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February 8, 2019
State and Local Tax
This Week
Illinois General Assembly
The House and the Senate returned to Springfield February 5 through the 7th.
The House is in session next week Wednesday through Friday. The Senate is not scheduled to be in session next week.
Next Friday, February 15, is the deadline the introduction of substantive House and Senate bills.
The Senate Revenue committee met on February 6. Two bills were considered by the committee: SB 91 creates an income tax checkoff for donations to the Ronald McDonald House Charities Fund. SB 110 provides that certain property tax exemption for veterans with disabilities carry over to the surviving spouse.
The House Revenue committee met on February 7. The committee did not vote on any legislation. Chairman Zalewski established a number of subcommittees and assigned all of the bills posted for the hearing on February 7 to subcommittee. He indicated that the committee will "go slow" in terms of voting on legislation during the initial portion of the legislative session, until the Governor makes his budget speech on February 20.
The House Revenue committee has scheduled a hearing for February 14.
New legislation and proposed constitutional amendments
The flood of new legislation introduced by members of the 101st General Assembly continues. As of this morning, 2276 bills have been introduced in the House and 1344 bills have been introduced in the Senate. A large number of the Senate bills introduced this week were appropriations bills or shell bills. A number of tax-related bills have been introduced this week:
HB 1655 - (McCombie) -
Creates the Illinois First-Time Homebuyer Savings Account Act. Provides that first-time homebuyers may open a first-time homebuyer savings account to pay or reimburse costs in connection with a qualified home purchase. Provides that the account holder shall not use any funds in a first-time homebuyer savings account to pay expenses of administering the account except for fees and charges assessed by the financial institution. Provides for reporting to the Department of Revenue. Defines terms. Amends the Illinois Income Tax Act. Provides that a taxpayer shall be allowed an annual credit for amounts deposited by the taxpayer into a first-time homebuyer savings account of up to $2,000 for individual taxpayers, and up to $4,000 for married taxpayers. Provides a maximum lifetime credit of 10 times the taxpayer's annual maximum deduction. Provides that beginning January 1, 2020, the Department shall adjust, every year, the maximum tax credits available to a first-time homebuyer savings account holder for inflation.
HB 2037 - (Cabello) - Amends the Illinois Income Tax Act. Makes changes to a credit awarded for wages paid to qualified veterans. Provides that the credit shall be: (1) $5,000 (instead of 20% of the gross wages, but not to exceed $5,000) for certain veterans who were unemployed at the time of hire; and (2) $1,200 (instead of 10% of the gross wages, but not to exceed $1,200) for other qualified veterans. Changes the definition of "qualified veteran" to include all Illinois residents who are members of the National Guard, reserve, or regular component of the Armed Forces of the United States. Allows the credit to be prorated. Provides that the credit is exempt from the Act's automatic sunset provision. Effective immediately.
HB 2079 - (Guzzardi) - Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, the Cigarette Tax Act, the Cigarette Use Tax Act, the Hotel Operators' Occupation Tax Act, the Motor Fuel Tax Law, the Telecommunications Excise Tax Act, and the Liquor Control Act of 1934. Provides that the vendor discount amount under those Acts shall be 1.75%. Provides that the vendor discount may not exceed $1,000 per vendor in any calendar year. Effective immediately.
HB 2085 - (Harris) - This bill and SB 1115 are key bills that the Illinois Chamber Tax Institute vigorously opposes.
This bill was the subject of my special Tax Institute Alert on February 5. As noted in the alert this bill and the identical Senate bill SB 1115, would modify the Illinois Income Tax Act to make world-wide combination the default filing position absent an election for a modified version of water's edge apportionment.
The sponsors held a press conference on Wednesday to announce the filing of this legislation. The House sponsor, Majority Leader Greg Harris described HB 2085 as follows in an email to constituents:
"I am carrying HB 2085 which closes Off-Shore Tax Haven corporate loopholes (also sometimes called the Water's Edge Election). Estimates show that up to $1.3 billion in Illinois taxes could be being sheltered using such loopholes. My legislation would begin to close those loopholes and return a fair share of corporate income tax payments to our State. Currently, 11 other states have implemented similar laws to be sure that corporations pay their fair share and other states are working on the issue."
