized management
(where, for example, authority over such matters as
purchasing, financing, tax compliance, product line,
personnel, marketing and capital investment is not
left to each member).

(B) In no event, shall any unitary business group
include members which are ordinarily required to
apportion business income under different subsections
of Section 304 except that for tax years ending on or
after December 31, 1987 this prohibition shall not
apply to a holding company that would otherwise be a
member of a unitary business group with taxpayers that
apportion business income under any of subsections
(b), (c), (c-1), or (d) of Section 304. If a unitary
business group would, but for the preceding sentence,
include members that are ordinarily required to
apportion business income under different subsections
of Section 304, then for each subsection of Section 304
for which there are two or more members, there shall be
a separate unitary business group composed of such
members. For purposes of the preceding two sentences, a
member is "ordinarily required to apportion business
income" under a particular subsection of Section 304 if
it would be required to use the apportionment method
prescribed by such subsection except for the fact that
it derives business income solely from Illinois. As
used in this paragraph, the phrase "United States"
means only the 50 states and the District of Columbia,
but does not include any territory or possession of the
United States or any area over which the United States
has asserted jurisdiction or claimed exclusive rights

with respect to the exploration for or exploitation of
natural resources.
(C) Holding companies.
(i) For purposes of this subparagraph, a
"holding company" is a corporation (other than a
corporation that is a financial organization under
paragraph (8) of this subsection (a) of Section
1501 because it is a bank holding company under the
provisions of the Bank Holding Company Act of 1956
(12 U.S.C. 1841, et seq.) or because it is owned by
a bank or a bank holding company) that owns a
controlling interest in one or more other
taxpayers ("controlled taxpayers"); that, during
the period that includes the taxable year and the 2
immediately preceding taxable years or, if the
corporation was formed during the current or
immediately preceding taxable year, the taxable
years in which the corporation has been in
existence, derived substantially all its gross
income from dividends, interest, rents, royalties,
fees or other charges received from controlled
taxpayers for the provision of services, and gains
on the sale or other disposition of interests in
controlled taxpayers or in property leased or
licensed to controlled taxpayers or used by the
taxpayer in providing services to controlled

taxpayers; and that incurs no substantial expenses
other than expenses (including interest and other
costs of borrowing) incurred in connection with
the acquisition and holding of interests in
controlled taxpayers and in the provision of
services to controlled taxpayers or in the leasing
or licensing of property to controlled taxpayers.
(ii) The income of a holding company which is a
member of more than one unitary business group
shall be included in each unitary business group of
which it is a member on a pro rata basis, by
including in each unitary business group that
portion of the base income of the holding company
that bears the same proportion to the total base
income of the holding company as the gross receipts
of the unitary business group bears to the combined
gross receipts of all unitary business groups (in
both cases without regard to the holding company)
or on any other reasonable basis, consistently
applied.
(iii) A holding company shall apportion its
business income under the subsection of Section
304 used by the other members of its unitary
business group. The apportionment factors of a
holding company which would be a member of more
than one unitary business group shall be included

with the apportionment factors of each unitary
business group of which it is a member on a pro
rata basis using the same method used in clause
(ii).
(iv) The provisions of this subparagraph (C)
are intended to clarify existing law.
(D) If including the base income and factors of a
holding company in more than one unitary business group
under subparagraph (C) does not fairly reflect the
degree of integration between the holding company and
one or more of the unitary business groups, the
dependence of the holding company and one or more of
the unitary business groups upon each other, or the
contributions between the holding company and one or
more of the unitary business groups, the holding
company may petition the Director, under the
procedures provided under Section 304(f), for
permission to include all base income and factors of
the holding company only with members of a unitary
business group apportioning their business income
under one subsection of subsections (a), (b), (c), or
(d) of Section 304. If the petition is granted, the
holding company shall be included in a unitary business
group only with persons apportioning their business
income under the selected subsection of Section 304
until the Director grants a petition of the holding

company either to be included in more than one unitary
business group under subparagraph (C) or to include its
base income and factors only with members of a unitary
business group apportioning their business income
under a different subsection of Section 304.
(E) If the unitary business group members'
accounting periods differ, the common parent's
accounting period or, if there is no common parent, the
accounting period of the member that is expected to
have, on a recurring basis, the greatest Illinois
income tax liability must be used to determine whether
to use the apportionment method provided in subsection
(a) or subsection (h) of Section 304. The prohibition
against membership in a unitary business group for
taxpayers ordinarily required to apportion income
under different subsections of Section 304 does not
apply to taxpayers required to apportion income under
subsection (a) and subsection (h) of Section 304. The
provisions of this amendatory Act of 1998 apply to tax
years ending on or after December 31, 1998.
(28) Subchapter S corporation. The term "Subchapter S
corporation" means a corporation for which there is in
effect an election under Section 1362 of the Internal
Revenue Code, or for which there is a federal election to
opt out of the provisions of the Subchapter S Revision Act
of 1982 and have applied instead the prior federal

Subchapter S rules as in effect on July 1, 1982.
(30) Foreign person. The term "foreign person" means
any person who is a nonresident alien individual and any
nonindividual entity, regardless of where created or
organized, whose business activity outside the United
States is 80% or more of the entity's total business
activity.
(b) Other definitions.
(1) Words denoting number, gender, and so forth, when
used in this Act, where not otherwise distinctly expressed
or manifestly incompatible with the intent thereof:
(A) Words importing the singular include and apply
to several persons, parties or things;
(B) Words importing the plural include the
singular; and
(C) Words importing the masculine gender include
the feminine as well.
(2) "Company" or "association" as including successors
and assigns. The word "company" or "association", when used
in reference to a corporation, shall be deemed to embrace
the words "successors and assigns of such company or
association", and in like manner as if these last-named
words, or words of similar import, were expressed.
(3) Other terms. Any term used in any Section of this
Act with respect to the application of, or in connection

with, the provisions of any other Section of this Act shall
have the same meaning as in such other Section.
(Source: P.A. 96-641, eff. 8-24-09; 97-507, eff. 8-23-11.)
Section 15-15. The Economic Development for a Growing
Economy Tax Credit Act is amended by changing Section 5-15 as
follows:
(35 ILCS 10/5-15)
Sec. 5-15. Tax Credit Awards. Subject to the conditions set
forth in this Act, a Taxpayer is entitled to a Credit against
or, as described in subsection (g) of this Section, a payment
towards taxes imposed pursuant to subsections (a) and (b) of
Section 201 of the Illinois Income Tax Act that may be imposed
on the Taxpayer for a taxable year beginning on or after
January 1, 1999, if the Taxpayer is awarded a Credit by the
Department under this Act for that taxable year.
(a) The Department shall make Credit awards under this Act
to foster job creation and retention in Illinois.
(b) A person that proposes a project to create new jobs in
Illinois must enter into an Agreement with the Department for
the Credit under this Act.
(c) The Credit shall be claimed for the taxable years
specified in the Agreement.
(d) The Credit shall not exceed the Incremental Income Tax
attributable to the project that is the subject of the

Agreement.
(e) Nothing herein shall prohibit a Tax Credit Award to an
Applicant that uses a PEO if all other award criteria are
satisfied.
(f) In lieu of the Credit allowed under this Act against
the taxes imposed pursuant to subsections (a) and (b) of
Section 201 of the Illinois Income Tax Act for any taxable year
ending on or after December 31, 2009, the Taxpayer may elect to
claim the Credit against its obligation to pay over withholding
under Section 704A of the Illinois Income Tax Act.
(1) The election under this subsection (f) may be made
only by a Taxpayer that (i) is primarily engaged in one of
the following business activities: water purification and
treatment, motor vehicle metal stamping, automobile
manufacturing, automobile and light duty motor vehicle
manufacturing, motor vehicle manufacturing, light truck
and utility vehicle manufacturing, heavy duty truck
manufacturing, motor vehicle body manufacturing, cable
television infrastructure design or manufacturing, or
wireless telecommunication or computing terminal device
design or manufacturing for use on public networks and (ii)
meets the following criteria:
(A) the Taxpayer (i) had an Illinois net loss or an
Illinois net loss deduction under Section 207 of the
Illinois Income Tax Act for the taxable year in which
the Credit is awarded, (ii) employed a minimum of 1,000

