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KEITH STAATS
Tax Institute
(217) 522-5512 ext. 231
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March 15
Illinois Chamber of Commerce
Second Annual Women in Business Conference at
Pinstripes in Oak Brook, IL.
The event will bring together business leaders from across the State to encourage women to invest in themselves, become courageous leaders, and be a force in their careers. Conference information and registration is available at this link.
March 20: Chamber Day Springfield - Save the date - additional details to follow -
registration
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February 22, 2019
State and Local Tax
This Week
Illinois General Assembly
The House returned to Springfield February 19 through the 21st.
The House is in session next week Tuesday through Thursday. The Senate is not in session next week.
The House Revenue committee has scheduled a hearing for next Thursday on February 28. The committee is scheduled to hold a subject matter hearing on FY 20 revenue estimates.
The Senate Revenue committee held a hearing on February 20. The committee passed out a number of bills:
SB 29 (Green Energy),
SB 71 (Income Tax - Natural Disaster Credit),
SB 140 (Property Tax - senior citizens homestead exemption),
SB 158 (Property Tax Sales in Error),
SB 1199 (Property Tax veterans disability homestead exemption),
SB 1217 (Hotel Tax distributions by a DuPage County municipality),
SB 1257 (Property Tax senior citizens homestead exemption) and
SB 1349 - (Uniform Penalty and Interest Act reform) - this bill is an initiative of the Illinois Chamber of Commerce Tax Institute.
Governor's budget message
Governor Pritzker gave his Budget Message on February 20. There are a number of tax proposals in the Governor's budget. Here is a link to the Operating Budget Book. A description of the tax proposals begins on Page 32. Here is a quick summary of the tax provisions:
Legalization of sports wagering ($212 million), legalization of recreational cannabis ($170 million), new plastic-bag tax at 5 cents per bag ($19-23 million), E-cigarettes tax ($10 million), cigarette tax increase of 32 cents per pack ($55 million), managed care organization assessment ($390 million), phasing out private-school scholarship credit ($6 million), progressive tax for video gaming ($89 million), capping the retailers discount at $1000 per vendor ($75 million), another tax amnesty program ($175 million), and decoupling from "federal repatriation credit" ($94 million).
I reached out to the Department because it wasn't completely clear to me what the Governor was proposing by "decoupling from federal repatriation credit." The Department confirmed my suspicion that this proposal is a replay of legislation the Department introduced last year, SB 3512, sponsored by Senator Althoff. SB 3512 passed the Senate unanimously last year. The bill stalled in the House. We were neutral on the bill last year, as were the other business associations.
SB 3512 was an IDOR initiative that was proposed as a reaction to
federal tax reform.
The addition modification in SB 3512 from last year involves IRC Section 250(a)(1)(A) and according to the Department was designed to continue the taxation of income that was previously subject to tax by Illinois prior to federal tax reform. The rationale for the legislation involves a rather detailed analysis of federal tax law involving the taxation of income received from foreign corporations.
Last year, I went over to the Department and met with Brian Stocker, the senior attorney in the Department's income legal division, and Brian walked me through the Department's rationale.
In order to explain the Department's rationale, Brian drew two scenarios on a white board to illustrate what the prior law and post-federal tax reform laws do with respect to this aspect of federal income taxation.
The first illustration represented pre-federal tax reform where income was taxed at the 35% federal rate. The second picture represented post-federal tax reform. SB 3512 is an addback designed to pick up the FDII (foreign derived intangible income) which, prior to federal tax reform, was subject to Illinois income taxation, but because of the way things were modified at the federal level by federal tax reform, without the addback in SB 3512 would not be subject to tax post-federal tax reform.
The Department's intention through the legislation is add back the FDII amount deducted under IRC 250. Their rationale was that it is equivalent to foreign income from operations not from a CFC (controlled foreign corporation) which they indicate was subject to Illinois income taxation prior to federal tax reform. (I can share the pictures of the white board that was the basis of my discussion with Brian with anyone who is interested.)
IL Chamber Tax Institute Initiatives
IDOR Legislative Initiatives
The Illinois Department of Revenue provided me with their list of legislative initiatives:
HB 3590 - (Yingling) -
Amends the Illinois Income Tax Act. Provides that winnings from pari-mutuel wagering conducted at a wagering facility licensed under the Illinois Horse Racing Act of 1975 or from winnings from gambling games conducted on a riverboat licensed under the Riverboat Gambling Act are taxable as income in this State, for both residents and nonresidents. Provides that such winners must withhold Illinois income tax from their winnings, if the payment of winnings must be reported to the Internal Revenue Service by the person making the payment.
HB 3608 - (Sosnowski) - Amends the Illinois Income Tax Act. Increases the amount of tax due that requires the payment of estimated taxes to $1,000 (currently $500).
