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May 3, 2019
State and Local Tax
This Week
Illinois General Assembly
The House and the Senate returned to Springfield on April 30 through Thursday May 2 for the final month of the legislative session.
The House and Senate are in session next week Tuesday through Friday. Next Friday is the House deadline to move substantive Senate bills out of committee and the Senate deadline to move substantive House bills out of committee.
As noted in Special Reports I sent out Tuesday and Wednesday, this was an eventful week. As previously reported,
SJRCA 0001 passed out of the Senate on May 1. The Constitutional amendment, authorizing a graduated income tax, is now in the House.
Representative Martwick is the sponsor of the amendment in the House. The amendment is currently in the House Rules committee and has not yet been assigned to a substantive committee. We will continue to oppose the constitutional amendment in the House.
SB 687 - the legislation that sets forth a schedule of income tax rates for the tax years beginning January 2021 if the constitutional amendment is enacted also passed the Senate on Wednesday. The House sponsor is Representative Zalewski, the Chair of the House Revenue committee. As of this morning, this bill is in the Rules committee and has not been assigned to a substantive committee.
We will continue to oppose SB 687 in the House.
SB 689 amends the Illinois Estate and Generation-Skipping Transfer Tax Act to repeal the Illinois estate tax and the Generation Skipping Transfer Tax effective January 1, 2021. The bill passed the Senate on Wednesday. Representative Zalewski is the House sponsor of SB 689. The bill is currently in the House Rules committee.
Although we are supportive of efforts to repeal the Illinois Estate and Generation-Skipping Transfer Tax Act, we did not take a position on this legislation because it was a portion of a package of bills tied to the graduated income tax legislation.
SB 690 is a property tax freeze bill that would extend the Property Tax Extension Limitation law beginning with levy year 2022 to certain school districts and limit the increase in property taxes to amounts approved by voters by referendum. The bill passed the Senate on Wednesday. Representative Zalewski is the House sponsor of SB 690. The bill is currently in the House Rules committee.
We did not take a position on this legislation because it was a portion of a package of bills tied to the graduated income tax legislation.
Senate Revenue committee
The Senate Revenue committee met on Tuesday. Here is a link to the legislation considered by the committee. Nothing of particular consequence was considered by the committee.
The Senate Revenue committee is scheduled to meet next week on Wednesday afternoon. Here is a link to the bills posted for committee consideration.
House Revenue committee
The House Revenue committee was scheduled to meet on Thursday, but cancelled the hearing.
The House Revenue committee is scheduled to meet twice next week. The sales, amusement and other taxes subcommittee of the Revenue committee is scheduled to meet on Wednesday afternoon to hold a subject matter hearing on sports wagering.
The full Revenue committee is scheduled to meet on next Thursday morning. Here is a link to the bills posted for committee consideration. At this point it is unclear as to which of the bills posted to the committee will actually be considered.
The Revenue committee is also scheduled to hold a subject matter hearing next Thursday morning entitled "Federal/State Transportation Financing: ONE Central Proposal."
The House Income Tax subcommittee of the Revenue committee is also scheduled to meet next Thursday morning. As of this morning, the only item posted for consideration is HR 146 (Halpin) which urges the U.S. Government to enact a federal system limiting and regulating the types of incentives that states can offer.
Amendments to tax legislation this week
See the above discussion of SB 687, SB 689 and SB 690.
Rulemaking
did not contain any new rulemakings by the Illinois Department of Revenue or the Illinois Department of Commerce and Economic Opportunity.
The Department of Revenue adopted two rulemakings this week. The Department adopted amendments to the Retailers' Occupation Tax rules, that up date the rules reference legislation enacted over the past two years. For example, the rules are amended to reflect that P.A. 100-22 amended the manufacturing machinery and equipment exemption to include machinery and equipment used primarily in graphic arts production.
The Department also adopted amendments to the Hotel Operators' Occupation Tax Act rules. The rules were amended to delete outdated statutory references and to make grammatical changes.
Court cases
No new court cases this week.
Tax Tribunal
No new decisions were posted this week.
The following new cases may be of interest:
The Company is a Delaware corporation with its principal place of business in Illinois. The Company reported the receipt of the fraud claim on its Illinois income tax return and allocated the award entirely to Maryland. The protest refers to a request for alternative apportionment, but it is a bit unclear to me from a review of the protest when and how the Company made that request.
The Department treated the award as business income, using the Company's apportionment formula. The Company is challenging the Department's assessment on various grounds.
CBIZ West v. Illinois Department of Revenue is an income tax case. The taxpayer protested two notices of deficiency issued by the Department. At issue is whether the taxpayer and its subsidiary were engaged in a unitary business and whether the gain realized from the sale of the subsidiary constitutes apportionable income.
The taxpayer is represented by David Dorner and Paul Bogdanski of Illinois Chamber Tax Institute member law firm Reed Smith.
Publications
The Illinois General Assembly's bipartisan Commission on Government Forecasting and Accountability recently issued a report on the Financial Condition of
Illinois State Retirement Systems.
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