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May 22, 2020

State and Local Tax  
This Week 

Illinois General Assembly

T he General Assembly returned to Springfield on May 20 for three days for a special session to consider a limited number of topics. 

As of this morning, Friday morning it still appears that there will be an effort for the General Assembly to wrap things up today.  As a result, the legislature will likely meet well into the evening. 

If they don't wrap things up today, I suspect they will stay over another day and work on Saturday. Note that in the House session plan linked below, the Illinois Department of Public Health has recommended that legislators self-isolate for 7 days when they return to their homes.  As a result, I suspect they would not adjourn today and come back on Tuesday after the Memorial Day weekend.

I will send out an update at the end of the day and during the day as warranted.

If you are interested in watching the House and Senate sessions and any committee hearings today, here is a link to Blueroomstream which has lowered its usual paywall for this week's session.

As of this morning i am watching   HB 2682 , which has been rumored to be a revenue omnibus bill.  This bill passed the House during the spring session and is currently sitting on 3rd reading in the Senate.  As a result, it could be amended, passed by the Senate and then sent back to the House for concurrence.

I'm leaving in the link to the House   COVID-19 session plan I'm also leaving in the  Joint Proclamation  that outlines the scope of the special session.  

SB 1805 - amendment 2 - Budget Implementation Bill (BIMP).  This amendment was filed last night and is scheduled to be heard this morning in the House Executive committee.  Based on a quick review of this 467 page amendment, here are the tax-related provisions I found:

The payments from income tax receipts to the Local Government Distributive fund are kept at the same rate as the current fiscal year.
The income tax refund fund for individuals is reduced from 9.5% of receipts to 9% of receipts
The income tax refund fund for corporations is reduced from 14.25% to 14%.

Based on my experience, the reductions in the funding of the income tax refund fund should not result in a backlog of refunds in a normal year.  However, in the case of individuals the drafters may not have taken into account the impact on state tax receipts of the change in federal law that allows for a 5 year carry back of net operating losses. As you know, Illinois has decoupled from IRC Section 172 for corporations and doesn't recognize state-level individual net operating losses. However, to the extent a federal net operating loss is carried back to a prior year to reduce federal adjusted gross income to zero, an individual will be able to file an Illinois claim for refund to request a refund of Illinois income taxes because the starting point for determining Illinois income tax liability is, in the case of an individual, federal adjusted gross income.

HB 123 -  Replaces everything after the enacting clause. Amends the Tobacco Products Tax Act of 1995. Provides that specified components of an "electronic cigarette" do not include any solution or substance that contains cannabis subject to tax under the Compassionate Use of Medical Cannabis Program Act or the Cannabis Cultivation Privilege Tax Law. Amends the Civic Center Code, Flood Prevention District Act, Metro-East Park and Recreation District Act, Local Mass Transit District Act, Regional Transportation Authority Act, and Water Commission Act of 1985. Provides that, notwithstanding any other provision of law, no tax may be imposed under specified provisions on the sale or use of cannabis. Amends the Compassionate Use of Medical Cannabis Program Act. Removes language providing that it is a Class B misdemeanor with a $1,000 fine for any person to breach the confidentiality of information obtained under the Act and instead requires each State department responsible for licensure under the Act to publish on its website specified ownership information of each cannabis business establishment licensed under the department's jurisdiction. Makes other changes. Amends the Cannabis Regulation and Tax Act. Allows specified medical cannabis dispensing organizations to change locations under specified circumstances. Sets forth provisions regarding the method of distribution of licenses when tied applicants exist in a BLS Region. Defines "tied applicant". Provides that, notwithstanding any other provision of law, no special district may levy a tax upon the cultivation and processing of cannabis or upon purchasers for the use of cannabis. Provides that specified agents may begin employment at specified entities while the agents' identification card applications are pending. Makes other changes. Amends the Illinois Vehicle Code. Provides that containers used to store cannabis in a motor vehicle upon a highway in this State must be secured and inaccessible and must be sealed or resealable (currently, only sealed). Effective immediately.

SB 685 -  Replaces everything after the enacting clause. Amends the Property Tax Code. In a county with fewer than 3,000,000 inhabitants, provides for the permissive waiver of interest and penalties. Provides that, in counties with less than 3,000,000 inhabitants, the annual tax sale that would ordinarily be held in calendar year 2020 shall be held no earlier than (i) 120 days after the effective date of this amendatory Act or (2) until the first day of the first month during which there is no longer a statewide COVID-19 public health emergency, as evidenced by an effective disaster declaration of the Governor covering all counties in the State. In provisions concerning the homestead exemption for persons with disabilities, the homestead exemption for veterans with disabilities, and the senior citizens assessment freeze homestead exemption, provides that those exemptions may be granted without application for the 2020 taxable year if the property qualified for the exemption in the 2019 taxable year, subject to certain limitations related to the COVID-19 pandemic. Provides that under no circumstance may a tax year be offered at a scavenger sale prior to the annual tax sale for that tax year. Effective immediately.

