Section 522.10  Purpose

 

The Department is charged with implementing a program to certify applicants for an apprenticeship credit under this Section. Upon satisfactory review, the Department shall issue a tax credit certificate to an employer incurring costs on behalf of a qualifying apprentice stating the amount of the tax credit to which the employer is entitled. [P.A. 101-0207; 35 ILCS 5/229(c)].

 

Section 522.20  Definitions

 

The following definitions are applicable to this Part.

 

"Act" or "Illinois Income Tax Act" [35 ILCS 5/101 et seq.]

 

"Certificate" means the tax credit certificate issued by the Department under Section 229(c) of the Act as amended by P.A. 101-207.

 

"Department" or "DCEO" means the Department of Commerce and Economic Opportunity. [20 ILCS 605/605-5 and P.A. 101-0207; 35 ILCS 5/229]

 

"Employer" means an Illinois income taxpayer who is the employer of the qualifying apprentice. [P.A. 101-0207; 35 ILCS 5/229(a)]

 

"Qualifying apprentice" means an individual who:

 

is a resident of the State of Illinois;

 

is at least 16 years old at the close of the school year for which a credit is sought;

 

during the school year for which a credit is sought, was a full-time apprentice enrolled in an apprenticeship program which is registered with the United States Department of Labor, Office of Apprenticeship; and

 

is employed in Illinois by the taxpayer who is the employer. [P.A. 101-0207; 35 ILCS 5/229(a)]

 

"Qualified education expense" means the amount incurred on behalf of a qualifying apprentice not to exceed $3,500, or $5,000 for taxpayers qualifying for the underserved area increase (Section 522.80(c)) for tuition, book fees, and lab fees at the school or community college in which the apprentice is enrolled during the regular school year. [P.A. 101-0207; 35 ILCS 5/229(a)]  Any amount paid for the purchase or rental cost of items that would be considered qualified education expenses but for the fact that the items are not substantially consumed during the school year and will remain the tangible personal property of a qualifying pupil or a custodian at the conclusion of the school year, or for items that are not required as part of the Program, shall not be considered qualified education expenses.  Examples of expenses that are excluded include, but not limited to, computers, tablets, and tools.  For purposes of this Section, an item is substantially consumed when, during the school year, the item is used to the extent that its fair market value has been reduced to a de minimis amount. Expenses that are paid, reimbursed, credited, or otherwise subsidized by other public or private sources are not qualified education expenses.

 

Tuition is the amount paid to a school as a condition of enrollment for a quarter, semester or year term in the program the qualifying apprentice is enrolled.

 

Book fees are amounts paid for the use of books (print or digital) that are essential to a qualifying apprentice's participation in the education program of the school.  A book is essential when the school or instructor of the school requires its use by the qualifying pupil in order to participate in and complete a course of the education program. 

 

Lab fees are amounts paid for the use of supplies, equipment, materials or instruments that are essential to a qualifying pupil's participation in a lab course of the school's education program.  Supplies, equipment, materials or instruments are essential when the school or instructor of the school requires their use by the qualifying apprentice in order to participate in and complete a lab course of the education program.  Lab courses include those courses that, in addition to classroom instruction by a teacher, provide an environment of organized activity involving observation, experimentation or practice in a course of study.  Lab courses of study include those courses with a scientific, musical, artistic, technical or language skill content.  Lab fees may be in the nature of a rental fee for supplies, equipment, materials or instruments that are used in the lab course.  Fees incurred for the purchase of supplies, equipment, materials or instruments used in a lab course and which are substantially consumed by the assignments and activities of the lab are also considered qualifying lab fees.

 

"School" means any public or nonpublic secondary or post-secondary school in Illinois that is:

 

an institution of higher education that provides a program that leads to an industry-recognized postsecondary credential or degree;

 

an entity that carries out programs registered under the federal National Apprenticeship Act; or

 

another public or private provider of a program of training services, which may include a joint labor-management organization that provides an apprenticeship school curriculum and courses. [P.A. 101-0207; 35 ILCS 5/229(a)]

 

"School Year" shall mean the customary annual schedule of courses at a school during which students, including qualifying apprentice(s) attend school as distinguished from the calendar year.

 

"Underserved area" shall have the same meaning as provided in the Economic Development for a Growing Economy Tax Credit (35 ILCS 10/5-5), as amended.