full-time employees in this State during the taxable
year in which the Credit is awarded, (iii) has an
Agreement under this Act on December 14, 2009 (the
effective date of Public Act 96-834), and (iv) is in
compliance with all provisions of that Agreement;
(B) the Taxpayer (i) had an Illinois net loss or an
Illinois net loss deduction under Section 207 of the
Illinois Income Tax Act for the taxable year in which
the Credit is awarded, (ii) employed a minimum of 1,000
full-time employees in this State during the taxable
year in which the Credit is awarded, and (iii) has
applied for an Agreement within 365 days after December
14, 2009 (the effective date of Public Act 96-834);
(C) the Taxpayer (i) had an Illinois net operating
loss carryforward under Section 207 of the Illinois
Income Tax Act in a taxable year ending during calendar
year 2008, (ii) has applied for an Agreement within 150
days after the effective date of this amendatory Act of
the 96th General Assembly, (iii) creates at least 400
new jobs in Illinois, (iv) retains at least 2,000 jobs
in Illinois that would have been at risk of relocation
out of Illinois over a 10-year period, and (v) makes a
capital investment of at least $75,000,000;
(D) the Taxpayer (i) had an Illinois net operating
loss carryforward under Section 207 of the Illinois
Income Tax Act in a taxable year ending during calendar

year 2009, (ii) has applied for an Agreement within 150
days after the effective date of this amendatory Act of
the 96th General Assembly, (iii) creates at least 150
new jobs, (iv) retains at least 1,000 jobs in Illinois
that would have been at risk of relocation out of
Illinois over a 10-year period, and (v) makes a capital
investment of at least $57,000,000; or
(E) the Taxpayer (i) employed at least 2,500
full-time employees in the State during the year in
which the Credit is awarded, (ii) commits to make at
least $500,000,000 in combined capital improvements
and project costs under the Agreement, (iii) applies
for an Agreement between January 1, 2011 and June 30,
2011, (iv) executes an Agreement for the Credit during
calendar year 2011, and (v) was incorporated no more
than 5 years before the filing of an application for an
Agreement.
(1.5) The election under this subsection (f) may also
be made by a Taxpayer for any Credit awarded pursuant to an
agreement that was executed between January 1, 2011 and
June 30, 2011, if the Taxpayer (i) is primarily engaged in
the manufacture of inner tubes or tires, or both, from
natural and synthetic rubber, (ii) employs a minimum of
2,400 full-time employees in Illinois at the time of
application, (iii) creates at least 350 full-time jobs and
retains at least 250 full-time jobs in Illinois that would

have been at risk of being created or retained outside of
Illinois, and (iv) makes a capital investment of at least
$200,000,000 at the project location.
(1.6) The election under this subsection (f) may also
be made by a Taxpayer for any Credit awarded pursuant to an
agreement that was executed within 150 days after the
effective date of this amendatory Act of the 97th General
Assembly, if the Taxpayer (i) is primarily engaged in the
operation of a discount department store, (ii) maintains
its corporate headquarters in Illinois, (iii) employs a
minimum of 4,250 full-time employees at its corporate
headquarters in Illinois at the time of application, (iv)
retains at least 4,250 full-time jobs in Illinois that
would have been at risk of being relocated outside of
Illinois, (v) had a minimum of $40,000,000,000 in total
revenue in 2010, and (vi) makes a capital investment of at
least $300,000,000 at the project location.
(1.7) Notwithstanding any other provision of law, the
election under this subsection (f) may also be made by a
Taxpayer for any Credit awarded pursuant to an agreement
that was executed or applied for on or after July 1, 2011
and on or before March 31, 2012, if the Taxpayer is
primarily engaged in the manufacture of original and
aftermarket filtration parts and products for automobiles,
motor vehicles, light duty motor vehicles, light trucks and
utility vehicles, and heavy duty trucks, (ii) employs a

minimum of 1,000 full-time employees in Illinois at the
time of application, (iii) creates at least 250 full-time
jobs in Illinois, (iv) relocates its corporate
headquarters to Illinois from another state, and (v) makes
a capital investment of at least $4,000,000 at the project
location.
(2) An election under this subsection shall allow the
credit to be taken against payments otherwise due under
Section 704A of the Illinois Income Tax Act during the
first calendar year beginning after the end of the taxable
year in which the credit is awarded under this Act.
(3) The election shall be made in the form and manner
required by the Illinois Department of Revenue and, once
made, shall be irrevocable.
(4) If a Taxpayer who meets the requirements of
subparagraph (A) of paragraph (1) of this subsection (f)
elects to claim the Credit against its withholdings as
provided in this subsection (f), then, on and after the
date of the election, the terms of the Agreement between
the Taxpayer and the Department may not be further amended
during the term of the Agreement.
(g) A pass-through entity that has been awarded a credit
under this Act, its shareholders, or its partners may treat
some or all of the credit awarded pursuant to this Act as a tax
payment for purposes of the Illinois Income Tax Act. The term
"tax payment" means a payment as described in Article 6 or

Article 8 of the Illinois Income Tax Act or a composite payment
made by a pass-through entity on behalf of any of its
shareholders or partners to satisfy such shareholders' or
partners' taxes imposed pursuant to subsections (a) and (b) of
Section 201 of the Illinois Income Tax Act. In no event shall
the amount of the award credited pursuant to this Act exceed
the Illinois income tax liability of the pass-through entity or
its shareholders or partners for the taxable year.
(Source: P.A. 96-834, eff. 12-14-09; 96-836, eff. 12-16-09;
96-905, eff. 6-4-10; 96-1000, eff. 7-2-10; 96-1534, eff.
3-4-11; 97-2, eff. 5-6-11.)
Section 15-17. The Business Location Efficiency Incentive
Act is amended by changing Section 25 as follows:
(35 ILCS 11/25)
(Section scheduled to be repealed on December 31, 2011)
Sec. 25. Repeal. This Act is repealed on December 31, 2016
2011.
(Source: P.A. 94-966, eff. 1-1-07.)
Section 15-18. The Small Business Job Creation Tax Credit
Act is amended by changing Sections 10 and 25 as follows:
(35 ILCS 25/10)
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
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.
"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 ending on June 30, 2016 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
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.
(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.)
(35 ILCS 25/25)
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;
(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 June 30, 2011, minus
the number of full-time Illinois employees employed by the
employer on the first day of that same incentive period 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 the first day of the incentive period
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.
(Source: P.A. 96-888, eff. 4-13-10; 96-1498, eff. 1-18-11.)
Section 15-20. The Use Tax Act is amended by changing
Sections 3-5, 3-10, and 3-90 as follows:
(35 ILCS 105/3-5)
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
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.
(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
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
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
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
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
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
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
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" as that term is

used in the Wildlife Code. This paragraph is exempt from the
provisions of Section 3-90.
(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
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, 2016
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 V of the Illinois
Public Aid Code who resides in a licensed long-term care
facility, as defined in the Nursing Home Care Act, or in a
licensed facility as defined in the ID/DD Community Care Act or
the Specialized Mental Health Rehabilitation 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.
(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
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.
(35) Beginning January 1, 2010, materials, parts,
equipment, components, and furnishings incorporated into or
upon an aircraft as part of the modification, refurbishment,
completion, replacement, repair, or maintenance of the
aircraft. This exemption includes consumable supplies used in
the modification, refurbishment, completion, replacement,
repair, and maintenance of aircraft, but excludes any
materials, parts, equipment, components, and consumable
supplies used in the modification, replacement, repair, and
maintenance of aircraft engines or power plants, whether such
engines or power plants are installed or uninstalled upon any
such aircraft. "Consumable supplies" include, but are not
limited to, adhesive, tape, sandpaper, general purpose
lubricants, cleaning solution, latex gloves, and protective
films. This exemption applies only to those organizations that
(i) hold an Air Agency Certificate and are empowered to operate
an approved repair station by the Federal Aviation
Administration, (ii) have a Class IV Rating, and (iii) conduct
operations in accordance with Part 145 of the Federal Aviation
Regulations. The exemption does not include aircraft operated
by a commercial air carrier providing scheduled passenger air
service pursuant to authority issued under Part 121 or Part 129
of the Federal Aviation Regulations.
(36) Tangible personal property purchased by a
public-facilities corporation, as described in Section

