October 26-28: Second week of the House and Senate fall veto session.
October 22, 2021
State and Local Tax
This Week
Illinois General Assembly
The House and Senate are returned to Springfield on October 19 for the first week of the veto session. Both chambers were scheduled to be in session through Thursday, but each cancelled the Thursday session.
The House and Senate are scheduled to return to Springfield next week for the second week of the veto session and are scheduled to be in Springfield Tuesday through Thursday.
As of this morning, the Governor's rumored package of tax incentives to encourage location of electric vehicle manufacturers and their suppliers in Illinois hasn't surfaced. As soon as I receive the language, I will send out a special edition of the newsletter.
As I noted last week, two tax-related bills were approved for consideration by the Senate Assignments committee. Here is the current status of those bills after the first week of the veto session:
HB 1539 - This week the bill was moved to 3rd reading in the Senate. As passed by the House, the bill amends the Property Tax Extension Limitation Law in the Property Tax Code. Provides that, for Township High School District 211, the aggregate extension base for levy year 2022 shall be the amount that the district's aggregate extension for levy year 2021 would have been assuming an extension of taxes for levy year 2021 at the limiting rate for levy year 2021. Effective immediately.
HB 3107 was on 3rd reading in the Senate at the end of the spring session. This week, the bill remained on 3rd reading. As it passed the House, the bill amends the Housing Development Act and revises the definition of "affordable housing project" and provides that the amount of tax credits reserved by the administrative housing agency for an approved project is limited to $32,850,352 in fiscal years 2022 and 2023 and will increase by 5% each fiscal year thereafter.
Last week, the House Rules committee met on Thursday and pushed out a series of bills to the Executive committee. One of the bills is tax-related:
SB 1139 - passed the Senate during the spring session, but did not pass the House by the end of May. This week in the House the bill was amended into a shell bill amending the Live Theater Production Tax Credit Act. The bill moved out of committee to floor where it was held on second reading.
New legislation was introduced this week. The bills have no chance to pass both chambers before the end of the veto session next week.
HB 4169 - DeLuca - This is another bill by Representative DeLuca to increase the amount of funds received by local governments from the income tax. The bill amends the Illinois Income Tax Act and provides that an amount equal to the sum of (i) 8% of the net revenue realized from the tax imposed upon individuals, trusts, and estates and (ii) 9.11% of the net revenue realized from the tax imposed upon corporations shall be deposited into the Local Government Distributive Fund (currently, an amount equal to the sum of (i) 6.06% of the net revenue realized from the tax imposed upon individuals, trusts, and estates and (ii) 6.85% of the net revenue realized from the tax imposed upon corporations shall be deposited into the Local Government Distributive Fund). Amends the State Revenue Sharing Act to provide that amounts paid into the Local Government Distributive Fund are appropriated on a continuing basis. Effective July 1, 2022. The bill remains in the Rules committee.
HB 4184 - Zalewski - Amends the Illinois Income Tax Act. Extends the income tax credit for certain hospitals through taxable years ending on or before December 31, 2027 (currently, December 31, 2022). Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act. Provides that the credit for personal property sold to or used by certain hospitals is exempt from the Acts' automatic sunset provisions. Effective immediately.
This bill extends the sunset date for the income tax credit provided to for-profit hospitals in an amount equal to the lesser of the amount of property taxes paid or the cost of free or discounted services provided during the tax year pursuant to the hospital's charitable financial assistance policy.
The bill also eliminates the sunset date from the sales tax exemption provided to charitable hospitals. The current sunset date is July 1, 2022.
You will recall that the income tax credit for charity care provided by for-profit hospitals and the legislation setting up the formula for determining when a non-profit hospital is "charitable" for purposes of the sales tax exemption was passed in the wake of the Illinois Supreme Court decision in Provena Covenant Medical Center v. Department of Revenue.
The Department of Revenue received what turned out to be a short-lived victory in the Provena case in relation to hospitals. Subsequent to the court's decision in Provena, the Illinois General Assembly passed legislation that authorized a formula for determining eligibility for the hospital sales tax exemption and also provided the income tax credit for charitable care provided by for-profit hospitals.
In the wake of Provena, and the subsequent legislation, if anything, it has been easier for hospitals to claim the sales tax exemption. However, in the wake of the standards outlined in Provena determining when an entity is "exclusively charitible" it has become much more difficult for other organizations that seek the exemption to meet the "exclusively charitable" standards outlined in Provena.
Rulemaking
The October 22 edition of the Illinois Register did not contain any proposed or adopted rules of the Illinois Department of Revenue or the Department of Commerce and Economic Opportunity.
Court cases
The Illinois Supreme Court issued an opinion in Guns Save Life, Inc. v. Ali. The case involves a challenge to two tax ordinances adopted by Cook County. The taxes were imposed on purchases of firearms and firearm ammunition. The circuit court and the appellate court upheld the taxes against constitutional challenges. The Supreme court reversed the lower courts.
The Supreme court found that the taxes violate the uniformity clause of the Illinois constitution. )Article IX, Section 2). After analyzing the tax ordinances under the uniformity clause, the court concluded:
"In sum, for the foregoing reasons, we hold that to satisfy scrutiny under a uniformity challenge, where a tax classification directly bears on a fundamental right, the government must establish that the tax classification is substantially related to the object of the legislation. Under that level of scrutiny, the firearm and ammunition tax ordinances violate the uniformity clause. Accordingly, we reverse the summary judgment entered in favor of defendants and remand to the circuit court for entry of summary judgment in favor of plaintiffs."
Tax Tribunal
No new decisions have been posted by the Tribunal this week. No unique issues were raised in the cases filed with the Tribunal this week.
Department of Revenue
The Department issued additional Informational Bulletins this week:
FY 2022-04 - Retailers' Occupation Tax Guidance for Remote Retailers and Marketplace Facilitators as set forth by the Leveling the Playing Field for Illinois Retail Act.
FY 2022-05 - Update to the Taxation of Sales by Auctioneers and Internet Auction Listing Services to Illinois Purchasers
FY 2022-06 - Simplified Municipal Telecommunications Tax Rate Changes Effective January 1, 2022
The Department issued two compliance alerts:
CA-2021-01-A - Tax Collection Obligations of Remote Retailers, Marketplace Sellers, and Marketplace Facilitators for Chicago Home Rule Municipal Soft Drink Retailers' Occupation Tax, Prepaid Wireless E911 Surcharge, and Illinois Telecommunications Access Corporation Assessment. This compliance alert supersedes Compliance Alert 2021--1, issued February 2021.
CA-2021-02-A - Tax Remittance Obligations for the Metropolitan Pier and Exposition Authority (MPEA) Retailers Occupation Tax on Food and Beverages Under the New Marketplace Facilitator Law.
