HB 2499 Senate amendment 2, the Budget Implementation bill was filed a few minutes ago. The tax law changes, including the tax increases, begin at page 610 and go through page 852. This is a quick review of the 879 page bill.

The amendment, which becomes the bill, includes 4 elements of the Governor's so-called "loophole closing" proposals.

1) The bill restricts the use of corporate net operating losses to $100,000 per year for any taxable year ending on or after December 31, 2021 and prior to December 31, 2024 (See P. 716) The bill does this by reinstating the $100,000 limitation on the use of net operating losses that previously was imposed for taxable years ending on or after December 31, 2012 and prior to December 31, 2014.

Note that existing language in IITA Section 207 provides that "for purposes of determining the taxable years to which a net loss may be carried under subsection (a) of this Section, no taxable year for which a deduction is disallowed under this subsection, or for which the deduction would exceed $100,000 if not for this subsection, shall be counted." (emphasis added).

2) The bill requires an addback for taxable years ending on or after June 30, 2021 of GILTI (the deduction allowed under IRC Section 250(a)(1)(B)(i))) and an amount equal to the deduction allowed under IRC Section 243(e) (certain dividends received from foreign corporations) and IRC Section 245A (deduction for foreign source-portion of dividends received by domestic corporations from specified 10 percent owned foreign corporations). (P. 651)

The bill modifies the foreign dividends subtraction to provide that for taxable years ending on or after June 30, 2021, for purposes of the subtraction, "the term 'dividend' does not include any amount treated as a dividend under Section 1248 of the Internal Revenue Code" (gain from certain sales or exchanges of stock in certain foreign corporations). (P.658)

3) The bill decouples from federal bonus depreciation (100 percent expensing - Illinois previously coupled from bonus depreciation of less than 100 percent expensing) by requiring an addback based an amendment to the convoluted bonus decoupling language currently in the law. (P. 635)

The bill has a corresponding annual subtraction modification for the property subject to the new addback. (P.660) From my quick read, appears as if depreciable assets are subject to MACRS depreciation. (Please let me know if I got that wrong.)

4) The bill eliminates the phase-out of the Franchise Tax. (P.852) It retains the exemption of the first $1,000 of liability that became effective on or after January 1, 2021, but deletes the subsequent annual increases in the phase out that were designed completely eliminate the tax.

Other Tax Provisions

The tax credit for affordable housing donations is extended to December 31, 2026. (P. 717)

The Angel Investment Credit is extended to December 31, 2026.

The River Edge Redevelopment Zone tax credit is extended for tax years ending prior to January 1, 2027. (P. 732)

The Live Theater Production Credit is extended to include tax years beginning prior to January 1, 2029. (P.737)

There is a new credit for employers that grant employees the option of taking a paid leave of absence of at least 30 days for serving as an organ donor or a bone marrow donor. (P. 748)

The Live Theater Production Credit is amended and expanded. (P. 751)

The sales tax exemption for menstrual pads, tampons, and menstrual cups is extended through December 31, 2026. (P. 774, 791, 813, 843)

The sales taxes are amended to provide that the tax imposed on food prepared for immediate consumption and transferred to residents by entities licensed under the Assisted Living and Shared Housing Act and an entity that holds a permit issued pursuant to the Life Care Facilities Act is 1%. (P.796, 818)

The Property Tax Code is amended to modify the method for valuation of supportive living facilities. (P. 846)

The Property Tax Code is amended to exempt property used for certain educational trade schools. (P. 846)