11-65-10 of the Illinois Municipal Code, for purposes of
constructing or furnishing a municipal convention hall, but
only if the legal title to the municipal convention hall is
transferred to the municipality without any further
consideration by or on behalf of the municipality at the time
of the completion of the municipal convention hall or upon the
retirement or redemption of any bonds or other debt instruments
issued by the public-facilities corporation in connection with
the development of the municipal convention hall. This
exemption includes existing public-facilities corporations as
provided in Section 11-65-25 of the Illinois Municipal Code.
This paragraph is exempt from the provisions of Section 3-90.
(Source: P.A. 96-116, eff. 7-31-09; 96-339, eff. 7-1-10;
96-532, eff. 8-14-09; 96-759, eff. 1-1-10; 96-1000, eff.
7-2-10; 97-38, eff. 6-28-11; 97-227, eff. 1-1-12; 97-431, eff.
8-16-11; revised 9-12-11.)
(35 ILCS 105/3-10)
Sec. 3-10. Rate of tax. Unless otherwise provided in this
Section, the tax imposed by this Act is at the rate of 6.25% of
either the selling price or the fair market value, if any, of
the tangible personal property. In all cases where property
functionally used or consumed is the same as the property that
was purchased at retail, then the tax is imposed on the selling
price of the property. In all cases where property functionally
used or consumed is a by-product or waste product that has been

refined, manufactured, or produced from property purchased at
retail, then the tax is imposed on the lower of the fair market
value, if any, of the specific property so used in this State
or on the selling price of the property purchased at retail.
For purposes of this Section "fair market value" means the
price at which property would change hands between a willing
buyer and a willing seller, neither being under any compulsion
to buy or sell and both having reasonable knowledge of the
relevant facts. The fair market value shall be established by
Illinois sales by the taxpayer of the same property as that
functionally used or consumed, or if there are no such sales by
the taxpayer, then comparable sales or purchases of property of
like kind and character in Illinois.
Beginning on July 1, 2000 and through December 31, 2000,
with respect to motor fuel, as defined in Section 1.1 of the
Motor Fuel Tax Law, and gasohol, as defined in Section 3-40 of
the Use Tax Act, the tax is imposed at the rate of 1.25%.
Beginning on August 6, 2010 through August 15, 2010, with
respect to sales tax holiday items as defined in Section 3-6 of
this Act, the tax is imposed at the rate of 1.25%.
With respect to gasohol, the tax imposed by this Act
applies to (i) 70% of the proceeds of sales made on or after
January 1, 1990, and before July 1, 2003, (ii) 80% of the
proceeds of sales made on or after July 1, 2003 and on or
before December 31, 2018 2013, and (iii) 100% of the proceeds
of sales made thereafter. If, at any time, however, the tax

under this Act on sales of gasohol is imposed at the rate of
1.25%, then the tax imposed by this Act applies to 100% of the
proceeds of sales of gasohol made during that time.
With respect to majority blended ethanol fuel, the tax
imposed by this Act does not apply to the proceeds of sales
made on or after July 1, 2003 and on or before December 31,
2018 2013 but applies to 100% of the proceeds of sales made
thereafter.
With respect to biodiesel blends with no less than 1% and
no more than 10% biodiesel, the tax imposed by this Act applies
to (i) 80% of the proceeds of sales made on or after July 1,
2003 and on or before December 31, 2018 2013 and (ii) 100% of
the proceeds of sales made thereafter. If, at any time,
however, the tax under this Act on sales of biodiesel blends
with no less than 1% and no more than 10% biodiesel is imposed
at the rate of 1.25%, then the tax imposed by this Act applies
to 100% of the proceeds of sales of biodiesel blends with no
less than 1% and no more than 10% biodiesel made during that
time.
With respect to 100% biodiesel and biodiesel blends with
more than 10% but no more than 99% biodiesel, the tax imposed
by this Act does not apply to the proceeds of sales made on or
after July 1, 2003 and on or before December 31, 2018 2013 but
applies to 100% of the proceeds of sales made thereafter.
With respect to 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,
modifications to a motor vehicle for the purpose of rendering
it usable by a disabled person, and insulin, urine testing
materials, syringes, and needles used by diabetics, for human
use, the tax is imposed at the rate of 1%. For the purposes of
this Section, until September 1, 2009: the term "soft drinks"
means any complete, finished, ready-to-use, non-alcoholic
drink, whether carbonated or not, including but not limited to
soda water, cola, fruit juice, vegetable juice, carbonated
water, and all other preparations commonly known as soft drinks
of whatever kind or description that are contained in any
closed or sealed bottle, can, carton, or container, regardless
of size; but "soft drinks" does not include coffee, tea,
non-carbonated water, infant formula, milk or milk products as
defined in the Grade A Pasteurized Milk and Milk Products Act,
or drinks containing 50% or more natural fruit or vegetable
juice.
Notwithstanding any other provisions of this Act,
beginning September 1, 2009, "soft drinks" means non-alcoholic
beverages that contain natural or artificial sweeteners. "Soft
drinks" do not include beverages that contain milk or milk
products, soy, rice or similar milk substitutes, or greater
than 50% of vegetable or fruit juice by volume.
Until August 1, 2009, and notwithstanding any other

provisions of this Act, "food for human consumption that is to
be consumed off the premises where it is sold" includes all
food sold through a vending machine, except soft drinks and
food products that are dispensed hot from a vending machine,
regardless of the location of the vending machine. Beginning
August 1, 2009, and notwithstanding any other provisions of
this Act, "food for human consumption that is to be consumed
off the premises where it is sold" includes all food sold
through a vending machine, except soft drinks, candy, and food
products that are dispensed hot from a vending machine,
regardless of the location of the vending machine.
Notwithstanding any other provisions of this Act,
beginning September 1, 2009, "food for human consumption that
is to be consumed off the premises where it is sold" does not
include candy. For purposes of this Section, "candy" means a
preparation of sugar, honey, or other natural or artificial
sweeteners in combination with chocolate, fruits, nuts or other
ingredients or flavorings in the form of bars, drops, or
pieces. "Candy" does not include any preparation that contains
flour or requires refrigeration.
Notwithstanding any other provisions of this Act,
beginning September 1, 2009, "nonprescription medicines and
drugs" does not include grooming and hygiene products. For
purposes of this Section, "grooming and hygiene products"
includes, but is not limited to, soaps and cleaning solutions,
shampoo, toothpaste, mouthwash, antiperspirants, and sun tan

lotions and screens, unless those products are available by
prescription only, regardless of whether the products meet the
definition of "over-the-counter-drugs". For the purposes of
this paragraph, "over-the-counter-drug" means a drug for human
use that contains a label that identifies the product as a drug
as required by 21 C.F.R. � 201.66. The "over-the-counter-drug"
label includes:
(A) A "Drug Facts" panel; or
(B) A statement of the "active ingredient(s)" with a
list of those ingredients contained in the compound,
substance or preparation.
If the property that is purchased at retail from a retailer
is acquired outside Illinois and used outside Illinois before
being brought to Illinois for use here and is taxable under
this Act, the "selling price" on which the tax is computed
shall be reduced by an amount that represents a reasonable
allowance for depreciation for the period of prior out-of-state
use.
(Source: P.A. 96-34, eff. 7-13-09; 96-37, eff. 7-13-09; 96-38,
eff. 7-13-09; 96-1000, eff. 7-2-10; 96-1012, eff. 7-7-10.)
(35 ILCS 105/3-90)
Sec. 3-90. Sunset of exemptions, credits, and deductions.
(a) The application of every exemption, credit, and
deduction against tax imposed by this Act that becomes law
after the effective date of this amendatory Act of 1994 shall

be limited by a reasonable and appropriate sunset date. A
taxpayer is not entitled to take the exemption, credit, or
deduction beginning on the sunset date and thereafter. Except
as provided in subsection (b) of this Section, if If a
reasonable and appropriate sunset date is not specified in the
Public Act that creates the exemption, credit, or deduction, a
taxpayer shall not be entitled to take the exemption, credit,
or deduction beginning 5 years after the effective date of the
Public Act creating the exemption, credit, or deduction and
thereafter.
(b) Notwithstanding the provisions of subsection (a) of
this Section, the sunset date of any exemption, credit, or
deduction that is scheduled to expire in 2011, 2012, or 2013 by
operation of this Section shall be extended by 5 years.
(Source: P.A. 88-660, eff. 9-16-94; 89-235, eff. 8-4-95.)
Section 15-25. The Service Use Tax Act is amended by
changing Sections 3-5, 3-10, and 3-75 as follows:
(35 ILCS 110/3-5)
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 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
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
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
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.
(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
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
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
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" as that term is
used in the Wildlife Code. 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,
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,
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, 2016
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 V of the Illinois
Public Aid Code who resides in a licensed long-term care
facility, as defined in the Nursing Home Care Act, or in a
licensed facility as defined in the ID/DD Community Care Act or
the Specialized Mental Health Rehabilitation 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
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
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.
(27) Beginning January 1, 2010, materials, parts,
equipment, components, and furnishings incorporated into or
upon an aircraft as part of the modification, refurbishment,
completion, replacement, repair, or maintenance of the
aircraft. This exemption includes consumable supplies used in
the modification, refurbishment, completion, replacement,
repair, and maintenance of aircraft, but excludes any
materials, parts, equipment, components, and consumable
supplies used in the modification, replacement, repair, and
maintenance of aircraft engines or power plants, whether such
engines or power plants are installed or uninstalled upon any
such aircraft. "Consumable supplies" include, but are not

limited to, adhesive, tape, sandpaper, general purpose
lubricants, cleaning solution, latex gloves, and protective
films. This exemption applies only to those organizations that
(i) hold an Air Agency Certificate and are empowered to operate
an approved repair station by the Federal Aviation
Administration, (ii) have a Class IV Rating, and (iii) conduct
operations in accordance with Part 145 of the Federal Aviation
Regulations. The exemption does not include aircraft operated
by a commercial air carrier providing scheduled passenger air
service pursuant to authority issued under Part 121 or Part 129
of the Federal Aviation Regulations.
(28) Tangible personal property purchased by a
public-facilities corporation, as described in Section
11-65-10 of the Illinois Municipal Code, for purposes of
constructing or furnishing a municipal convention hall, but
only if the legal title to the municipal convention hall is
transferred to the municipality without any further
consideration by or on behalf of the municipality at the time
of the completion of the municipal convention hall or upon the
retirement or redemption of any bonds or other debt instruments
issued by the public-facilities corporation in connection with
the development of the municipal convention hall. This
exemption includes existing public-facilities corporations as
provided in Section 11-65-25 of the Illinois Municipal Code.
This paragraph is exempt from the provisions of Section 3-75.
(Source: P.A. 96-116, eff. 7-31-09; 96-339, eff. 7-1-10;

