March 25:House deadline to move Senate bills out of House committees and Senate deadline to move House bills out of Senate committees.
April 1: House third reading deadline for Senate bills and Senate third reading deadline for House bills.
April 8: General Assembly spring session scheduled adjournment.
Save the dates -
April 20 - Webinar - Introduction to Illinois sales taxes and an Illinois update. 2 hours of Illinois CPE and CLE submitted for approval. Free to Tax Institute members. Register at this link
April 25 - Tax Institute Quarterly meeting - 2:00 - 4:00 pm. We are planning a hybrid meeting with an in person option at our Chicago offices and a webcast for those who don't wish to attend in person. I'll present a legislative wrap up - the General Assembly is scheduled to adjourn on April.
Special Guest - Roger Koss - Head of the IDOR Audit Bureau who will give an update and answer questions (invited).
March 25, 2022
State and Local Tax
This Week
Illinois General Assembly
The House and Senate returned to Springfield on Tuesday and were scheduled to be in session through Friday. The Senate cancelled Friday's scheduled session day.
Beginning next Monday, the House and Senate are scheduled to be in session in Springfield, including the weekend of April 2 and 3, through the scheduled adjournment date of April 8..
The House Revenue committee met on Thursday. The committee held subject matter hearings on a series of bills dealing with tax credits and economic development and property tax exemptions.
The following bills were approved by the committee and moved to the floor:
SB 1794 - As introduced - Amends the Local Government Taxpayers' Bill of Rights Act. Provides that the statute of limitations set by a unit of local government for the determination and assessment of taxes covered by the Act may not exceed 10 years (currently, 4 years) after the end of the calendar year for which the return for the period was filed or the end of the calendar year in which the return for the period was due, whichever occurs later. Makes conforming changes concerning the tolling of this 10-year period. Amends the Illinois Municipal Code. In a Section concerning municipal audits of public utilities, provides that municipalities may request information from public utilities no more than annually (currently, no more than once every 2 years). Provides that, if the public utility fails to respond in a timely manner to the request for information with complete information, the public utility shall be liable to the municipality for a penalty of $1,000 for each day it fails to produce the requested information. Provides that, if a public utility is liable for any error in past tax payments in excess of $5,000 that were unknown prior to an audit from the municipality, then the public utility shall reimburse the municipality for the cost of the audit. Sets forth conditions under which the public utility may be liable for attorney's fees incurred by the municipality.
As amended in the Senate - Amendment 1 - Replaces everything after the enacting clause. Reinserts the provisions of the introduced bill with the following changes. In provisions amending the Local Government Taxpayers' Bill of Rights Act, creates a 7-year statute of limitations for utility taxes (currently, 4 years). In provisions amending the Illinois Municipal Code, provides that a public utility that is an electric utility may not provide customer-specific information. Provides that penalties for failure to respond to requests for information shall be assessed by the municipality, but may be reduced or vacated by the municipality or a court of competent jurisdiction upon demonstration by the public utility that the public utility's failure to provide the requested information resulted from excusable neglect. In provisions concerning a public utility's liability for premises that have been annexed to the municipality, provides that the utility shall only be liable beginning 60 days after the date that the municipality provided the public utility notice of the annexation. Adds provisions amending the Public Utilities Act. Provides that the Illinois Commerce Commission shall not consider: (i) costs associated with a municipal audit; (ii) any court costs, attorney's fees, or other fees incurred under certain provisions of the Illinois Municipal Code; (iii) unpaid utility taxes owed to a municipality; or (iv) any penalties or interest imposed by a municipality under certain provisions of the Illinois Municipal Code to be expenses for the purpose of determining any rate or charge.
Senate amendment 2 - Makes changes to the bill as amended by Senate Amendment No. 1 to provide that the Illinois Commerce Commission shall not consider: (i) any court costs, attorney's fees, or other fees incurred under certain provisions of the Illinois Municipal Code; or (ii) any penalties or interest imposed by a municipality under certain provisions of the Illinois Municipal Code to be expenses for the purpose of determining any rate or charge (Senate Amendment No. 1 also includes costs associated with a municipal audit and unpaid utility taxes owed to a municipality in the list). Further amends the Public Utilities Act to provide that customer specific billing, usage, or load shape data may be provided to a unit of local government if the unit of local government is requesting the information for the purposes of an audit under specified provisions of the Illinois Municipal Code.
Three amendments to SB 1794 were proposed in the House. The House amendments were tabled and the bill was voted out of committee in the form it passed the Senate. The sponsor, Representative DeLuca advised that it is his intent to continue negotiations with the opponents of the legislation to reach an agreed amendment and promised to bring the amendment back to the committee, rather than taking the amendment directly to the floor. The Chairman advised that they will seek to have the committee deadline extended for this bill in order to allow negotiations to continue.