HB 3597 -  Replaces everything after the enacting clause. Amends the Tax Increment Allocation Redevelopment Act of the Illinois Municipal Code. Extends the estimated dates of completion of redevelopment projects and the retirement of obligations issued to finance redevelopment project costs for redevelopment project areas existing in the Village of Maywood, the City of Joliet, the Village of Mahomet, the City of Quincy, and the City of Rushville. Creates a tax increment allocation financing extension to the 47th year (currently, the 35th year) after the adoption of the ordinance of December 20, 1986 by the City of Charleston. Requires adoption of an ordinance by the City of Charleston extending the completion date of the redevelopment project area to 47 years and providing notice to the taxing bodies that would otherwise constitute the joint review board. Effective immediately.

SJR 1 - Passed the Senate last night on a partisan roll call vote.  This resolution provides the language the Secretary of State will send to every registered voter this fall on the proposed graduated income tax constitutional amendment.

SB 2052 - As amended this bill contains a number of TIF extensions.  The bill passed the House yesterday and is back in the Senate for a concurrence vote on the House amendments.

New legislation
Note that none of the new legislation is in a procedural  posture to pass the General Assembly during the special session this week. These proposals could only be enacted if they end up as a portion of an end-of-session tax bill.

HB 5786 - Pizer -  Amends the Property Tax Code. Provides that, for taxable year 2020 (payable in 2021), in counties with 3,000,000 or more inhabitants, current taxes shall be payable in 4 equal installments, due on March 1, June 1, September 1, and December 1. Effective immediately.

SB 3992 - Villivalam -  Amends the Illinois Income Tax Act. Creates an income tax credit for employers who hire residents of the State to work in the fields of technology, health care, or manufacturing if those residents were unemployed as a result of the COVID-19 pandemic. Sets forth the amount of the credit. Effective immediately.

SB 3995 - Bush -  Amends the Property Tax Code. Provides that, for taxable year 2020 and thereafter, the maximum reductions under the senior citizens homestead exemption and the general homestead exemption that apply in counties with more than 3,000,000 inhabitants apply in counties with 300,000 or more inhabitants. Effective immediately.

Illinois Department of Revenue
The Department issued Informational Bulletin  FY 2020-29 "Illinois withholding requirements for out-of-state employers who employ Illinois residents working from home due to COVID-19 Virus Outbreak."  

The Department explains in the Bulletin:
"Employee compensation is subject to Illinois Income Tax Withholding when the employee has performed normal work duties in Illinois for more than 30 working days. If an Illinois resident employee has performed work for more than 30 working days from their home in Illinois for an out-of-state employer, the employer may be required to register with the Illinois Department of Revenue (IDOR) and withhold Illinois Income Tax from the employee." 

The Cook County Final Multiplier was  announced as 2.9160.  As explained by the Department, t he Department determines the equalization factor for each county by comparing over a three-year period the actual selling price of individual properties to the assessed value placed on those properties by the county assessor. If the median level of assessment for all property in the county varies from the 33 1/3 percent level required by law, an equalization factor is assigned to bring assessments to the legally mandated level.

The Internal Revenue Service has established a  Coronavirus Tax Relief web page. 

The May 22 edition of the Illinois Register has not yet been published this morning. I'll provide information as to any tax-related rulemaking when I send out an update to this newsletter at the end of the day.

Court cases
The Illinois appellate court for the first district issued an opinion in  The University of Chicago and Bright Horizons Children's Centers, LLC v. Department of Revenue.  

The Department of Revenue appealed from the circuit court's reversal of the Department's administrative hearings decision. The Department contended that it properly determined that two on-campus day cares run by Bright Horizons were not reasonably necessary for fulfilling the University's education objectives and that Bright Horizons operates with a view to profit.  

The University and Bright Horizons contended that the University is entitled to an exemption under Section 15-35 of the Property Tax Code because its use of the subject properties for daycare facilities was "reasonably necessary" for the accomplishment of the educational objectives or the efficient administration of the University.

The appellate court agreed with the Department of Revenue and reversed the circuit court.

Tax Tribunal 
No new decisions were issued this week.

Neither of the two new cases filed this week raise any unique issues.

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