96-532, eff. 8-14-09; 96-759, eff. 1-1-10; 96-1000, eff.
7-2-10; 97-38, eff. 6-28-11; 97-227, eff. 1-1-12; 97-431, eff.
8-16-11; revised 9-12-11.)
(35 ILCS 110/3-10) (from Ch. 120, par. 439.33-10)
Sec. 3-10. Rate of tax. Unless otherwise provided in this
Section, the tax imposed by this Act is at the rate of 6.25% of
the selling price of tangible personal property transferred as
an incident to the sale of service, but, for the purpose of
computing this tax, in no event shall the selling price be less
than the cost price of the property to the serviceman.
Beginning on July 1, 2000 and through December 31, 2000,
with respect to motor fuel, as defined in Section 1.1 of the
Motor Fuel Tax Law, and gasohol, as defined in Section 3-40 of
the Use Tax Act, the tax is imposed at the rate of 1.25%.
With respect to gasohol, as defined in the Use Tax Act, the
tax imposed by this Act applies to (i) 70% of the selling price
of property transferred as an incident to the sale of service
on or after January 1, 1990, and before July 1, 2003, (ii) 80%
of the selling price of property transferred as an incident to
the sale of service on or after July 1, 2003 and on or before
December 31, 2018 2013, and (iii) 100% of the selling price
thereafter. If, at any time, however, the tax under this Act on
sales of gasohol, as defined in the Use Tax Act, is imposed at
the rate of 1.25%, then the tax imposed by this Act applies to
100% of the proceeds of sales of gasohol made during that time.

With respect to majority blended ethanol fuel, as defined
in the Use Tax Act, the tax imposed by this Act does not apply
to the selling price of property transferred as an incident to
the sale of service on or after July 1, 2003 and on or before
December 31, 2018 2013 but applies to 100% of the selling price
thereafter.
With respect to biodiesel blends, as defined in the Use Tax
Act, with no less than 1% and no more than 10% biodiesel, the
tax imposed by this Act applies to (i) 80% of the selling price
of property transferred as an incident to the sale of service
on or after July 1, 2003 and on or before December 31, 2018
2013 and (ii) 100% of the proceeds of the selling price
thereafter. If, at any time, however, the tax under this Act on
sales of biodiesel blends, as defined in the Use Tax Act, with
no less than 1% and no more than 10% biodiesel is imposed at
the rate of 1.25%, then the tax imposed by this Act applies to
100% of the proceeds of sales of biodiesel blends with no less
than 1% and no more than 10% biodiesel made during that time.
With respect to 100% biodiesel, as defined in the Use Tax
Act, and biodiesel blends, as defined in the Use Tax Act, with
more than 10% but no more than 99% biodiesel, the tax imposed
by this Act does not apply to the proceeds of the selling price
of property transferred as an incident to the sale of service
on or after July 1, 2003 and on or before December 31, 2018
2013 but applies to 100% of the selling price thereafter.
At the election of any registered serviceman made for each

fiscal year, sales of service in which the aggregate annual
cost price of tangible personal property transferred as an
incident to the sales of service is less than 35%, or 75% in
the case of servicemen transferring prescription drugs or
servicemen engaged in graphic arts production, of the aggregate
annual total gross receipts from all sales of service, the tax
imposed by this Act shall be based on the serviceman's cost
price of the tangible personal property transferred as an
incident to the sale of those services.
The tax shall be imposed at the rate of 1% on food prepared
for immediate consumption and transferred incident to a sale of
service subject to this Act or the Service Occupation Tax Act
by an entity licensed under the Hospital Licensing Act, the
Nursing Home Care Act, the ID/DD Community Care Act, the
Specialized Mental Health Rehabilitation Act, or the Child Care
Act of 1969. The tax shall also be imposed at the rate of 1% on
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 is not otherwise included in this paragraph)
and prescription and nonprescription medicines, drugs, medical
appliances, modifications to a motor vehicle for the purpose of
rendering it usable by a disabled person, and insulin, urine
testing materials, syringes, and needles used by diabetics, for
human use. For the purposes of this Section, until September 1,
2009: the term "soft drinks" means any complete, finished,

ready-to-use, non-alcoholic drink, whether carbonated or not,
including but not limited to soda water, cola, fruit juice,
vegetable juice, carbonated water, and all other preparations
commonly known as soft drinks of whatever kind or description
that are contained in any closed or sealed bottle, can, carton,
or container, regardless of size; but "soft drinks" does not
include coffee, tea, non-carbonated water, infant formula,
milk or milk products as defined in the Grade A Pasteurized
Milk and Milk Products Act, or drinks containing 50% or more
natural fruit or vegetable juice.
Notwithstanding any other provisions of this Act,
beginning September 1, 2009, "soft drinks" means non-alcoholic
beverages that contain natural or artificial sweeteners. "Soft
drinks" do not include beverages that contain milk or milk
products, soy, rice or similar milk substitutes, or greater
than 50% of vegetable or fruit juice by volume.
Until August 1, 2009, and notwithstanding any other
provisions of this Act, "food for human consumption that is to
be consumed off the premises where it is sold" includes all
food sold through a vending machine, except soft drinks and
food products that are dispensed hot from a vending machine,
regardless of the location of the vending machine. Beginning
August 1, 2009, and notwithstanding any other provisions of
this Act, "food for human consumption that is to be consumed
off the premises where it is sold" includes all food sold
through a vending machine, except soft drinks, candy, and food

products that are dispensed hot from a vending machine,
regardless of the location of the vending machine.
Notwithstanding any other provisions of this Act,
beginning September 1, 2009, "food for human consumption that
is to be consumed off the premises where it is sold" does not
include candy. For purposes of this Section, "candy" means a
preparation of sugar, honey, or other natural or artificial
sweeteners in combination with chocolate, fruits, nuts or other
ingredients or flavorings in the form of bars, drops, or
pieces. "Candy" does not include any preparation that contains
flour or requires refrigeration.
Notwithstanding any other provisions of this Act,
beginning September 1, 2009, "nonprescription medicines and
drugs" does not include grooming and hygiene products. For
purposes of this Section, "grooming and hygiene products"
includes, but is not limited to, soaps and cleaning solutions,
shampoo, toothpaste, mouthwash, antiperspirants, and sun tan
lotions and screens, unless those products are available by
prescription only, regardless of whether the products meet the
definition of "over-the-counter-drugs". For the purposes of
this paragraph, "over-the-counter-drug" means a drug for human
use that contains a label that identifies the product as a drug
as required by 21 C.F.R. � 201.66. The "over-the-counter-drug"
label includes:
(A) A "Drug Facts" panel; or
(B) A statement of the "active ingredient(s)" with a

list of those ingredients contained in the compound,
substance or preparation.
If the property that is acquired from a serviceman is
acquired outside Illinois and used outside Illinois before
being brought to Illinois for use here and is taxable under
this Act, the "selling price" on which the tax is computed
shall be reduced by an amount that represents a reasonable
allowance for depreciation for the period of prior out-of-state
use.
(Source: P.A. 96-34, eff. 7-13-09; 96-37, eff. 7-13-09; 96-38,
eff. 7-13-09; 96-339, eff. 7-1-10; 96-1000, eff. 7-2-10; 97-38,
eff. 6-28-11; 97-227, eff. 1-1-12; revised 9-12-11.)
(35 ILCS 110/3-75)
Sec. 3-75. Sunset of exemptions, credits, and deductions.
(a) The application of every exemption, credit, and
deduction against tax imposed by this Act that becomes law
after the effective date of this amendatory Act of 1994 shall
be limited by a reasonable and appropriate sunset date. A
taxpayer is not entitled to take the exemption, credit, or
deduction beginning on the sunset date and thereafter. Except
as provided in subsection (b) of this Section, if If a
reasonable and appropriate sunset date is not specified in the
Public Act that creates the exemption, credit, or deduction, a
taxpayer shall not be entitled to take the exemption, credit,
or deduction beginning 5 years after the effective date of the