 

Section 522.30  Maximum Amount of Available Credits

 

For taxable years beginning on or after January 1, 2020, and beginning on or before January 1, 2025, subject to appropriation the aggregate amount of the tax credits that may be claimed under this Section for qualified education expenses incurred by an employer on behalf of a qualifying apprentice, shall be limited to $5,000,000 per calendar year.  If applications for a greater amount are received per year, credits shall be allowed on a first-come first-served basis, based on the date on which each properly completed application for a certificate of eligibility is received by the Department. If more than one certificate is received on the same day, the credits will be awarded based on the time of submission for that particular day. [P.A. 101-0207; 35 ILCS 5/229(b)] The aggregate amount will be determined based on the date the qualified education expenses were incurred by the employer. Employers must submit a claim for a credit by March 31 of the current calendar year to receive a credit for expenses incurred during the previous calendar year.

 

Section 522.40  Eligibility Requirements

 

a)         In order to qualify for credits under the Act, an applicant must adhere to the requirements established by the Department in this Section and Section 522.50. The Department shall require that any application must be submitted via the Department's web-based application process.

 

b)         The applicant shall be an Illinois taxpayer registered as a business entity with the Illinois Secretary of State's Office.

 

c)         In order to qualify for a credit, the applicant must provide support, including but not limited to:

 

1)         receipts obtained from the school in which the qualifying apprentices was enrolled;

 

2)         a qualifying enrollment of apprentices in a program at a school that meets the definition under the Act; and

 

3)         incurred or is incurring qualified education expenses on behalf of the qualifying apprentice.

 

Section 522.50  Form of Application

 

a)         The application submitted by the employer shall at a minimum include the following information about the employer submitting the application:

 

1)         The applicant name, address, email, and telephone number;

 

2)         key contact name and title;

 

3)         total number of qualifying apprentices employed;

 

4)         employer industry by the North American Industry Classification System;

 

5)         Federal Employer Identification Number (FEIN); and

 

6)         Any other provisions or information the Department determines necessary to facilitate the Department's evaluation.

 

b)         The application submitted by the employer shall also include the following information about the qualifying apprentices:

 

1)         The name, age, residence address, and taxpayer identification number of each qualifying apprentice employed by the taxpayer during the taxable year;

 

2)         the name of the school at which the qualifying apprentice is enrolled; [P.A. 101-0207; 35 ILCS 5/229(g)]

 

3)         The total amount of education expenses incurred on behalf of the qualifying apprentices by the applicant, including expenses incurred that do not qualify as education expenses to be reimbursed;

 

4)         The total amount of qualified education expenses incurred with respect to each qualifying apprentice; [P.A. 101-0207; 35 ILCS 5/229(g)] and

 

5)         Any other provisions or information the Department determines necessary to facilitate the Department's evaluation.

 

c)         The applicant is responsible for the accuracy of all data, information and documentation submitted to the Department.

 

d)         Any materials or data made available or received by any agent or employee of the Department from an applicant for, or a recipient of a tax credit under Section 229(c) of the Act as amended by P.A. 101-207, that contain information that is exempt from disclosure under Section 7 of the Freedom of Information Act [5 ILCS 140/7] shall not be disclosed.

 

e)         To aid an employer in claiming the apprenticeship education expense credit, a school should provide to the employer a written receipt documenting the apprenticeship education expenses paid to the school by the employer on behalf of qualifying apprentices during the school year. The written receipt should be provided to the employer on upon request. When a school provides a written receipt to an employer, it should use the form prescribed by the Department and include the following information:

 

1)         the designated school year during which the qualifying education expenses were paid;

 

2)         the name and address of the school;

 

3)         the name and address of the employer;

 

4)         the name and social security number of the qualifying apprentice or apprentices;

 

5)         a list of education expense amounts paid for tuition, book fees and lab fees during the school year; and

 

6)         the total of all such education expenses paid during the school year. All information contained on the written receipt provided by a school is deemed confidential information for use as supporting documentation of the apprenticeship education expense credit claimed and shall not be used for any other purpose.

 

Section 522.60  Application Review

 

a)         Applications will be accepted at any time during the year. The Department will provide interested applicants with an application package upon request. Submission of an application does not commit the Department to award a credit.  All applications shall be submitted electronically to the Department.

 

b)         The Department shall review the information submitted by the applicant under Section 522.50.  The Department shall review all applications to determine that all required information and documentation has been provided.  Applicants will be notified, electronically, of any application deficiencies and will be allowed 30 days to correct the deficiencies through submission of additional documentation.  The Department has the discretion to extend the cure the period in extenuating circumstances, provided the applicant submits a written request outlining the circumstances for which it needs an extension. 