We met with Representative Harris on Wednesday to explain our strong opposition to his legislation. Among other things, I explained that the $1.3 billion dollar revenue estimate is based on a deeply flawed estimate put together in a recent study by ITEP, that I shared with the Tax Institute members in a prior weekly alert. I explained that the reference to 11 other states implementing similar laws was in error, and I explained why I explained that the use of world-wide apportionment is simply terrible tax policy.
We issued a statement following the Wednesday press conference that included the following:
"HB 2085 and SB 1115 are attempts to fix a problem that doesn't exist. The bills appear to have been triggered by a flawed study that alleges widespread tax avoidance through the use of offshore "tax havens." Illinois legislation adopted 10 years ago amended the Illinois Income Tax Act to bring back this income earned offshore.
In addition, to attempting to address an issue of "tax havens" that doesn't exist, the legislation would change to Illinois Income Tax Act to reinstate a flawed way of apportioning the income of corporations that was rejected by this State in 1984. This concept, "world-wide combination" was thoroughly analyzed by a working group of the U.S. Treasury Department that consisted of representatives of the federal government, states, and businesses. In 1984, Illinois joined the overwhelming majority of the states adopted the "water's-edge" system that has remained in place to this day.
We understand that the efforts of the sponsors to find new revenues to fund government services. However, these proposals are flawed, will impose unnecessary burdens on the business community, and will not raise anywhere near the amount of revenue the proponents hope will be raised."
We are working with COST (Council on State Taxation) and other business groups to lead the opposition to this deeply flawed legislation.
I will send out an invitation to a conference call to discuss this legislation later today to get your thoughts and insights.
HB 2120 - (West) - Amends the Property Tax Code. In a Section regarding property tax exemptions for charitable purposes, provides that property held by a charitable organization for the purpose of constructing or rehabilitating residences for eventual transfer to qualified low-income families through sale, lease, or contract for deed is exempt from property tax as a charitable purpose. Provides that the exemption commences on the day title to the property is transferred to the organization and continues to the end of the levy year in which the organization transfers title to the property to a qualified low-income family. Effective immediately.
HB 2125 - (Moylan) - Amends the State Finance Act, the Motor Fuel Tax Law, the Emergency Telephone System Act, the Riverboat Gambling Act, and the Video Gaming Act. Provides that, in the absence of an appropriation for any State fiscal year, moneys that are required to be distributed to units of local government and other entities from the State and Local Sales Tax Reform Fund, the Motor Fuel Tax Fund, the State Gaming Fund, the Local Government Video Gaming Distributive Fund, and the Statewide 9-1-1 Fund are subject to a continuing appropriation. Effective immediately.
HB 2128 - (D'Amico) - mends the Illinois Income Tax Act. Creates an income tax credit for taxpayers who replace a lead water service pipe with a copper water service pipe at a qualified residence. Provides that the credit shall be equal to the lesser of (i) 25% of the cost of replacing the lead water service pipes in each taxable year for which the credit is taken or (ii) $2,500 in each such taxable year. Provides that the credit may be taken for the taxable year in which the pipes are replaced and in each of the next 3 consecutive years. Provides that the term "qualified residence" means a single family residence that is owned and occupied by the taxpayer as his or her primary residence. Effective immediately.
HB 2130 -(Davidsmeyer) - Amends the Illinois Vehicle Code. Repeals a provision providing for the collection of an annual commercial distribution fee on vehicles of the second division weighing more than 8,000 pounds. Makes conforming changes. Effective immediately.
HB 2139 - (Wheeler) -
This bill is an Illinois Chamber Tax Institute initiative. Amends the Illinois False Claims Act. Provides that no court has jurisdiction over a civil action relating to or involving a false claim regarding certain tax acts administered by the Department of Revenue unless the action is brought by the Attorney General. Provides that the Department of Revenue has the sole authority to bring an administrative action and that the Attorney General has the sole authority to bring a judicial action under the Act for a false claim, statement, or record pertaining to certain taxes administered by the Department of Revenue. Contains provisions concerning reporting, investigative, and enforcement procedures for allegations of false claims pertaining to certain taxes. Contains provisions governing the payment of rewards to persons who provide information that leads to recovery of funds under the new provisions. Provides that the appeal of a determination regarding an award may be appealed exclusively to the Court of Claims and must be filed within 30 days of the determination of the award. Makes other changes, including a corresponding change in the Court of Claims Act.