SB 3189 - As introduced - Amends the Use Tax Act and the Retailers' Occupation Tax Act. Provides that, on and after January 1, 2023, returns for motor vehicles, watercraft, aircraft, and trailers that are required to be registered with an agency of the State are required to be filed electronically.
As amended - Replaces everything after the enacting clause. Amends the Property Tax Code. Provides that certain property located in Bloom, Bremen, Calumet, Rich, Thornton, or Worth Township may be certified as southland reactivation property. Provides that, beginning with the first tax year after the property is certified as southland reactivation property and continuing through the twelfth tax year after the property is certified as southland reactivation property, the property shall be valued at 50% of the base year equalized assessed value. Provides that the base year is the last tax year prior to the date of the application for southland reactivation designation during which the property was occupied and assessed and had an equalized assessed value. Sets forth the maximum aggregate tax liability for property that has been certified as southland reactivation property. Effective immediately.
SB 2990 - Amends the Tax Increment Allocation Redevelopment Act of the Illinois Municipal Code. Extends the estimated date of completion of a redevelopment project and the retirement of obligations issued to finance redevelopment project costs for an ordinance adopted on December 13, 1999 by the Village of Palatine to create the Village of Palatine Downtown Area TIF District. Effective immediately.
SB 3069 - As introduced - Amends the Property Tax Code. Provides that condominium associations and homeowner associations may also file appeals with the Property Tax Appeal Board. Effective immediately.
As amended - Replaces everything after the enacting clause. Provides that an association may, on behalf of all or several of the owners that constitute the association, file an appeal to the Property Tax Appeal Board or intervene in an appeal filed by a taxing body. Defines "association" as: (1) a common interest community association; (2) a unit owners' association; or (3) a master association.
SB 3097 - As introduced - Amends the Property Tax Code. Provides that, after filing a petition to obtain a tax deed, the owner of a certificate of purchase must file with the clerk of the circuit court (currently, the county clerk) the names and addresses of persons who are entitled to service of notice. Effective January 1, 2022. As amended in the Senate the bill was given an immediate effective date.
As amended in the House - Replaces everything after the enacting clause. Amends the Property Tax Code. In provisions concerning the scavenger sale, repeals provisions added by Public Act 102-528 that require the county clerk to mail notice of the expiration of the period of redemption within 30 days from the date of the filing of addresses with the clerk. Requires the purchaser of the certificate of purchase to prepare the notice of the expiration of the period of redemption and deliver it to the clerk of the Circuit Court not more than 6 months and not less than 111 days prior to the expiration of the period of redemption. Requires the clerk to mail the notices not less than 3 months prior to the expiration of the period of redemption. Effective immediately.
SB 3661 - As introduced - Amends the Motor Fuel Tax Law. Provides that only railroad companies, street, suburban or interurban railroad companies, and pipeline companies are required to report deliveries of motor fuel (currently, railroad companies, street, suburban or interurban railroad companies, pipeline companies, motor truck or motor tank car companies, water transportation companies, and every person transporting reportable motor fuel to a point in this State from a point without this State). Effective immediately.
As amended in the Senate - Replaces everything after the enacting clause. Amends the Motor Fuel Tax Law. Repeals provisions concerning reports by railroad companies, and street, suburban, or interurban railroad companies. Makes a conforming change.
SB 3832 - As introduced - Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act. Provides that tangible personal property sold by or on behalf of the State Treasurer pursuant to the Revised Uniform Unclaimed Property Act is exempt. the bill was amended in the Senate to add an immediate effective date.
The House Revenue committee is scheduled to meet next Thursday. Here is a link to the bills posted for the hearing next week. Remember that the Revenue committee generally posts everything assigned to the committee. We won't know what bills will actually be considered until shortly before the Thursday hearing.
As of this morning, the House Revenue committee has not yet scheduled a hearing for next week.
The Senate Revenue committee met this week.
The committee held a subject matter hearing on SB 3012. As proposed - Amends the Property Tax Code. Provides that the county board may designate a geographic area within the county as a flood zone. Provides that homestead property that is located within a flood zone is entitled to a reduction of $5,000 from the property's equalized assessed value for the tax year in which the area is designated as a flood zone.
