Did Illinois's enterprise-zone pollution-control exemption cover the pollution-control facility itself and its repair parts?

Plain-English summary

The Section 1e enterprise-zone exemption covered tangible personal property used or consumed in operating a pollution-control facility, not the facility itself or its repair and replacement parts. A certified business argued for a broader exemption covering treatment equipment, monitoring equipment, repair parts, and operating supplies.

The Department rejected that reading. It said Section 1e's express language could not reasonably be read to exempt pollution-control facilities themselves. It also refused to add repair and replacement parts because the legislature had expressly included such parts in the separate Section 1d manufacturing and graphic-arts exemption but not in Section 1e.

The GIL separately described the former Section 1a exemption for pollution-control facilities, including integral replacement parts, and noted that exemption was available only until July 1, 2003. Under that former provision, chemicals, fuel, and other nonintegral operating property did not qualify.

What this means for you

Do not combine distinct enterprise-zone exemptions. Identify the specific statutory provision, whether the purchase is the facility itself or property used or consumed in its operation, and whether current law expressly includes repair parts.

Common questions

Q: Did Section 1e exempt the pollution-control equipment itself?
A: No, according to this GIL.

Q: Did Section 1e include repair and replacement parts?
A: No. The Department said it could not expand the statute to add them.

Q: Why did the GIL discuss Section 1d?
A: To show that the legislature expressly included repair parts in a different exemption when it intended that result.

Subject

Enterprise Zones

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2011.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2011/st-11-0008.pdf

Original ruling text

ST 11-0008-GIL 02/28/2011 ENTERPRISE ZONES
This letter concerns the exemption for tangible personal property used or consumed in the
operation of pollution control facilities located in enterprise zones. See 35 ILCS 120/1e. (This
is a GIL.)

February 28, 2011

Dear Xxxxx:
This letter is in response to your letter dated November 17, 2010, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the
taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR
are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information
Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website
at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
We are requesting a written letter ruling clarifying the exemption on pollution control
equipment afforded certified Enterprise Zone businesses. We are not currently under
audit nor have any pending litigation affecting the issue presented below.
Having met the requirements under the Retailers' Occupation Tax Act, 35 ILCS 120/1f,
ABC has been certified by the Department of Commerce and Economic Opportunity
(DCEO). This certification makes available a tax exemption on pollution control
equipment under the Retailers' Occupation Tax Act, 35 ILCS 120/1e, which states in its
entirety:
Subject to the provisions of Section 1f, or subject to the provisions of
Section 5.5 of the Illinois Enterprise Zone Act, all tangible personal
property to be used or consumed in the operation of pollution control
facilities, as defined in Section 1a of this Act, within an enterprise zone
established pursuant to the ‘Illinois Enterprise Zone Act’, as amended,
shall be exempt from the tax imposed by this Act. (Source: P.A. 85-1182.)
(underlining added for emphasis)
The tax exemption on pollution control equipment under Section 1a of this same Act
was rescinded effective June 30, 2003. It states in its entirety:

‘Pollution control facilities’ means any system, method, construction,
device or appliance appurtenant thereto sold or used or intended for the
primary purpose of eliminating, preventing or reducing air and water
pollution as the term ‘air pollution’ or ‘water pollution’ is defined in the
‘Environmental Protection Act’, enacted by the 76th General Assembly, or
for the primary purpose of treating, pretreating, modifying or disposing of
any potential solid, liquid or gaseous pollutant which if released without
such treatment, pretreatment, modification or disposal might be harmful,
detrimental or offensive to human, plant or animal life, or to property.
Until July 1, 2003, the purchase, employment and transfer of such tangible
personal property as pollution control facilities is not a purchase, use or
sale of tangible personal property. (Source: P.A. 93-24, eff. 6-20-03.)
We understand this latter exemption to say only the treating equipment and repair parts
qualify for the tax exemption. It does not extend to non-treating equipment, supplies
used or consumed in the operation of a pollution control facility, and was available to all
businesses not just those certified by DCEO.
Though the exemption under the Retailers' Occupation Tax Act, 35 ILCS 120/1a expired
seven years ago, it is our position that Section 1e has always permitted an exemption
on pollution control facilities within an enterprise zone for DCEO certified businesses.
The exemption is available on the purchase of pollution treating equipment, non-treating
(monitoring) equipment, all associated repair parts, and supplies used or consumed in
the operation of a pollution control facility.
Our position is supported by the Department’s own Regulation 130.1951i)3), which
states in part:
However, if a business enterprise is certified by the Department of
Commerce and Community Affairs, all tangible personal property used or
consumed by it in the operation of pollution control facilities within an
enterprise zone is exempt from tax. (underlining added for emphasis)
Kindly clarify the Department’s position on the pollution control exemption available for
DCEO certified businesses.
If you have any questions or require additional information, please feel free to write or
call me.