HB 2155 - (Conroy) - Amends the Illinois Income Tax Act. Provides that the credit for student assistance contributions sunsets on December 30, 2025 (instead of December 30, 2020). Provides that the credit for student-assistance contributions may not exceed $1,000 (currently, $500) per contributing employee per taxable year. Effective immediately.
HB 2168 - (Feigenholtz) - Amends the Property Tax Code. Provides for a reduction in the equalized assessed value of newly-constructed or rehabilitated rental property if the owner of the residential real property commits that, for a period of 10 years, at least 15% of the multifamily building's units will have rents that are at or below maximum rents and are occupied by households with household incomes at or below maximum income limits. Provides that the chief county assessment officer of a county with 3,000,000 or more inhabitants shall establish such a program, and the chief county assessment officer of a county with less than 3,000,000 inhabitants shall establish such a program upon passage of an ordinance by a majority vote of the county board. Sets forth application requirements and the amount of the reduction. Effective immediately.
HB 2185 - (Manley) - Amends the Property Tax Code. Provides that a taxpayer who has been granted a senior citizens homestead exemption need not reapply for the exemption. Provides that the county assessor shall establish procedures with the county recorder of deeds or the county clerk to determine whether a person who has been granted a senior citizens homestead exemption has conveyed ownership of the property or is deceased. Provides that, if the person has conveyed ownership of the property or is deceased, then the county assessor shall mail notice to the new owner of the property, stating that (i) the exemption will be removed from the property and (ii) the new property owner may reapply for the exemption if the property becomes qualified.
HB 2193 - (Pappas) - Amends the Illinois Income Tax Act. Creates an income tax credit in an amount equal to the amount paid by the taxpayer during the taxable year for the purpose of purchasing acoustical materials, other materials, labor, and professional services to soundproof a residential home located at an eligible address against aircraft noise generated by an airport governed by the provisions of the Permanent Noise Monitoring Act. Provides that the credit may not reduce the taxpayer's liability to less than zero; however, the credit may be carried forward. Provides that the credit is exempt from the Act's automatic sunset provisions. Effective immediately.
HB 2208 - (Yingling) - Amends the Property Tax Code. Provides that the maximum reduction for the senior homestead exemption is $9,000 in counties with a population of more than 500,000 but not more than 1,000,000, $8,000 in counties with 3,000,000 or more inhabitants, and $5,000 in all other counties. Provides that the corporate authorities of the City of Chicago or the county board of a county with 3,000,000 or more inhabitants may, by ordinance, increase the maximum reduction for the senior homestead exemption for property under the jurisdiction of that city or county to not more than $9,000. Provides that the maximum reduction for the general homestead exemption is $12,000 in counties with a population of more than 500,000 but not more than 1,000,000, $10,000 in counties with 3,000,000 or more inhabitants, and $6,000 in all other counties. Provides that the corporate authorities of the City of Chicago or the county board of a county with 3,000,000 or more inhabitants may, by ordinance, increase the maximum reduction for the general homestead exemption for property under the jurisdiction of that city or county to not more than $12,000.
HB 2209 - (Yingling) - Amends the Property Tax Code. Provides that each tax bill shall contain a list of each tax increment financing (TIF) district in which the property is located and the dollar amount of tax due that is allocable to the TIF district. Effective immediately.
HB 2211 - (Yingling) - Amends the Property Tax Code. Provides that the election authority for Lake County shall cause to be submitted to the voters of Lake County at the general election held on November 3, 2020 a referendum to convert the Office of the Chief Assessment Officer of Lake County to an elected office rather than an appointed office. Provides for the form of the referendum to be submitted. Provides that in the event that a majority of the electors voting on the referendum are in favor thereof, the Office of the Chief Assessment Officer of Lake County shall become an elected office. Provides requirements for the candidacy, election, and assumption of office of a Chief Assessment Officer of Lake County. Amends the Election Code to allow for the submission of a referendum regarding the Office of the Chief Assessment Officer of Lake County. Effective immediately.