Public Act creating the exemption, credit, or deduction and
thereafter.
(b) Notwithstanding the provisions of subsection (a) of
this Section, the sunset date of any exemption, credit, or
deduction that is scheduled to expire in 2011, 2012, or 2013 by
operation of this Section shall be extended by 5 years.
(Source: P.A. 88-660, eff. 9-16-94; 89-235, eff. 8-4-95.)
Section 15-30. The Service Occupation Tax Act is amended by
changing Sections 3-5, 3-10, and 3-55 as follows:
(35 ILCS 115/3-5)
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
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
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.
(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
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, 2016
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 V of the Illinois
Public Aid Code who resides in a licensed long-term care
facility, as defined in the Nursing Home Care Act, or in a
licensed facility as defined in the ID/DD Community Care Act or
the Specialized Mental Health Rehabilitation 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
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
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" as that term is used
in the Wildlife Code. 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
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
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
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,
2016, 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
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.
(28) Tangible personal property sold to a
public-facilities corporation, as described in Section
11-65-10 of the Illinois Municipal Code, for purposes of
constructing or furnishing a municipal convention hall, but

only if the legal title to the municipal convention hall is
transferred to the municipality without any further
consideration by or on behalf of the municipality at the time
of the completion of the municipal convention hall or upon the
retirement or redemption of any bonds or other debt instruments
issued by the public-facilities corporation in connection with
the development of the municipal convention hall. This
exemption includes existing public-facilities corporations as
provided in Section 11-65-25 of the Illinois Municipal Code.
This paragraph is exempt from the provisions of Section 3-55.
(29) Beginning January 1, 2010, materials, parts,
equipment, components, and furnishings incorporated into or
upon an aircraft as part of the modification, refurbishment,
completion, replacement, repair, or maintenance of the
aircraft. This exemption includes consumable supplies used in
the modification, refurbishment, completion, replacement,
repair, and maintenance of aircraft, but excludes any
materials, parts, equipment, components, and consumable
supplies used in the modification, replacement, repair, and
maintenance of aircraft engines or power plants, whether such
engines or power plants are installed or uninstalled upon any
such aircraft. "Consumable supplies" include, but are not
limited to, adhesive, tape, sandpaper, general purpose
lubricants, cleaning solution, latex gloves, and protective
films. This exemption applies only to those organizations that
(i) hold an Air Agency Certificate and are empowered to operate

an approved repair station by the Federal Aviation
Administration, (ii) have a Class IV Rating, and (iii) conduct
operations in accordance with Part 145 of the Federal Aviation
Regulations. The exemption does not include aircraft operated
by a commercial air carrier providing scheduled passenger air
service pursuant to authority issued under Part 121 or Part 129
of the Federal Aviation Regulations.
(Source: P.A. 96-116, eff. 7-31-09; 96-339, eff. 7-1-10;
96-532, eff. 8-14-09; 96-759, eff. 1-1-10; 96-1000, eff.
7-2-10; 97-38, eff. 6-28-11; 97-73, eff. 6-30-11; 97-227, eff.
1-1-12; 97-431, eff. 8-16-11; revised 9-12-11.)
(35 ILCS 115/3-10) (from Ch. 120, par. 439.103-10)
Sec. 3-10. Rate of tax. Unless otherwise provided in this
Section, the tax imposed by this Act is at the rate of 6.25% of
the "selling price", as defined in Section 2 of the Service Use
Tax Act, of the tangible personal property. For the purpose of
computing this tax, in no event shall the "selling price" be
less than the cost price to the serviceman of the tangible
personal property transferred. The selling price of each item
of tangible personal property transferred as an incident of a
sale of service may be shown as a distinct and separate item on
the serviceman's billing to the service customer. If the
selling price is not so shown, the selling price of the
tangible personal property is deemed to be 50% of the
serviceman's entire billing to the service customer. When,

however, a serviceman contracts to design, develop, and produce
special order machinery or equipment, the tax imposed by this
Act shall be based on the serviceman's cost price of the
tangible personal property transferred incident to the
completion of the contract.
Beginning on July 1, 2000 and through December 31, 2000,
with respect to motor fuel, as defined in Section 1.1 of the
Motor Fuel Tax Law, and gasohol, as defined in Section 3-40 of
the Use Tax Act, the tax is imposed at the rate of 1.25%.
With respect to gasohol, as defined in the Use Tax Act, the
tax imposed by this Act shall apply to (i) 70% of the cost
price of property transferred as an incident to the sale of
service on or after January 1, 1990, and before July 1, 2003,
(ii) 80% of the selling price of property transferred as an
incident to the sale of service on or after July 1, 2003 and on
or before December 31, 2018 2013, and (iii) 100% of the cost
price thereafter. If, at any time, however, the tax under this
Act on sales of gasohol, as defined in the Use Tax Act, is
imposed at the rate of 1.25%, then the tax imposed by this Act
applies to 100% of the proceeds of sales of gasohol made during
that time.
With respect to majority blended ethanol fuel, as defined
in the Use Tax Act, the tax imposed by this Act does not apply
to the selling price of property transferred as an incident to
the sale of service on or after July 1, 2003 and on or before
December 31, 2018 2013 but applies to 100% of the selling price

thereafter.
With respect to biodiesel blends, as defined in the Use Tax
Act, with no less than 1% and no more than 10% biodiesel, the
tax imposed by this Act applies to (i) 80% of the selling price
of property transferred as an incident to the sale of service
on or after July 1, 2003 and on or before December 31, 2018
2013 and (ii) 100% of the proceeds of the selling price
thereafter. If, at any time, however, the tax under this Act on
sales of biodiesel blends, as defined in the Use Tax Act, with
no less than 1% and no more than 10% biodiesel is imposed at
the rate of 1.25%, then the tax imposed by this Act applies to
100% of the proceeds of sales of biodiesel blends with no less
than 1% and no more than 10% biodiesel made during that time.
With respect to 100% biodiesel, as defined in the Use Tax
Act, and biodiesel blends, as defined in the Use Tax Act, with
more than 10% but no more than 99% biodiesel material, the tax
imposed by this Act does not apply to the proceeds of the
selling price of property transferred as an incident to the
sale of service on or after July 1, 2003 and on or before
December 31, 2018 2013 but applies to 100% of the selling price
thereafter.
At the election of any registered serviceman made for each
fiscal year, sales of service in which the aggregate annual
cost price of tangible personal property transferred as an
incident to the sales of service is less than 35%, or 75% in
the case of servicemen transferring prescription drugs or

servicemen engaged in graphic arts production, of the aggregate
annual total gross receipts from all sales of service, the tax
imposed by this Act shall be based on the serviceman's cost
price of the tangible personal property transferred incident to
the sale of those services.
The tax shall be imposed at the rate of 1% on food prepared
for immediate consumption and transferred incident to a sale of
service subject to this Act or the Service Occupation Tax Act
by an entity licensed under the Hospital Licensing Act, the
Nursing Home Care Act, the ID/DD Community Care Act, the
Specialized Mental Health Rehabilitation Act, or the Child Care
Act of 1969. The tax shall also be imposed at the rate of 1% on
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 is not otherwise included in this paragraph)
and prescription and nonprescription medicines, drugs, medical
appliances, modifications to a motor vehicle for the purpose of
rendering it usable by a disabled person, and insulin, urine
testing materials, syringes, and needles used by diabetics, for
human use. For the purposes of this Section, until September 1,
2009: the term "soft drinks" means any complete, finished,
ready-to-use, non-alcoholic drink, whether carbonated or not,
including but not limited to soda water, cola, fruit juice,
vegetable juice, carbonated water, and all other preparations
commonly known as soft drinks of whatever kind or description

that are contained in any closed or sealed can, carton, or
container, regardless of size; but "soft drinks" does not
include coffee, tea, non-carbonated water, infant formula,
milk or milk products as defined in the Grade A Pasteurized
Milk and Milk Products Act, or drinks containing 50% or more
natural fruit or vegetable juice.
Notwithstanding any other provisions of this Act,
beginning September 1, 2009, "soft drinks" means non-alcoholic
beverages that contain natural or artificial sweeteners. "Soft
drinks" do not include beverages that contain milk or milk
products, soy, rice or similar milk substitutes, or greater
than 50% of vegetable or fruit juice by volume.
Until August 1, 2009, and notwithstanding any other
provisions of this Act, "food for human consumption that is to
be consumed off the premises where it is sold" includes all
food sold through a vending machine, except soft drinks and
food products that are dispensed hot from a vending machine,
regardless of the location of the vending machine. Beginning
August 1, 2009, and notwithstanding any other provisions of
this Act, "food for human consumption that is to be consumed
off the premises where it is sold" includes all food sold
through a vending machine, except soft drinks, candy, and food
products that are dispensed hot from a vending machine,
regardless of the location of the vending machine.
Notwithstanding any other provisions of this Act,
beginning September 1, 2009, "food for human consumption that

