Executive Director
Tax Institute

(217) 522-5512 ext. 231

July 4, 2017

Tax Institute special update - SB 9  

Illinois General Assembly 
SB 9, the non-property tax portion of the budget and spending bills considered by the Illinois General Assembly over the long holiday weekend was amended in the House and passed the House on Sunday July 2.

The House amendment to SB was considered and passed by the Senate today, July 4.  SB 9 was vetoed by Governor and was returned to the Senate.  The Senate voted to override the Governor's veto.  SB 9 was then sent to the House for consideration of a veto override.

The Senate also passed the revenue bill, SB 6, and the budget implementation bill, SB 42. The Governor vetoed SB 6 and SB 42 as well.  Both vetoes were overridden by the Senate and have been sent to the House for consideration of a veto override.

After overriding the Governor's vetoes this afternoon the Senate remains in "continuous session" and has recessed until the call of the Senate President.  No date for the Senate to return has been specified.

SB 9, SB 6 and SB 42 were not considered by the House today.  The House was scheduled to be in session this afternoon.  However, the House did not have a quorum sufficient to conduct business today. 

The House is scheduled to be in session again tomorrow at 10:00. At this point it is unclear whether the House will take up the Governor's vetoes tomorrow.

SB 9 as passed, contains the following provisions:

The Service taxes as proposed in earlier versions of SB 9 were removed.

Income Tax Provisions
Tax rates are increased to 4.95% for individuals, and 7% for corporations effective July 1.  The tax rate increases are permanent.

The research and development credit is restored retroactively, but the base period expansion present in earlier versions of SB 9 was removed.

The Illinois Income Tax Act is decoupled from the federal Domestic Production Activities Deduction (IRC Section 199).

The unitary business non-combination rule is repealed.  The language in earlier versions of SB 9 that established an exception to the repeal for insurance companies was removed.

The definition of United States in the unitary business group definition in the IITA is amended to include areas over which the U.S. claims jurisdiction for purposes of natural resource exploration.

The Standard Exemption and property tax credit are eliminated for couples with income greater than $500,000 and individual taxpayers with income greater than $250,000.

The earned income tax credit and the education expense credit are increased.

A new income tax credit is established for the cost of instructional materials and supplies purchased by educators.

Sales Tax Provisions
The graphic arts machinery and equipment exemption is restored effective July 1, 2017 as a portion of the manufacturing machinery and equipment exemption.  The new combined manufacturing machinery and equipment and graphic arts equipment exemption is exempted from the automatic sunset provisions.

The expansion of the manufacturing machinery and equipment exemption to include production-related tangible personal property formerly covered by the expired manufacturers' purchase credit was removed from the final version of SB 9.

Henceforth, gasohol will subject to sales tax at 100% of selling price - currently taxed at 80% of selling price. 

Miscellaneous provisions
A new centralized state tax lien act is established. Currently, the Department of Revenue must go to each of the 102 counties to file tax liens against the property of taxpayers.  Under this proposal, a centralized registry of tax liens will be established for all tax liens.  It is my understanding that the centralized lien registry is an initiative of the Illinois Department of Revenue.

A complete rewrite of the state's unclaimed property laws was included in SB 9 as amended in the House.  This rewrite is an initiative of the State Treasurer.  This language is similar, with the exception of the treatment of gift cards to HB 2603.  We opposed the inclusion of this language in SB 9.

We have serious concerns about the adverse effect of the unclaimed property law rewrite on the business community.  Our efforts to have this rewrite excluded from SB 9 were unsuccessful.  I would also observe that inclusion of this non-tax related proposal in SB 9 could subject SB 9 to a constitutional challenge as a violation of the single subject requirement for legislation under Article IV, Section 8 of the Illinois Constitution.

In floor debate on SB 9, Senator Althoff obtained a commitment from Senator Hutchinson, the sponsor of SB 9, to work with the business community to address our concerns.
Other legislation
As reported in Friday's Update HB 162, which contains an extension and reinstatement of the EDGE program passed the House.

HB 162 passed out of the Senate Revenue committee unanimously and moved to the floor.  HB 162 was not called for a vote by the full Senate. 

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