HB 2212 - (Yingling) - Amends the Property Tax Code. Provides that the county clerk shall abate property taxes levied by a unit of local government on property that is included in a neighborhood association that maintains the roads or sidewalks serving the property. Provides that the amount of the abatement shall be equal to the amount of property taxes levied by the unit of local government on that property for the purpose of maintaining roads or sidewalks. Effective immediately.
HB 2213 - (Yingling) - Amends the Property Tax Code. Provides that, for the 2015 and 2016 taxable years, the exemption for veterans with disabilities carries over to the surviving spouse of a veteran who was killed in the line of duty in the current taxable year or any preceding taxable year. Provides that, for the 2019 taxable year and thereafter, the exemption for veterans with disabilities carries over to the surviving spouse of a veteran who did not obtain the exemption before death, but who would have qualified for the exemption in the current taxable year if he or she had survived. Effective immediately.
HB 2217 - (Davis-Zalewski) This bill is an initiative of the Cook County Assessor. We met with the Assessor and his staff earlier this week and he provided the following one page summary of the legislation.
Amends the Property Tax Code. Provides that, in counties with 3,000,000 or more inhabitants, taxpayers of income producing property shall submit income and expense data related to the property annually to the chief county assessment officer. Provides that, in counties with fewer than 3,000,000 inhabitants, the county board may provide by resolution that taxpayers of income producing property shall submit income and expense data annually to the chief county assessment officer. Provides that, when determining the value of property for assessment purposes, the assessor may consider all relevant information pertaining to the fair cash value of the property, including, but not limited to, income and expense data, sales data, property characteristics data, construction cost data, appraisals, and other valuation information. Effective immediately.
HB 2241 - (Martwick) - Amends the Property Tax Code. Creates a homestead exemption of $1,000 for homestead property on which a stormwater retention basin has been constructed during the taxable year. Effective immediately.
HB 2243 - (Martwick) - Amends the Property Tax Code. Makes changes concerning certifications required for township and multi-township assessors and supervisors of assessments. Effective immediately.
HB 2251- (Jones) - Amends the Illinois Income Tax Act. Provides that each taxpayer who (i) was a resident of another State, (ii) first became a resident of Illinois in a taxable year beginning on or after January 1, 2019, (iii) agrees to reside in Illinois for a period of at least 10 consecutive years, and (iv) applies to the Department of Revenue for a new resident income tax credit is entitled to an income tax credit in the amount of $15,000 per year. Provides for recapture if the taxpayer fails to reside in the State for a period of at least 10 consecutive years after being approved for a credit by the Department. Provides that the credit is exempt from the Act's automatic sunset. Effective immediately.
HB 2270 - (Martwick) - Amends the Tax Increment Allocation Redevelopment Act of the Illinois Municipal Code. Provides that if a county clerk determines that any lot, block, tract, or parcel of real property within a redevelopment project area is not taxable or has an initial equalized assessed value of $0, then the fair market value of the lot, block, tract, or parcel shall be instead determined by a written MAI-certified appraisal or by a written certified appraisal of a State-certified or State-licensed real estate appraiser. Provides that this reappraisal shall be the initial equalized assessed value of the lot, block, tract, or parcel and shall be added to the total initial equalized assessed value of the taxable real property within the redevelopment project area. Limits the provisions to tax increment allocation financing ordinances adopted after the effective date of the amendatory Act.
