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January 10, 2020
State and Local Tax
This Week
Illinois General Assembly
The House and Senate will return to Springfield for the beginning of the spring legislative session on January 28.
New legislation
SB 2339 - McConchie - .
Amends the Property Tax Extension Limitation Law in the Property Tax Code. Provides that a taxing district shall reduce its aggregate extension base for the purpose of lowering its limiting rate for future years upon referendum approval initiated by the submission of a petition by the voters of the district. Effective immediately.
SB 2341 - Bush - Amends the Property Tax Code. Provides that the county board of Lake County, by ordinance, or the voters of Lake County, by backdoor referendum, may vote to discontinue all offices of the township assessor in the county. Provides petition and referendum requirements. Provides that after the adoption of an ordinance, or after the approval of a backdoor referendum, to discontinue all offices of township assessor in Lake County, the office of township assessor is discontinued in each township at the end of each township assessor's term. Provides that at the end of each township assessor's term: (i) the Chief County Assessment Officer of Lake County assumes the duties of the township assessor; (ii) the county board members become the board of health for any public health district in the township; and (iii) the office of the township collector of the township ceases and the county treasurer assumes the duties of the township collector. Amends the Public Health District Act making conforming changes. Effective immediately.
HB 4017 - Murphy - Amends the Illinois Estate and Generation-Skipping Transfer Tax Act. Provides that, for persons dying on or after January 1, 2021, the exclusion amount shall be the applicable exclusion amount calculated under Section 2010 of the Internal Revenue Code, including any deceased spousal unused exclusion amount (currently, the exclusion amount for Illinois estate tax purposes is $4,000,000). Effective immediately.
HB 4021 - Murphy - This bill is an Illinois Chamber of Commerce Tax Institute initiative. Amends the Illinois Income Tax Act. Creates an income tax deduction for an amount of up to $50,000 per tax year contributed to a small business asset purchase account and all interest earned on such accounts during the tax year. Provides that a "small business asset purchase account" means an account established by a taxpayer, the proceeds of which are used to purchase property used primarily in Illinois for which a federal income tax deduction is claimed under Section 179 of the Internal Revenue Code. Provides an addition modification for amounts withdrawn from a small business asset purchase account that are not used for qualified purchases. Amends the Uniform Penalty and Interest Act to establish a penalty for improper use of moneys in a small business asset purchase account. Effective immediately.
HB 4048 - Carroll - This is an Illinois Chamber of Commerce Tax Institute initiative. Amends the Tobacco Products Tax Act of 1995. Provides that, beginning on January 1, 2021, the tax per cigar or other rolled tobacco product shall not exceed $0.50 per cigar or roll. Provides that distributors are allowed a discount in the amount of 2% of the distributor's tax liability, but not to exceed $2,000 per return.
Property Tax Relief Task Force
The Task Force missed its preliminary report deadline.
The final report of the Task Force was due to be submitted to the Governor and the General Assembly on December 31. The Task Force has missed the December 31 deadline too. A copy of the Draft Report has surfaced. As the linked letter describes, there is not bi-partisan support for the proposals contained in the draft report.
Rulemaking
The January 3 edition of the Illinois Register contained rulemakings of interest in addition to the emergency rules governing marketplace facilitators that I discussed in last week's newsletter.
The Department of Revenue proposed amendments to the Income Tax rules to implement P.A. 101-585 which modified the income taxation of nonresidents and the foreign tax credit.
The Department of Commerce and Economic Opportunity proposed emergency and permanent rules to implement provisions of the Cannabis Regulation and Tax Act relating to Social Equity Applicants for the various licenses authorized by P.A. 101-27.
The Illinois Department of Revenue proposed four emergency rulemakings and two permanent rulemakings in the January 10 edition of the
Illinois Register.
The first two emergency rulemakings amend the Retailers' Occupation Tax rules and the Use Tax rules. The Department has also proposed identical permanent rules. The rulemakings are described as follows:
"The guidance provided in the emergency amendment regarding the trade-in credit limitation on the trade-in of first division motor vehicles applies to sales of motor vehicles beginning on January 1, 2020. Although the Department of Revenue published Informational Bulletin FY 2020-1 in September 2019 regarding this issue, an organization representing automobile dealers as well as the Illinois Secretary of State's Office recently had additional inquiries and it became clear that the Department could not rely on existing information about vehicle registrations to delineate which vehicles are subject to the trade-in credit limitation, but must itself provide specific guidance on what constitutes a first division motor vehicle subject to the limitation. As a result of these inquiries, the Department posted a "Frequently Asked Questions" document on its website on December 20, 2019 and is filing this emergency rulemaking in order to put in place binding guidance on this issue that both taxpayers and Department employees can rely on."
The third emergency rulemaking promulgates new Cannabis Cultivation and Privilege Tax rules and are described as follows: " The rulemaking implements PA 101-27, codified at 410 ILCS 705/. Beginning September 1, 2019, a tax is imposed upon the privilege of cultivating cannabis at the rate of 7% of the gross receipts from the first sale of cannabis by a cultivator to a cultivator, craft grower, infuser or dispensing organization. The sale of any product that contains any amount of cannabis or any derivative thereof is subject to the tax on the full selling price of the product."
The fourth emergency rulemaking promulgates new Cannabis Purchaser Excise Tax rules and are described as follows: "The rulemaking implements PA 101-27, codified at 410 ILCS 705. Beginning January 1, 2020, a tax is imposed upon purchasers for the privilege of using cannabis at the following rates: 1) any cannabis, other than a cannabis-infused product, with an adjusted delta-9-tetrahydrocannabinol level at or below 35% shall be taxed at a rate of 10% of the purchase price; 2) any cannabis, other than a cannabis-infused product, with an adjusted delta-9tetrahydrocannabinol level above 35% shall be taxed at a rate of 25% of the purchase price; and 3) a cannabis-infused product shall be taxed at a rate of 20% of the purchase price."
Court cases
No new decisions this week.
Tax Tribunal
The Tribunal posted one new decision this week. Kishwaukee Auto Corral, Inc. v. Department of Revenue is a protest of a refund claim denial. Kishwaukee filed a refund claim for the percentage of sales tax it never received from an individual customer following a default. Kishwaukee paid all of the sales tax up front to the Department at the time of purchase.
The Department denied the refund claim stating it lacks the statutory to pay the refund. The Department asserted that Illinois law was amended in 2015 to provide in section 6d that refunds are limited to retailers who charge off uncollectible accounts on their books and records as well as claim a corresponding bad debt deduction on their federal income tax return. The Department contended that because Kishwaukee is a cash-basis taxpayer which is unable to claim a bad debt deduction on its federal income tax return, the Department cannot grant the claims for refunds.
Judge Conway ruled for the Department.
None of the new cases filed with the Tribunal raise unique tax issues.
Publications
The Illinois General Assembly's bi-partisan Commission on Government Forecasting and Accountability has issued the Monthly Briefing for the Month Ended: December 2019.
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