DEPARTMENT’S RESPONSE:
The pollution control facilities sales tax exemption contained in Section 1a of the Retailers’
Occupation Tax Act was, until July 1, 2003, available for “any system, method, construction, device or
appliance appurtenant thereto sold or used or intended for the primary purpose of eliminating,
preventing, or reducing air and water pollution as the term ‘pollution’ is defined in the Environmental
Protection Act (415 ILCS 5/1 et seq.), or for the primary purpose of treating, pretreating, modifying or
disposing of any potential solid, liquid, gaseous pollutant which if released without such treatment,
pretreatment, modification or disposal might be harmful, detrimental or offensive to human, plant or
animal life, or to property”. See, 35 ILCS 120/1a; 86 Ill. Adm. Code 130.335(a).

The exemption also extended to replacement parts for the pollution control equipment. The
exemption did not extend, however, to chemicals used in such equipment, to fuel used in operating
such equipment, or any other tangible personal property used in connection with the equipment, but
which is not an integral part of the pollution control equipment. 86 Ill. Adm. Code 130.335(a). The
primary purpose of the system, method, construction or device sold had to be for the elimination,
removal or prevention of pollutants in the air or water in order to qualify for the sales tax exemption.
The seller of pollution control equipment had to obtain a signed statement from the purchaser
certifying the equipment would be used as a pollution control facility in order for the seller to be
relieved of the duty to collect and remit tax on the sale.
Section 1e of the Retailers' Occupation Tax Act provides that “all tangible personal property to
be used or consumed in the operation of pollution control facilities, as defined in Section 1a of this
Act, within an enterprise zone established pursuant to the "Illinois Enterprise Zone Act", as amended,
shall be exempt from the tax … .” 35 ILCS 120/1e. See also, 86 Ill. Adm. Code 130.1951(i). Section
130.1951(i)(3) provides numerous examples of items used or consumed in the operation of pollution
control facilities.
There is no language in either the Act or the rules that indicates or suggests that that items
qualifying as “pollution control facilities” under Section 1a also qualify for an exemption under Section
1e of the Act. Section 1e is limited to tangible personal property to be used or consumed in the
operation of pollution control facilities. The express language of Section 1e cannot reasonably be
interpreted to exempt the pollution control facilities themselves.
Section 1d provides an exemption for tangible personal property to be used or consumed
within an enterprise zone or a High Impact Business in the process of the manufacturing or assembly
of tangible personal property for wholesale or retail sale or lease or in the process of graphic arts
production. Unlike Section 1e, Section 1d contains express language that states the exemption
“includes repair and replacement parts for machinery and equipment used primarily in the process of
manufacturing or assembling tangible personal property or in the process of graphic arts production
… for wholesale or retail sale, or lease, and equipment, manufacturing or graphic arts fuels, material
and supplies for the maintenance, repair or operation of such manufacturing or assembling or graphic
arts machinery or equipment.” 35 ILCS 120/1d. It should also be noted that the Retailers'
Occupation Tax Act presently contains an exemption for tangible personal property that will be used
primarily in the process of manufacturing or assembly and graphic arts machinery and equipment. 35
ILCS 120/2-5(14) and 2-45; 35 ILCS 2-5(4).
Sections 1d and 1e were added to the Retailers' Occupation Tax Act by P.A. 84-940, effective
September 25, 1985. The General Assembly expressly included repair and replacement parts in the
exemption contained in Section 1d. It did not include repair and replacement parts in the exemption
contained in Section 1e. The Department cannot by rule expand the scope of Section 1e to include
repair and replacement parts. Nor can the Department expand the scope of the exemption contained
in Section 1e to include the pollution control facilities. The exemption contained in Section 1e is
limited to tangible personal property to be used or consumed in the operation of pollution control
facilities.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Richard S. Wolters
Associate Counsel
RSW:msk