HB 3633 - (Manley) - Amends the Illinois Income Tax Act. Provides that, for purposes of being liable for income tax, compensation is paid in this State if some of the individual's service is performed within this State, the individual's service performed within this State is nonincidental to the individual's service performed without this State, and the individual's service is performed within this State for more than 30 working days during the tax year. Defines terms.
HB 3660 - (Martwick) - Amends the Illinois Vehicle Code. Increases the use tax rate for private sales of motor vehicles valued at $30,000 or more from a flat rate of $1,500 to the following rates: $2,000 for a vehicle valued from $30,000 to $49,999; $2,500 for a vehicle valued from $50,000 to $99,999; $5,000 for a vehicle valued from $100,000 to $999,999; and $10,000 for a vehicle valued at $1,000,000 or more. Provides that the same motorcycles, motor driven cycles, and mopeds are subject to the same rates as other motor vehicles (currently a flat rate of $25 is imposed regardless of value). Effective January 1, 2020.
HB 3713 - (Zalewski) - Amends the Illinois Procurement Code. Provides that the Code does not apply to contracts entered into prior to July 1, 2022 by a State agency, or by multiple State agencies, for the single integrated tax processing system currently in use by the Department of Revenue on the effective date of the amendatory Act. Amends the Governmental Joint Purchasing Act. Provides that the Act does not apply to contracts entered into by multiple State agencies for the single integrated tax processing system currently in use by the Department of Revenue on the effective date of the amendatory Act.
SB 2099 - (Hutchinson) - Amends the Illinois Procurement Code. Provides that the Code does not apply to contracts entered into prior to July 1, 2022 by a State agency, or by multiple State agencies, for the single integrated tax processing system currently in use by the Department of Revenue on the effective date of the amendatory Act. Amends the Governmental Joint Purchasing Act. Provides that the Act does not apply to contracts entered into by multiple State agencies for the single integrated tax processing system currently in use by the Department of Revenue on the effective date of the amendatory Act.
New legislation this week
The bill filing deadline was Friday February 15. 3717 bills were introduced in the House and 2153 bills were introduced in the Senate. Two additional tax-related bills were introduced this week in addition to the bills I included in the Monday newsletter:
SB 1281 - (Hunter) - A
mends the Metropolitan Pier and Exposition Authority Act. Changes the name of the Act and Authority to the Metropolitan Public Exposition Authority Act and the Metropolitan Public Exposition Authority. Provides that the Authority may enter into installment payments contracts or lease purchase agreements for specified purposes. Limits the applicability of provisions concerning persons engaged in the business of providing ground transportation and livery vehicles. Requires imposition of a $1 occupation tax on specified persons engaged in the business of providing a transportation network service in the metropolitan area at the McCormick Square campus or a commercial service airport. Increases specified bonding authority of the Authority from $2,850,000,000 to $3,450,000,000. Increases the minimum contract amount requiring a contract to be competitively bid or require a request for proposal. Makes other changes relating to minority-owned, women-owned, and veteran-owned businesses and contractors, contracts for professional services, and contracts entered into pursuant to the Governmental Joint Purchasing Act. Amends various Acts, Laws, and Codes making conforming changes concerning the Act's title and Authority's name. Amends the State Finance Act, Use Tax Act, Service Use Tax Act, Service Occupation Tax Act, and Retailers' Occupation Tax Act. Increases the amounts that may be deposited into the McCormick Place Expansion Project Fund through the year 2036 (currently, through 2032), allowing for increases each fiscal year thereafter that bonds are outstanding, but not after fiscal year 2070 (currently, 2060). Effective immediately.
HB 3707 - (Walker) - mends the Illinois Enterprise Zone Act. In a Section concerning eligibility for an Enterprise Zone based on the local labor market area, provides that the Department of Commerce and Economic Opportunity may consider information released in the most recent American Community Survey (currently, the federal decennial census only). Provides that the Department of Commerce and Economic Opportunity may award partial points if the applicant demonstrates specific job creation and investment below specified thresholds. Contains provisions concerning provisional certification and provisional decertification. Provides that, for Enterprise Zones that are scheduled to expire on or after January 1, 2022, an application process shall begin 5 years prior to the year in which the Zone expires. Provides that the Department of Commerce and Economic Opportunity may consider written comments or any other information regarding a pending Enterprise Zone application submitted after the deadline and received prior to the decision on all pending applications. Makes changes concerning the total number of Enterprise Zones that may be certified. Effective immediately.
Rulemaking
did not contain any new rulemakings by the Illinois Department of Revenue or the Illinois Department of Commerce and Economic Opportunity.
Court cases
No new tax-related cases this week.
Tax Tribunal
No new decisions were posted this week.
None of the new cases filed this week raise unique issues.
Publications
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