is to be consumed off the premises where it is sold" does not
include candy. For purposes of this Section, "candy" means a
preparation of sugar, honey, or other natural or artificial
sweeteners in combination with chocolate, fruits, nuts or other
ingredients or flavorings in the form of bars, drops, or
pieces. "Candy" does not include any preparation that contains
flour or requires refrigeration.
Notwithstanding any other provisions of this Act,
beginning September 1, 2009, "nonprescription medicines and
drugs" does not include grooming and hygiene products. For
purposes of this Section, "grooming and hygiene products"
includes, but is not limited to, soaps and cleaning solutions,
shampoo, toothpaste, mouthwash, antiperspirants, and sun tan
lotions and screens, unless those products are available by
prescription only, regardless of whether the products meet the
definition of "over-the-counter-drugs". For the purposes of
this paragraph, "over-the-counter-drug" means a drug for human
use that contains a label that identifies the product as a drug
as required by 21 C.F.R. � 201.66. The "over-the-counter-drug"
label includes:
(A) A "Drug Facts" panel; or
(B) A statement of the "active ingredient(s)" with a
list of those ingredients contained in the compound,
substance or preparation.
(Source: P.A. 96-34, eff. 7-13-09; 96-37, eff. 7-13-09; 96-38,
eff. 7-13-09; 96-339, eff. 7-1-10; 96-1000, eff. 7-2-10; 97-38,

eff. 6-28-11; 97-227, eff. 1-1-12; revised 9-12-11.)
(35 ILCS 115/3-55)
Sec. 3-55. Sunset of exemptions, credits, and deductions.
(a) The application of every exemption, credit, and
deduction against tax imposed by this Act that becomes law
after the effective date of this amendatory Act of 1994 shall
be limited by a reasonable and appropriate sunset date. A
taxpayer is not entitled to take the exemption, credit, or
deduction beginning on the sunset date and thereafter. Except
as provided in subsection (b) of this Section, if If a
reasonable and appropriate sunset date is not specified in the
Public Act that creates the exemption, credit, or deduction, a
taxpayer shall not be entitled to take the exemption, credit,
or deduction beginning 5 years after the effective date of the
Public Act creating the exemption, credit, or deduction and
thereafter.
(b) Notwithstanding the provisions of subsection (a) of
this Section, the sunset date of any exemption, credit, or
deduction that is scheduled to expire in 2011, 2012, or 2013 by
operation of this Section shall be extended by 5 years.
(Source: P.A. 88-660, eff. 9-16-94.)
Section 15-35. The Retailers' Occupation Tax Act is amended
by changing Sections 2-5, 2-10, and 2-70 as follows:

(35 ILCS 120/2-5)
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
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 (2) (7) is exempt from the
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
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.
(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
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
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
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,
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
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
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
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
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
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" as that term is used
in the Wildlife Code. 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,
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,
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, 2016
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 V of the Illinois
Public Aid Code who resides in a licensed long-term care
facility, as defined in the Nursing Home Care Act, or a
licensed facility as defined in the ID/DD Community Care Act or
the Specialized Mental Health Rehabilitation 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
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,
2016, 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)
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.
(40) Beginning January 1, 2010, materials, parts,
equipment, components, and furnishings incorporated into or
upon an aircraft as part of the modification, refurbishment,
completion, replacement, repair, or maintenance of the
aircraft. This exemption includes consumable supplies used in
the modification, refurbishment, completion, replacement,
repair, and maintenance of aircraft, but excludes any
materials, parts, equipment, components, and consumable
supplies used in the modification, replacement, repair, and
maintenance of aircraft engines or power plants, whether such
engines or power plants are installed or uninstalled upon any
such aircraft. "Consumable supplies" include, but are not
limited to, adhesive, tape, sandpaper, general purpose
lubricants, cleaning solution, latex gloves, and protective
films. This exemption applies only to those organizations that
(i) hold an Air Agency Certificate and are empowered to operate
an approved repair station by the Federal Aviation
Administration, (ii) have a Class IV Rating, and (iii) conduct
operations in accordance with Part 145 of the Federal Aviation
Regulations. The exemption does not include aircraft operated
by a commercial air carrier providing scheduled passenger air
service pursuant to authority issued under Part 121 or Part 129
of the Federal Aviation Regulations.
(41) Tangible personal property sold to a
public-facilities corporation, as described in Section

11-65-10 of the Illinois Municipal Code, for purposes of
constructing or furnishing a municipal convention hall, but
only if the legal title to the municipal convention hall is
transferred to the municipality without any further
consideration by or on behalf of the municipality at the time
of the completion of the municipal convention hall or upon the
retirement or redemption of any bonds or other debt instruments
issued by the public-facilities corporation in connection with
the development of the municipal convention hall. This
exemption includes existing public-facilities corporations as
provided in Section 11-65-25 of the Illinois Municipal Code.
This paragraph is exempt from the provisions of Section 2-70.
(Source: P.A. 96-116, eff. 7-31-09; 96-339, eff. 7-1-10;
96-532, eff. 8-14-09; 96-759, eff. 1-1-10; 96-1000, eff.
7-2-10; 97-38, eff. 6-28-11; 97-73, eff. 6-30-11; 97-227, eff.
1-1-12; 97-431, eff. 8-16-11; revised 9-12-11.)
(35 ILCS 120/2-10)
Sec. 2-10. Rate of tax. Unless otherwise provided in this
Section, the tax imposed by this Act is at the rate of 6.25% of
gross receipts from sales of tangible personal property made in
the course of business.
Beginning on July 1, 2000 and through December 31, 2000,
with respect to motor fuel, as defined in Section 1.1 of the
Motor Fuel Tax Law, and gasohol, as defined in Section 3-40 of
the Use Tax Act, the tax is imposed at the rate of 1.25%.

Beginning on August 6, 2010 through August 15, 2010, with
respect to sales tax holiday items as defined in Section 2-8 of
this Act, the tax is imposed at the rate of 1.25%.
Within 14 days after the effective date of this amendatory
Act of the 91st General Assembly, each retailer of motor fuel
and gasohol shall cause the following notice to be posted in a
prominently visible place on each retail dispensing device that
is used to dispense motor fuel or gasohol in the State of
Illinois: "As of July 1, 2000, the State of Illinois has
eliminated the State's share of sales tax on motor fuel and
gasohol through December 31, 2000. The price on this pump
should reflect the elimination of the tax." The notice shall be
printed in bold print on a sign that is no smaller than 4
inches by 8 inches. The sign shall be clearly visible to
customers. Any retailer who fails to post or maintain a
required sign through December 31, 2000 is guilty of a petty
offense for which the fine shall be $500 per day per each
retail premises where a violation occurs.
With respect to gasohol, as defined in the Use Tax Act, the
tax imposed by this Act applies to (i) 70% of the proceeds of
sales made on or after January 1, 1990, and before July 1,
2003, (ii) 80% of the proceeds of sales made on or after July
1, 2003 and on or before December 31, 2018 2013, and (iii) 100%
of the proceeds of sales made thereafter. If, at any time,
however, the tax under this Act on sales of gasohol, as defined
in the Use Tax Act, is imposed at the rate of 1.25%, then the

tax imposed by this Act applies to 100% of the proceeds of
sales of gasohol made during that time.
With respect to majority blended ethanol fuel, as defined
in the Use Tax Act, the tax imposed by this Act does not apply
to the proceeds of sales made on or after July 1, 2003 and on or
before December 31, 2018 2013 but applies to 100% of the
proceeds of sales made thereafter.
With respect to biodiesel blends, as defined in the Use Tax
Act, with no less than 1% and no more than 10% biodiesel, the
tax imposed by this Act applies to (i) 80% of the proceeds of
sales made on or after July 1, 2003 and on or before December
31, 2018 2013 and (ii) 100% of the proceeds of sales made
thereafter. If, at any time, however, the tax under this Act on
sales of biodiesel blends, as defined in the Use Tax Act, with
no less than 1% and no more than 10% biodiesel is imposed at
the rate of 1.25%, then the tax imposed by this Act applies to
100% of the proceeds of sales of biodiesel blends with no less
than 1% and no more than 10% biodiesel made during that time.
With respect to 100% biodiesel, as defined in the Use Tax
Act, and biodiesel blends, as defined in the Use Tax Act, with
more than 10% but no more than 99% biodiesel, the tax imposed
by this Act does not apply to the proceeds of sales made on or
after July 1, 2003 and on or before December 31, 2018 2013 but
applies to 100% of the proceeds of sales made thereafter.
With respect to 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,
modifications to a motor vehicle for the purpose of rendering
it usable by a disabled person, and insulin, urine testing
materials, syringes, and needles used by diabetics, for human
use, the tax is imposed at the rate of 1%. For the purposes of
this Section, until September 1, 2009: the term "soft drinks"
means any complete, finished, ready-to-use, non-alcoholic
drink, whether carbonated or not, including but not limited to
soda water, cola, fruit juice, vegetable juice, carbonated
water, and all other preparations commonly known as soft drinks
of whatever kind or description that are contained in any
closed or sealed bottle, can, carton, or container, regardless
of size; but "soft drinks" does not include coffee, tea,
non-carbonated water, infant formula, milk or milk products as
defined in the Grade A Pasteurized Milk and Milk Products Act,
or drinks containing 50% or more natural fruit or vegetable
juice.
Notwithstanding any other provisions of this Act,
beginning September 1, 2009, "soft drinks" means non-alcoholic
beverages that contain natural or artificial sweeteners. "Soft
drinks" do not include beverages that contain milk or milk
products, soy, rice or similar milk substitutes, or greater
than 50% of vegetable or fruit juice by volume.
Until August 1, 2009, and notwithstanding any other

