Illinois General Assembly

The House and Senate has adjourned until the fall veto session.  The first day of the veto session is scheduled for October 28.

SB 687  -  (P.A. 101-0008) The Governor signed this bill on Wednesday.  The legislation that imposes graduated income tax rates effective January 2021, if the the constitutional amendment authorizing graduated rates is approved by the voters  passed the Senate and passed the House with an amendment that deals with distributions of a percentage of the proceeds of the income tax to local governments. 

This week I will highlight some of the details of SB 689.  I'll dig into SB 690, another major piece of tax legislation, next week.  In the interim, there is a link to my quick summary of all tax-related legislation below.

SB 689 - (P.A. 101-0009) This bill was signed by the Governor on Wednesday.  There are some important pro-taxpayer highlights of this bill:

Illinois Department of Revenue tax amnesty - from 10/1/ - 11/15/19 - Note that there appears to be a gap period between this amnesty and the prior amnesty.  The prior amnesty covered periods  after June 30, 2002 and prior to July 1, 2009 for the tax amnesty period beginning on October 1, 2010 through November 8, 2010. 

The new amnesty covers periods after June 30, 2011 and prior to July 1, 2018 for the tax amnesty period beginning on October 1, 2019 through November 15, 2019

Franchise Tax amnesty - from 10/1/19 - 11/15/19 - The Franchise Tax Amnesty applies to franchise tax or license fee liabilities for any tax period ending after March 15, 2008 and on or before June 30, 2019.  Unlike the Department of Revenue tax amnesty discussed above, there is no "gap" period under the Franchise Tax amnesty.   

It is unclear to me at this point how the Franchise Tax amnesty will be implemented for filers who may need to amend reports filed for periods ending before March 15, 2008 as a part of an overall amnesty filing.

Gradual elimination of the Franchise Tax - Here is the operative language:   

"On or after January 1, 2020 and prior to January 1, 2021, the first $30 in liability is exempt from the tax imposed under this Section. On or after January 1, 2021 and prior to January 1, 2022, the first $1,000 in liability is exempt from the tax imposed under this Section. On or after January 1, 2022 and prior to January 1, 2023, the first $10,000 in liability is exempt from the tax imposed under this Section. On or after January 1, 2023 and prior to January 1, 2024, the first $100,000 in liability is exempt from the tax imposed under this Section. The provisions of this Section shall not require the payment of any franchise tax that would otherwise have been due and payable on or after January 1, 2024." 

Manufacturers' Purchase Credit - This is not simply a return of the prior MPC. This is now a complete exemption for production-related tangible personal property.  The portion of SB 689 consists of language that I drafted for legislation previously introduced by Representative Keith Wheeler. 

The new exemption is effective for purchases made on an after July 1, 2019.  It should be noted that there is no sunset date for this exemption.  In the legislative debate in the House on this bill, the sponsor stated that because production-related tangible personal property is now part of the manufacturing machinery and equipment exemption, there will be no sunset date because the existing manufacturing machinery and equipment exemption has no sunset date.

It is a much more generous exemption without the difficult reporting requirements of the original MPC.  This legislation simply expands the manufacturing machinery and equipment exemption to include production-related tangible personal property.  Production-related tangible personal property will now be exempt from all state and local sales taxes.  It is no longer limited to the 6.25% state tax.  There are no requirements that MPC be "earned" through the purchase of exempt machinery and equipment.

Please note that the statutory definition of "production-related tangible personal property" is amended to include "supplies and consumables used in a manufacturing facility including fuels, coolants, solvents, oils, lubricants, and adhesives, hand tools, protective apparel, and fire and safety equipment used or consumed within an manufacturing facility."  I took this language out of the MPC regulations and put it into the statutory definition to make clear that these items will continue to fall with the scope of the definition.  

The inclusion of "solvents" in the definition may prevent some future disputes over the scope of the "chemicals and chemicals acting as catalysts" provision of the machinery and equipment exemption.  In the past, the Department has denied requests for exemption of substances that they characterized as "solvents."

Blue Collar Jobs Act - an EDGE type credit that provides an income tax credit in the form of a credit for incremental income tax withholding for construction jobs for High Impact businesses, businesses in Enterprise Zones and River Edge areas.  The credit is enhanced if the construction jobs are in an "underserved" area - this is the same definition used in the current EDGE credit.

I put together an updated summary of Tax and and Budget-related legislation from the spring legislative session that is available at this  link.

Rulemaking