 

c)         In evaluating an application, the Department shall determine if the following are true:

 

1)         The employer enrolled the qualifying apprentices in a school;

 

2)         The school accepted payment and the period of time in which the employer can receive a refund has expired; and

 

3)         The employer is incurring or incurred qualified education expenses on behalf of qualifying apprentices.

 

d)         Upon satisfactory review, the Department shall issue a tax credit certificate to an employer incurring or who has incurred costs on behalf of a qualifying apprentice stating the amount of the tax credit to which the employer is entitled. If the employer is seeking a tax credit for multiple qualifying apprentices, the Department may issue a single tax credit certificate that encompasses the aggregate total of tax credits for qualifying apprentices for a single employer. [P.A. 101-0207; 35 ILCS 5/229(c)]

 

Section 522.70  Application Denial/Approval of Certification

 

Applicants shall be notified in writing as to the Department's evaluation of all completed applications. If approved, the Department will issue a certification to the employer. If the Department denies an application, it will specify the reasons for the denial in writing and allow the applicant 30 days to amend and resubmit its application for evaluation.

 

Section 522.80  Determination of Amount of Tax Credit

 

a)         The credit shall be equal to 100% of the qualified education expenses, but in no event may the total credit amount awarded to a single taxpayer in a single taxable year exceed $3,500 per qualifying apprentice. [P.A. 101-0207; 35 ILCS 5/229(b)]

 

b)         Underserved Area Increase. A taxpayer shall be entitled to an additional $1,500 credit (for a total credit up to $5,000 per qualifying apprentice) against the tax imposed by subsections (a) and (b) of Section 201 of the Illinois Income Tax Act if (i) the qualifying apprentice resides in an Underserved Area during the school year for which a credit is sought by an employer or (ii) the employer's Principal Place of Business is located in an Underserved Area. [P.A. 101-0207; 35 ILCS 5/229(b)]

 

c)         In no event shall a credit under this Section reduce the taxpayer's liability under this Act to less than zero. If a taxpayer received a grant for qualifying education expenses to be paid by a grantor, only the qualifying education expenses not paid for with grant funds can be claimed. [P.A. 101-0207; 35 ILCS 5/229(b)]

 

d)         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 Section 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. [P.A. 101-0207; 35 ILCS 5/229(b)]

 

e)         The tax credit for qualified education expenses incurred must be claimed for the tax year in which the qualified education expenses are actually paid by the employer. Any part of the apprenticeship education expense credit not claimed or allowed in a given tax year shall not be carried forward or backward to any other tax year.  Likewise, where qualified education expenses are incurred in excess of the allowable education expense credit for any given tax year, the excess of qualified education expenses shall not be used in claiming the education expense credit for any other tax year.

 

Section 522.90  Record Retention

 

An employer filing a return claiming the apprenticeship education expense credit shall maintain records of proof as to the education expenses paid for by the employer. The employer shall maintain the records for a period of not less than 3 years after the date the return on which the employer claimed the apprenticeship education expense credit was filed. Records maintained by the employer shall be subject to inspection by the Department and its duly authorized agents and employees.

 

Section 522.100  Noncompliance

 

a)         If the Department determines that a tax credit certificate for credits under the Act is not in compliance with the requirements of the certification or any provisions of this Part or the Act, the Director shall provide notice to the employer of the alleged noncompliance, and allow the employer a hearing under Article 10 of the Illinois Administrative Procedure Act [5 ILCS 100/10]. The notice shall include the reason for noncompliance and the date and location of a hearing to be held (see 56 Ill. Adm. Code 2605 (Administrative Hearing Rules)). If, after notice and any hearing, the Director determines that a noncompliance event exists and determines that the certification shall be revoked, the Director shall issue to the Illinois Department of Revenue notice to that effect, stating the employer name, noncompliance date and the employer credits subject to recapture by the Illinois Department of Revenue. Alleged noncompliance shall include, but is not limited to, the following:

 

1)         a demonstration that the employer failed materially to comply with the terms and conditions of the certification; or

 

2)         a determination upon investigation that the employer provided false or misleading information to the Department.

 

b)         If the Department's determination of noncompliance is confirmed after any hearing described in Section 522.100(a) or remains uncontested, the Department will notify the employer in writing, that its credit certification is revoked, and any credits issued to the employer prior to the revocation are subject to recapture by the Illinois Department of Revenue.  The Department shall refer the revocation to the Department of Revenue and request proceedings be initiated to recover wrongfully issued credits.