provisions of this Act, "food for human consumption that is to
be consumed off the premises where it is sold" includes all
food sold through a vending machine, except soft drinks and
food products that are dispensed hot from a vending machine,
regardless of the location of the vending machine. Beginning
August 1, 2009, and notwithstanding any other provisions of
this Act, "food for human consumption that is to be consumed
off the premises where it is sold" includes all food sold
through a vending machine, except soft drinks, candy, and food
products that are dispensed hot from a vending machine,
regardless of the location of the vending machine.
Notwithstanding any other provisions of this Act,
beginning September 1, 2009, "food for human consumption that
is to be consumed off the premises where it is sold" does not
include candy. For purposes of this Section, "candy" means a
preparation of sugar, honey, or other natural or artificial
sweeteners in combination with chocolate, fruits, nuts or other
ingredients or flavorings in the form of bars, drops, or
pieces. "Candy" does not include any preparation that contains
flour or requires refrigeration.
Notwithstanding any other provisions of this Act,
beginning September 1, 2009, "nonprescription medicines and
drugs" does not include grooming and hygiene products. For
purposes of this Section, "grooming and hygiene products"
includes, but is not limited to, soaps and cleaning solutions,
shampoo, toothpaste, mouthwash, antiperspirants, and sun tan

lotions and screens, unless those products are available by
prescription only, regardless of whether the products meet the
definition of "over-the-counter-drugs". For the purposes of
this paragraph, "over-the-counter-drug" means a drug for human
use that contains a label that identifies the product as a drug
as required by 21 C.F.R. � 201.66. The "over-the-counter-drug"
label includes:
(A) A "Drug Facts" panel; or
(B) A statement of the "active ingredient(s)" with a
list of those ingredients contained in the compound,
substance or preparation.
(Source: P.A. 96-34, eff. 7-13-09; 96-37, eff. 7-13-09; 96-38,
eff. 7-13-09; 96-1000, eff. 7-2-10; 96-1012, eff. 7-7-10.)
(35 ILCS 120/2-70)
Sec. 2-70. Sunset of exemptions, credits, and deductions.
(a) The application of every exemption, credit, and
deduction against tax imposed by this Act that becomes law
after the effective date of this amendatory Act of 1994 shall
be limited by a reasonable and appropriate sunset date. A
taxpayer is not entitled to take the exemption, credit, or
deduction beginning on the sunset date and thereafter. Except
as provided in subsection (b) of this Section, if If a
reasonable and appropriate sunset date is not specified in the
Public Act that creates the exemption, credit, or deduction, a
taxpayer shall not be entitled to take the exemption, credit,

or deduction beginning 5 years after the effective date of the
Public Act creating the exemption, credit, or deduction and
thereafter.
(b) Notwithstanding the provisions of subsection (a) of
this Section, the sunset date of any exemption, credit, or
deduction that is scheduled to expire in 2011, 2012, or 2013 by
operation of this Section shall be extended by 5 years.
(Source: P.A. 88-660, eff. 9-16-94.)
Section 15-37. The Property Tax Code is amended by changing
Section 18-165 as follows:
(35 ILCS 200/18-165)
Sec. 18-165. Abatement of taxes.
(a) Any taxing district, upon a majority vote of its
governing authority, may, after the determination of the
assessed valuation of its property, order the clerk of that
county to abate any portion of its taxes on the following types
of property:
(1) Commercial and industrial.
(A) The property of any commercial or industrial
firm, including but not limited to the property of (i)
any firm that is used for collecting, separating,
storing, or processing recyclable materials, locating
within the taxing district during the immediately
preceding year from another state, territory, or

country, or having been newly created within this State
during the immediately preceding year, or expanding an
existing facility, or (ii) any firm that is used for
the generation and transmission of electricity
locating within the taxing district during the
immediately preceding year or expanding its presence
within the taxing district during the immediately
preceding year by construction of a new electric
generating facility that uses natural gas as its fuel,
or any firm that is used for production operations at a
new, expanded, or reopened coal mine within the taxing
district, that has been certified as a High Impact
Business by the Illinois Department of Commerce and
Economic Opportunity. The property of any firm used for
the generation and transmission of electricity shall
include all property of the firm used for transmission
facilities as defined in Section 5.5 of the Illinois
Enterprise Zone Act. The abatement shall not exceed a
period of 10 years and the aggregate amount of abated
taxes for all taxing districts combined shall not
exceed $4,000,000.
(A-5) Any property in the taxing district of a new
electric generating facility, as defined in Section
605-332 of the Department of Commerce and Economic
Opportunity Law of the Civil Administrative Code of
Illinois. The abatement shall not exceed a period of 10

years. The abatement shall be subject to the following
limitations:
(i) if the equalized assessed valuation of the
new electric generating facility is equal to or
greater than $25,000,000 but less than
$50,000,000, then the abatement may not exceed (i)
over the entire term of the abatement, 5% of the
taxing district's aggregate taxes from the new
electric generating facility and (ii) in any one
year of abatement, 20% of the taxing district's
taxes from the new electric generating facility;
(ii) if the equalized assessed valuation of
the new electric generating facility is equal to or
greater than $50,000,000 but less than
$75,000,000, then the abatement may not exceed (i)
over the entire term of the abatement, 10% of the
taxing district's aggregate taxes from the new
electric generating facility and (ii) in any one
year of abatement, 35% of the taxing district's
taxes from the new electric generating facility;
(iii) if the equalized assessed valuation of
the new electric generating facility is equal to or
greater than $75,000,000 but less than
$100,000,000, then the abatement may not exceed
(i) over the entire term of the abatement, 20% of
the taxing district's aggregate taxes from the new

electric generating facility and (ii) in any one
year of abatement, 50% of the taxing district's
taxes from the new electric generating facility;
(iv) if the equalized assessed valuation of
the new electric generating facility is equal to or
greater than $100,000,000 but less than
$125,000,000, then the abatement may not exceed
(i) over the entire term of the abatement, 30% of
the taxing district's aggregate taxes from the new
electric generating facility and (ii) in any one
year of abatement, 60% of the taxing district's
taxes from the new electric generating facility;
(v) if the equalized assessed valuation of the
new electric generating facility is equal to or
greater than $125,000,000 but less than
$150,000,000, then the abatement may not exceed
(i) over the entire term of the abatement, 40% of
the taxing district's aggregate taxes from the new
electric generating facility and (ii) in any one
year of abatement, 60% of the taxing district's
taxes from the new electric generating facility;
(vi) if the equalized assessed valuation of
the new electric generating facility is equal to or
greater than $150,000,000, then the abatement may
not exceed (i) over the entire term of the
abatement, 50% of the taxing district's aggregate

taxes from the new electric generating facility
and (ii) in any one year of abatement, 60% of the
taxing district's taxes from the new electric
generating facility.
The abatement is not effective unless the owner of
the new electric generating facility agrees to repay to
the taxing district all amounts previously abated,
together with interest computed at the rate and in the
manner provided for delinquent taxes, in the event that
the owner of the new electric generating facility
closes the new electric generating facility before the
expiration of the entire term of the abatement.
The authorization of taxing districts to abate
taxes under this subdivision (a)(1)(A-5) expires on
January 1, 2010.
(B) The property of any commercial or industrial
development of at least 500 acres having been created
within the taxing district. The abatement shall not
exceed a period of 20 years and the aggregate amount of
abated taxes for all taxing districts combined shall
not exceed $12,000,000.
(C) The property of any commercial or industrial
firm currently located in the taxing district that
expands a facility or its number of employees. The
abatement shall not exceed a period of 10 years and the
aggregate amount of abated taxes for all taxing

districts combined shall not exceed $4,000,000. The
abatement period may be renewed at the option of the
taxing districts.
(2) Horse racing. Any property in the taxing district
which is used for the racing of horses and upon which
capital improvements consisting of expansion, improvement
or replacement of existing facilities have been made since
July 1, 1987. The combined abatements for such property
from all taxing districts in any county shall not exceed
$5,000,000 annually and shall not exceed a period of 10
years.
(3) Auto racing. Any property designed exclusively for
the racing of motor vehicles. Such abatement shall not
exceed a period of 10 years.
(4) Academic or research institute. The property of any
academic or research institute in the taxing district that
(i) is an exempt organization under paragraph (3) of
Section 501(c) of the Internal Revenue Code, (ii) operates
for the benefit of the public by actually and exclusively
performing scientific research and making the results of
the research available to the interested public on a
non-discriminatory basis, and (iii) employs more than 100
employees. An abatement granted under this paragraph shall
be for at least 15 years and the aggregate amount of abated
taxes for all taxing districts combined shall not exceed
$5,000,000.