SB 3012 as amended - Replaces everything after the enacting clause. Reinserts the provisions of the introduced bill with changes. Provides that the homestead exemption applies to qualified residential property (in the introduced bill, homestead property). Provides that "qualified residential property" means real property that is improved with a permanent structure that is occupied as a primary residence by one or more individuals with a household income that does not exceed 100% of the area median income. Provides that property owners shall provide each tenant with certain information concerning flooding. Provides that areas that may be designated as flood zones include, but are not limited to, Special Flood Hazard Areas designated by the Federal Emergency Management Agency, areas adjacent to Lake Michigan or the Chicago River, or other geographic areas determined by the county board to have experienced excessive flooding during the tax year.
The following bill was voted out of committee to the floor:
SB 1146 - This bill was introduced as a shell bill. As amended -Replaces everything after the enacting clause. Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act. Makes changes concerning the exemption for biodiesel, renewable diesel, and biodiesel blends. Provides that the exemption is permanent. Changes the percentage of biodiesel that is required for the biodiesel blend to qualify for the exemption. Amends the Motor Fuel Tax Law. Provides that a distributor who has a blender permit may blend petroleum-based diesel fuel with biodiesel and sell the blended or unblended product on any premises owned and operated by the dealer or distributor for the purpose of supporting or facilitating the retail sale of motor fuel. Provides that a refiner or supplier of petroleum-based diesel fuel or biodiesel shall not refuse to sell or transport to a distributor who is properly licensed and permitted as a blender any petroleum-based diesel fuel or biodiesel based on the distributor's or dealer's intent to use that product for blending. Effective immediately.
The Senate Revenue committee is scheduled to meet next week on March 30. Here is a link to the bills that have so far been posted for the committee. It is likely that additional legislation will be posted for committee consideration prior to the hearing.
Two new tax-related bills were introduced in the House this week:
HB 5726 - Niemerg - Amends the Motor Fuel Tax Law. Provides that, beginning on July 1, 2022, the rate of tax shall be $0.19 per gallon (currently $0.38 per gallon, adjusted each year according to the percentage increase in the Consumer Price Index), plus an additional 2 1/2 cents per gallon for diesel fuel, liquefied natural gas, or propane. Amends the Illinois Municipal Code. Provides that no tax may be imposed under the Municipal Motor Fuel Tax Law on or after July 1, 2022. Preempts the exercise of home rule powers. Effective immediately.
HB 5730 - Scherer - Amends the Property Tax Code. Provides that property may be granted the Senior Citizens Assessment Freeze Homestead Exemption without reapplication if: (1) each member of the taxpayer's household provides written consent to the Department of Revenue and the chief county assessment officer allowing the Department of Revenue to share his or her income information with the chief county assessment officer; and (2) the taxpayer notifies the chief county assessment officer in writing that he or she is opting out of the reapplication process for future taxable years. Requires the chief county assessment officer to verify the taxpayer's household income with the Department of Revenue. Requires the titleholder of record or the transferee, as applicable, to notify the chief county assessment officer if the property ceases to qualify for the exemption. Effective immediately.
House and Senate amendments filed since the last newsletter:
SB 1146 - This bill was introduced as a shell bill. See above discussion of Senate Revenue committee action for details on the amendment.
SB 3069 - As introduced - Amends the Property Tax Code. Provides that condominium associations and homeowner associations may also file appeals with the Property Tax Appeal Board. Effective immediately.
As amended in the House - Replaces everything after the enacting clause. Provides that an association may, on behalf of all or several of the owners that constitute the association, file an appeal to the Property Tax Appeal Board or intervene in an appeal filed by a taxing body. Defines "association" as: (1) a common interest community association; (2) a unit owners' association; or (3) a master association. Staats comment - This bill is an initiative of the Illinois State Bar Association designed to address a court ruling that determined that condominium associations and homeowner associations did not have standing to file appeals with the Property Tax Appeal Board on behalf of their members. The bill was amended in the House to address technical concerns of the Property Tax Appeal Board first raised when the bill was scheduled for consideration in the House Revenue committee.
SB 3097 - See House Revenue committee discussion above.
SB 3189 - See House Revenue committee discussion above.
SB 3634 - As introduced - Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act. Provides that, beginning on July 1, 2022, breast pumps, breast pump collection and storage supplies, and breast pump kits are exempt from the taxes imposed under those Acts. Effective immediately.
As amended in the House - Removes language from the engrossed bill providing that the term "breast pump collection and storage supplies" includes "other items that may be useful to initiate, support, or sustain breast-feeding using a breast pump during lactation that may be sold separately but are generally sold as part of a breast pump kit". Provides that a "breast pump kit" means a kit that: (1) contains no more than a breast pump, breast pump collection and storage supplies, a rechargeable battery for operating the breast pump, a breastmilk cooler, bottle stands, ice packs, and a breast pump carrying case; and (2) is pre-packaged as a breast pump kit by the breast pump manufacturer or distributor.
