Illinois Senate Bill 689 (“SB 689”)1 was signed by Governor Pritzker on June 5, 2019. Among the many changes made by this legislation, it revives and expands the manufacturing exemption to include production related tangible personal property, beginning July 1, 2019.2
Illinois previously exempted production related tangible personal property, but the exemption ended June 30, 2008. In addition, from September 1, 2004, and sunsetting August 30, 2014, qualifying manufacturers were able to earn a Manufacturer’s Purchase Credit (MPC).3 The MPC could be claimed by a manufacturer for 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. The MPC was a tax credit equal to half of the state sales tax that would have been owed if the purchase had not otherwise been exempt.
Under SB 689, the Illinois manufacturing exemption once again includes production related tangible personal property. “Production related tangible personal property” means all tangible personal property that is used or consumed by the purchaser in a manufacturing facility in which a manufacturing process takes place and includes, without limitation, tangible personal property that is purchased for incorporation into real estate within a manufacturing facility, supplies, and consumables used in a manufacturing facility and tangible personal property that is used or consumed in activities such as research and development, preproduction material handling, receiving, quality control, inventory control, storage, staging, and packaging for shipping and transportation purposes. These items were also exempt under the Illinois exemption that ended on June 30, 2008. However, SB 689 also includes the following types of items as production related tangible personal property, now eligible for the exemption: fuels, coolants, solvents, oils, lubricants, adhesives, hand tools, protective apparel, and fire and safety equipment used or consumed within a manufacturing facility.4
Another distinction under the reboot of this exemption is that the two limitations that applied to production related tangible personal property purchased on or before June 30, 2008, do not apply to production related tangible personal property purchased on or after July 1, 2019. The two limitations were as follows:
(i) The maximum amount of the exemption for any one taxpayer could not exceed 5% of the purchase price of production related tangible personal property that is purchased on or after July 1, 2007 and on or before June 30, 2008. A Manufacturer’s Purchase Credit5 could not be earned on the purchase of production related tangible personal property for which an exemption was received.
(ii) The maximum aggregate amount of the exemptions for production related tangible personal property purchased on or after July 1, 2007 and on or before June 30, 2008 to all taxpayers could not exceed $10,000,000.
1 Illinois Public Act 101-0009, enacted June 5, 2019.
2 35 Ill. Comp. Stat. 105/3-5(18).
3 35 Ill. Comp. Stat. 105/3-85, sunset August 30, 2014.
4 35 Ill. Comp. Stat. 105/3-50(5), as amended by Illinois SB 689, effective June 5, 2019.
5 35 Ill. Comp. Stat. 105/3-85, sunset August 30, 2014.
TECHNICAL INFORMATION CONTACTS:
Mark Nachbar
Principal
Ryan
630.515.0477
mark.nachbar@ryan.com
Michael Willer
Director
Ryan
630.515.0477
michael.willer@ryan.com