(5) Housing for older persons. Any property in the
taxing district that is devoted exclusively to affordable
housing for older households. For purposes of this
paragraph, "older households" means those households (i)
living in housing provided under any State or federal
program that the Department of Human Rights determines is
specifically designed and operated to assist elderly
persons and is solely occupied by persons 55 years of age
or older and (ii) whose annual income does not exceed 80%
of the area gross median income, adjusted for family size,
as such gross income and median income are determined from
time to time by the United States Department of Housing and
Urban Development. The abatement shall not exceed a period
of 15 years, and the aggregate amount of abated taxes for
all taxing districts shall not exceed $3,000,000.
(6) Historical society. For assessment years 1998
through 2018 2013, the property of an historical society
qualifying as an exempt organization under Section
501(c)(3) of the federal Internal Revenue Code.
(7) Recreational facilities. Any property in the
taxing district (i) that is used for a municipal airport,
(ii) that is subject to a leasehold assessment under
Section 9-195 of this Code and (iii) which is sublet from a
park district that is leasing the property from a
municipality, but only if the property is used exclusively
for recreational facilities or for parking lots used

exclusively for those facilities. The abatement shall not
exceed a period of 10 years.
(8) Relocated corporate headquarters. If approval
occurs within 5 years after the effective date of this
amendatory Act of the 92nd General Assembly, any property
or a portion of any property in a taxing district that is
used by an eligible business for a corporate headquarters
as defined in the Corporate Headquarters Relocation Act.
Instead of an abatement under this paragraph (8), a taxing
district may enter into an agreement with an eligible
business to make annual payments to that eligible business
in an amount not to exceed the property taxes paid directly
or indirectly by that eligible business to the taxing
district and any other taxing districts for premises
occupied pursuant to a written lease and may make those
payments without the need for an annual appropriation. No
school district, however, may enter into an agreement with,
or abate taxes for, an eligible business unless the
municipality in which the corporate headquarters is
located agrees to provide funding to the school district in
an amount equal to the amount abated or paid by the school
district as provided in this paragraph (8). Any abatement
ordered or agreement entered into under this paragraph (8)
may be effective for the entire term specified by the
taxing district, except the term of the abatement or annual
payments may not exceed 20 years.

(9) United States Military Public/Private Residential
Developments. Each building, structure, or other
improvement designed, financed, constructed, renovated,
managed, operated, or maintained after January 1, 2006
under a "PPV Lease", as set forth under Division 14 of
Article 10, and any such PPV Lease.
(10) Property located in a business corridor that
qualifies for an abatement under Section 18-184.10.
(b) Upon a majority vote of its governing authority, any
municipality may, after the determination of the assessed
valuation of its property, order the county clerk to abate any
portion of its taxes on any property that is located within the
corporate limits of the municipality in accordance with Section
8-3-18 of the Illinois Municipal Code.
(Source: P.A. 96-1136, eff. 7-21-10; 97-577, eff. 1-1-12.)
Section 15-40. The Illinois Estate and Generation-Skipping
Transfer Tax Act is amended by changing Section 2 as follows:
(35 ILCS 405/2) (from Ch. 120, par. 405A-2)
Sec. 2. Definitions.
"Federal estate tax" means the tax due to the United States
with respect to a taxable transfer under Chapter 11 of the
Internal Revenue Code.
"Federal generation-skipping transfer tax" means the tax
due to the United States with respect to a taxable transfer

under Chapter 13 of the Internal Revenue Code.
"Federal return" means the federal estate tax return with
respect to the federal estate tax and means the federal
generation-skipping transfer tax return with respect to the
federal generation-skipping transfer tax.
"Federal transfer tax" means the federal estate tax or the
federal generation-skipping transfer tax.
"Illinois estate tax" means the tax due to this State with
respect to a taxable transfer.
"Illinois generation-skipping transfer tax" means the tax
due to this State with respect to a taxable transfer that gives
rise to a federal generation-skipping transfer tax.
"Illinois transfer tax" means the Illinois estate tax or
the Illinois generation-skipping transfer tax.
"Internal Revenue Code" means, unless otherwise provided,
the Internal Revenue Code of 1986, as amended from time to
time.
"Non-resident trust" means a trust that is not a resident
of this State for purposes of the Illinois Income Tax Act, as
amended from time to time.
"Person" means and includes any individual, trust, estate,
partnership, association, company or corporation.
"Qualified heir" means a qualified heir as defined in
Section 2032A(e)(1) of the Internal Revenue Code.
"Resident trust" means a trust that is a resident of this
State for purposes of the Illinois Income Tax Act, as amended

from time to time.
"State" means any state, territory or possession of the
United States and the District of Columbia.
"State tax credit" means:
(a) For persons dying on or after January 1, 2003 and
through December 31, 2005, an amount equal to the full credit
calculable under Section 2011 or Section 2604 of the Internal
Revenue Code as the credit would have been computed and allowed
under the Internal Revenue Code as in effect on December 31,
2001, without the reduction in the State Death Tax Credit as
provided in Section 2011(b)(2) or the termination of the State
Death Tax Credit as provided in Section 2011(f) as enacted by
the Economic Growth and Tax Relief Reconciliation Act of 2001,
but recognizing the increased applicable exclusion amount
through December 31, 2005.
(b) For persons dying after December 31, 2005 and on or
before December 31, 2009, and for persons dying after December
31, 2010, an amount equal to the full credit calculable under
Section 2011 or 2604 of the Internal Revenue Code as the credit
would have been computed and allowed under the Internal Revenue
Code as in effect on December 31, 2001, without the reduction
in the State Death Tax Credit as provided in Section 2011(b)(2)
or the termination of the State Death Tax Credit as provided in
Section 2011(f) as enacted by the Economic Growth and Tax
Relief Reconciliation Act of 2001, but recognizing the
exclusion amount of only (i) $2,000,000 for persons dying prior

to January 1, 2012, (ii) $3,500,000 for persons dying on or
after January 1, 2012 and prior to January 1, 2013, and (iii)
$4,000,000 for persons dying on or after January 1, 2013, and
with reduction to the adjusted taxable estate for any qualified
terminable interest property election as defined in subsection
(b-1) of this Section.
(b-1) The person required to file the Illinois return may
elect on a timely filed Illinois return a marital deduction for
qualified terminable interest property under Section
2056(b)(7) of the Internal Revenue Code for purposes of the
Illinois estate tax that is separate and independent of any
qualified terminable interest property election for federal
estate tax purposes. For purposes of the Illinois estate tax,
the inclusion of property in the gross estate of a surviving
spouse is the same as under Section 2044 of the Internal
Revenue Code.
In the case of any trust for which a State or federal
qualified terminable interest property election is made, the
trustee may not retain non-income producing assets for more
than a reasonable amount of time without the consent of the
surviving spouse.
"Taxable transfer" means an event that gives rise to a
state tax credit, including any credit as a result of the
imposition of an additional tax under Section 2032A(c) of the
Internal Revenue Code.
"Transferee" means a transferee within the meaning of

Section 2603(a)(1) and Section 6901(h) of the Internal Revenue
Code.
"Transferred property" means:
(1) With respect to a taxable transfer occurring at the
death of an individual, the deceased individual's gross
estate as defined in Section 2031 of the Internal Revenue
Code.
(2) With respect to a taxable transfer occurring as a
result of a taxable termination as defined in Section
2612(a) of the Internal Revenue Code, the taxable amount
determined under Section 2622(a) of the Internal Revenue
Code.
(3) With respect to a taxable transfer occurring as a
result of a taxable distribution as defined in Section
2612(b) of the Internal Revenue Code, the taxable amount
determined under Section 2621(a) of the Internal Revenue
Code.
(4) With respect to an event which causes the
imposition of an additional estate tax under Section
2032A(c) of the Internal Revenue Code, the qualified real
property that was disposed of or which ceased to be used
for the qualified use, within the meaning of Section
2032A(c)(1) of the Internal Revenue Code.
"Trust" includes a trust as defined in Section 2652(b)(1)
of the Internal Revenue Code.
(Source: P.A. 96-789, eff. 9-8-09; 96-1496, eff. 1-13-11.)