SB 3685 - As introduced - Amends the Property Tax Code. Provides that courses and training for the Certified Illinois Assessing Officer certificate shall be held in a manner and format deemed appropriate by the Department of Revenue (currently, required to be held at various convenient locations throughout the State). Removes a requirement that the hearing concerning the tentative equalization factor shall be held in either Chicago or Springfield. Effective January 1, 2023.
The bill is on 3rd reading in the House and the following floor amendment was filed on Thursday (the amendment is currently in the Rules committee) - Replaces everything after the enacting clause. Reinserts the provisions of the engrossed bill. Adds provisions amending the Motor Fuel Tax Law. In provisions allowing tax-free sales of dyed diesel fuel for non-highway purposes, provides that the sale must be made by the licensed distributor to the end user of the fuel who is not a licensed distributor (currently, someone who is not a licensed distributor). Adds provisions amending the Use Tax Act and the Retailers' Occupation Tax Act. Provides that, on and after January 1, 2023, returns for motor vehicles, watercraft, aircraft, and trailers that are required to be registered with an agency of the State are required to be filed electronically. Effective January 1, 2023, except that provisions amending the Motor Fuel Tax Law take effect upon becoming law. The amendment inserts "clean up" language proposed by the Illinois Department of Revenue that was previously introduced in other bills that did not move forward
HB 448 - As introduced - Amends the Property Tax Extension Limitation Law in the Property Tax Code. Provides that, for levy years 2021 and later, the taxing district's aggregate extension base is the greater of (A) the district's last preceding aggregate extension limit or (B) the district's last preceding aggregate extension, subject to certain adjustments. Provides that the term "aggregate extension limit" means the district's last preceding aggregate extension if the taxing district had utilized the maximum limiting rate permitted without referendum for each of the 5 immediately preceding levy years. Effective immediately.
As amended in the House - Replaces everything after the enacting clause. Reinserts the provisions of the introduced bill with formatting changes. Makes the following substantive changes. Provides that the provisions apply only to: (1) certain school districts; (2) park districts; (3) library districts; and (4) community college districts. Provides that the taxing district must certify to the county clerk that the taxing district did not extend the maximum amount permitted under the Property Tax Extension Limitation Law for a particular levy year. Provides that the aggregate extension for a taxing district that utilizes the recapture provisions of the introduced bill may not exceed the taxing district's last preceding aggregate extension by more than 5% unless the increase is approved by the voters. Effective immediately.
As proposed for amendment in the Senate (the amendment has not yet been assigned for committee consideration) - Provides that the taxing district's certification to the county clerk that it did not extend the maximum amount permitted under the Property Tax Extension Limitation Law must be submitted not more than 60 days after the taxing district files its levy ordinance or resolution with the county clerk (rather than not more than 30 days after the taxing district's budget and levy ordinance is adopted for the levy year).
HB 4132 - As introduced - Amends the Parking Excise Tax Act. Creates an exemption for parking areas and garages that are operated for the use of attendees, vendors, or employees of the Illinois State Fair or the DuQuoin State Fair and are not otherwise subject to taxation under the Act in the ordinary course of business.
As proposed for amendment in the Senate (the amendment was assigned to the Senate Revenue committee on Thursday) - Replaces everything after the enacting clause. Reinserts the provisions of the engrossed bill with the following changes. Provides that the Parking Excise Tax does not apply to: (1) a parking area or garage operated by the State, a State university, or a unit of local government; (2) the purchase of a parking space by the State, a State university, or a unit of local government for use by employees of the State, State university, or unit of local government; (3) a parking space leased to a governmental entity for use by the public; or (4) a parking area or garage owned and operated by a person engaged in the business of renting real estate and used by the lessee to park motor vehicles, recreational vehicles, or self-propelled vehicles for the lessee's own use. Effective immediately.
Tax-related bills that passed both chambers:
SB 1711 - see bills that passed the House below.
Tax-related bills that passed the Senate: None this week
As introduced - Amends the Historic Preservation Tax Credit Act. Provides that the aggregate amount of the credit may not exceed $3,000,000. Provides that credits may be awarded upon completion of the project and approval of a complete application (currently, review of the project). Provides that the taxpayer is not eligible to receive credits under that Act and as qualified River Edge Redevelopment Zone property for the same qualified expenditures or qualified rehabilitation plan. Makes various technical corrections concerning allocation of credits. Amends the Illinois Income Tax Act with respect to the Historic Preservation Tax Credit to include provisions concerning limited liability companies. Effective immediately.
