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May 18, 2018
State and Local Tax this week
Illinois General Assembly
The House and Senate were in session this week from Tuesday May 15 through Friday May 18.
The House and Senate are scheduled to be in session all next week beginning on Monday and are scheduled to be in session each day, including the weekend and the Memorial Day holiday through Thursday May 31.
Again this week, there was little public discussion of tax issues. Budget discussions are ongoing, but as of yet there has yet been little public discussion.
With the exception of property tax legislation, most tax-related legislation has some impact on state revenues and, hence, on the state budget. The House and Senate Revenue committees have not moved any legislation forward that could be construed to have a negative effect on state revenues - this includes the Chamber's legislative proposals.
We will continue to work to include Chamber Tax Institute legislative proposals in any final budget legislation.
This week we also continued our efforts to amend the Revised Uniform Unclaimed Property Act to roll back the egregious anti-business provisions of that law.
SB 3229, sponsored by Senator Harmon is on third reading in the Senate. This bill is an initiative of the financial industry and would modify some provisions of the Act. As discussed in prior newsletters, the language of SB 3229 that purports to eliminate the retroactivity of the Act does not eliminate the retroactivity problems inherent in the Act. We have engaged in discussions with Senator Harmon and his staff to highlight our concerns and provided amendatory language to the Senator to address the concerns of the business community. The Treasurer's office is strongly opposed to our proposed amendments. The Treasurer is strongly in favor of maintaining retroactive implementation of the Act.
Revenue committees
The Senate Revenue committee did not meet this week.
The Senate Revenue committee has scheduled a hearing for next week on May 22. As of this morning, only one bill has been posted for Senate Revenue committee consideration. HB 4237, the work around to the $10,000 federal SALT tax deduction cap.
The House Revenue committee met this week on Thursday May 17. Here is link a to the bills that were posted for consideration. The overwhelming majority of the bills considered by the House Revenue committee were TIF extensions and property tax legislation.
SB 3238 passed the House Revenue and Finance Committee unanimously. This bill amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act. Provides that the exemption for coal and aggregate exploration, mining, off-highway hauling, processing, maintenance, and reclamation equipment. The Chamber supports this legislation.
SB 2604 - the Illinois Chamber Tax Institute initiative to amend the Uniform Penalty and Interest Act was posted for the House Revenue committee yesterday, but was one of the many bills posted for consideration that was not called for a vote.
As of this morning, the House Revenue committee not yet scheduled a hearing next week.
Other Committees
HB 4081 - The Call Center Worker Act was considered by the Senate Telecommunications and Information Technology committee and failed to pass yesterday evening 8-7-0. This bill would create the "Call Center Worker and Consumer Protection Act," and would require businesses to notify the state Treasurer of their intention to move any customer service or back-office operations out of the state. Among, other things employers who do not comply with the notification requirements in the proposed law would be subject to a $10,000 per day penalty for being in violation of the Act. Any company that engages in a relocation covered by the Act would be ineligible for any direct or indirect state grants or loans for 5 years and would be required to remit the unamortized value of any grant, guaranteedloan, tax benefits, or any other government support previously received to the State Treasurer. Tyler Diers of the Chamber testified in opposition and is actively leading a coalition to defeat the passage of the bill. The bill has been rescheduled for a hearing next week.
SB 3285 - Creates the Illinois Home Grown Business Opportunity Act. This bill was scheduled for consideration by the House Business Incentives for Local Communities Committee.
SB 3285 provides that the Department of Commerce and Economic Opportunity shall develop an economic plan to assist businesses and municipalities located geographically close to bordering states. .
The May 18 edition of the
Illinois Register was not published this morning as of the finalization of today's newsletter. I'll report on any pertinent rulemakings in next week's newsletter.
Tax Tribunal
No new decisions were issued by the Tribunal this week. One new case filed with the Tribunal this week may be of interest.
Mastercard Incorporated v. Illinois Department of Revenue, is an income tax case that involves a challenge to the Illinois "throw out" rule. During the tax years at issue, MasterCard did not exclude any receipts from its sales factor. Upon audit, the Department of Revenue invoked the throw out rule and excluded certain receipts from he denominator of the taxpayer's sales factor on the basis that the taxpayer was not taxable in the jurisdictions to which such receipts were attributed.
IITA Section 304(a)(3)(C-5)(iv) provides that receipts from services are thrown out of the apportionment formula if a taxpayer is not taxable in the state to which such receipts are assigned. Section 100.3200(a)(2) of the Department's regulations provides that a taxpayer is subject to a tax only if it actually pays a tax.
MasterCard is challenging the requirement of the regulation that a taxpayer must actually pay a tax in order to be subject to a tax. It contends IITA Section 303(f) requires only that the non-Illinois jurisdiction has the ability to tax a taxpayer. MasterCard also raises a number of constitutional arguments in support of its challenge to the throw out rule.
I suspect that the Department of Revenue may respond to MasterCard's argument as to the validity of the Department's rule by responding that this issue was previously addressed by an Illinois appellate court in the context of the Illinois throwback rule in
Dover Corporation v. Department of Revenue, 271 Ill. App.3d 700 (1995)
Tax Institute Second Quarter Meeting
June 12 - Featured speaker Representative Mike Zalewski Chairman of the House Revenue committee. One hour of ethics training to be presented by Horwood Marcus & Berk. The meeting is hosted by BDO at the offices of McDermott Will & Emery, 444 W. Lake Street, Suite 4000, Chicago. Please RSVP to me at [email protected]
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