As amended - Further amends the Historic Preservation Tax Credit Act to provide that the amount of qualified expenditures must (i) equal $5,000 or more and (ii) exceed the adjusted basis of the structure on the first day the qualified rehabilitation plan commenced (currently, the expenditures must (i) equal $5,000 or more or (ii) exceed the adjusted basis of the structure on the first day the qualified rehabilitation plan commenced). Makes various technical corrections.
Illinois Department of Revenue
The Department recently posted its Income Tax Audit Manual and Income Tax Audit Manual Updates. It is a bit difficult to find on the Department's web site - click the "Information For" drop down, then click "research," then click "publications" and then click "all other publications." A hat tip to David Kupiec of Kupiec and Martin who found it and sent me the link.
The Income Tax Audit Manual is a 2549 pages pdf - so you may not want to just hit "print" when you bring it up on your computer.
I haven't had a chance to go through the document in detail, but from a quick review it looks to be a complete version of the Income Tax Audit Manual that I recall from my time at the Department.
According to the Department's web page, the Sales Tax Audit Manual and the Miscellaneous Tax Audit Manual will be added at a later date.
Rulemaking
The March 25 edition of the Illinois Register did not contain any adopted rulemakings by the Department of Commerce and Economic Opportunity or the Department of Revenue.
Today's Illinois Register contained one new proposed rulemaking by the Illinois Department of Commerce and Economic Opportunity The Department of Commerce and Economic Opportunity has proposed new rules for the Data Center Investment Program. You will recall that the Department proposed rules for the data center program about a year ago, but never moved forward to adopt the earlier rulemaking and the earlier rulemaking lapsed by operation of law due to the requirement in the Illinois Administrative Procedure Act that a rulemaking must be adopted within one year of the date it is proposed in the Illinois Register.
The Department provided this description of the new data center rules:
"Provides rules for companies seeking to participate in the data center investment program, including definitions, eligibility criteria, and application process and procedure. The rules also provide details regarding entering into, and the contents of, memorandum of understanding to be entered into between the Department and the applicant business. Finally, these rules detail the process and procedure applicable to noncompliant participants."
Today's Illinois Register contained 4 new rulemakings amending the Retailers' Occupation Tax, Use Tax, Service Occupation Tax and Service Use Tax rules dealing with "verified credits."
The Department provided the following description of the Retailers' Occupation Tax rulemaking:
This new regulation explains the unique nature of a verified credit and the ways it can be used. Verified credits represent a unique situation in sales taxes. They arise when a taxpayer remits more tax than is due, and the Department can verify this overpayment from the face of the return. This is in contrast to situations where a credit memorandum is involved, because in these situations, the taxpayer must prove the tax was overpaid before getting a credit or refund (e.g., tax was erroneously remitted on a sale that should have been tax exempt and the retailer is able to document this exemption – after giving back the taxes to the purchaser that erroneously remitted them). The rule explains the different ways a verified credit may be used. For instance, it may be rolled over in the taxpayer's account to offset liability of the taxpayer that arises under the Retailers' Occupation Tax Act, the Use Tax Act, the Service Occupation Tax Act, or the Service Use Tax Act subsequent to the origination of the verified credit. It may also be converted to a credit memorandum in several ways. Once converted, the resulting credit memorandum may be assigned to other taxpayers in the same manner as other credit memoranda issued to taxpayers by the Department. The rule explains the provisions of this regulation apply equally to verified credits authorized under the provisions of other tax acts administered by the Department. The rule establishes new procedures for the conversion of verified credits into credit memoranda. It has long been the Department's policy that verified credits can be converted to credit memos, but only within 3 to 3.5 years after they arose. Since the Department can verify the overpayment from the face of the return and the taxpayer has the immediate use of the verified credit to apply against its liability without the need to file a claim for credit and prove the overpayment, the new rule provides that there is no statute of limitations for converting a verified credit to a credit memo – it can be converted at any time after the verified credit arises. However, the rule also reiterates the longstanding Uniform Penalty and Interest Act regulation found at 86 Ill. Adm. Code 700.230(a)(2) stating that no interest is paid on verified credits, clarifying that this applies to situations when a verified credit is converted to a credit memo. "
No new decisions have been posted by the Tribunal this week. A number of new cases were filed this week. None of the new cases appear to raise unique issues.
Publications
The Civic Federation issue its Analysis of the Governor's proposed fiscal year 2023 budget.
Free webinar - Critical Cybersecurity Briefing Presented by the Illinois Chamber of Commerce and U.S. Representative Underwood
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