HB 2271 - (Martwick) - Amends the Tax Increment Allocation Redevelopment Act of the Illinois Municipal Code. Provides that if (1) three or more improved lots, blocks, tracts, or parcels of real property within a single redevelopment project area are purchased by a developer or a developer's parent company or wholly-owned subsidiary, or any combination thereof, within the 3 years prior to the date that the ordinance providing for the tax increment allocation was adopted by the municipality, and (2) an improvement on any of the lots, blocks, tracts, or parcels of real property is demolished or otherwise rendered uninhabitable, then the initial equalized assessed value for the lot, block, tract or parcel of real property shall be the equalized assessed value of the lot, block, tract, or parcel of real property on the date it was purchased by the developer, the developer's parent company, or the developer's wholly-owned subsidiary or purchased by any combination thereof. Limits the provisions to ordinances adopted after the effective date of the amendatory Act.
SB 1115 - (Steans) - See the discussion of HB 2085 above. Amends the Illinois Income Tax Act. Provides for a water's edge apportionment election for certain members of a unitary business group. Provides that, with respect to foreign corporations that make a water's edge election, the deduction for dividends is limited to 75%.
SB 1124 - (Link) - Amends the Tobacco Products Tax Act of 1995. Provides that, beginning on July 1, 2019, "tobacco products" also includes electronic cigarettes. Effective immediately.
SB 1132 - (Aquino) - Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, the Cigarette Tax Act, the Cigarette Use Tax Act, the Hotel Operators' Occupation Tax Act, the Motor Fuel Tax Law, the Telecommunications Excise Tax Act, and the Liquor Control Act of 1934. Provides that the vendor discount amount under those Acts shall be 1.75%. Provides that the vendor discount may not exceed $1,000 per vendor in any calendar year. Effective immediately.
SB 1160 - (Stadelman) -
This bill should be of great interest to property tax practitioners. It appears to be an attempt to address the "dark stores" issue. Please provide me with your analysis and comments on this proposal.
Amends the Property Tax Code. Provides that, with respect to non-residential property, neither the board of review nor the Property Tax Appeal Board may consider comparable real property sales made subject to a private restriction or covenant in connection with the sale or rental of the property if that private restriction or covenant substantially impairs the use of the comparable property as compared to the property subject to assessment, or if that private restriction or covenant materially increases the likelihood of vacancy or inactivity on the property. Effective immediately.
SB 1162 - (Villivalam) -
Amends the Illinois Income Tax Act. Creates a credit in the amount of $25 for individual taxpayers who vote in an election during the taxable year. Effective immediately.
SB 1199 - (Murphy) - Amends the Property Tax Code. Provides that a taxpayer who has been granted a homestead exemption for veterans with disabilities need not reapply if he or she has been found by the Department of Veterans' Affairs to be permanently and totally disabled. Provides when any change occurs in use or ownership of property that has been granted a homestead exemption for veterans with disabilities, the transferee shall notify the chief county assessment officer of the change in writing within 90 days. Provides that the chief county assessment officer shall ensure that, if the property ceases to qualify for the exemption as a result of the change in use or ownership, then the exemption shall be removed beginning with the next taxable year after the change occurs.
SB 1217 - (Tom Cullerton) Amends the Illinois Municipal Code. Provides that not less than 75% of the amounts collected by a municipality within DuPage County pursuant to the municipal hotel operators' occupation tax and municipal hotel use tax shall be used to promote tourism within that municipality. Requires that the municipality that belong to a not-for-profit organization headquartered in DuPage County that is recognized by the Department of Commerce and Economic Opportunity as a certified local tourism and convention bureau entitled to receive State tourism grant funds. Provides that the remainder of the amounts collected may be used by the municipality for economic development or capital infrastructure. Repeals the provisions on January 1, 2021. Effective immediately.
SB 1248 - (Murphy) Amends the Property Tax Code. Provides that the county clerk shall abate 10% of the taxes imposed on qualified forest property that is part of a proposed new housing development. Provides that the owner of the property shall obtain approval from the Department of Natural Resources and shall submit a conservation plan and a new housing development plan to the Department of Natural Resources. Provides that "qualified forest property" means land of at least one acre that: (i) is at least 10% stocked by forest trees of any size; (ii) includes forest strips that are at least 120 feet wide; (iii) is managed in accordance with a conservation plan approved by the Department of Natural Resources; and (iv) is not developed for non-forest use as of January 1 of the first taxable year of the abatement. Effective immediately.
SB 1257 - (Cunningham) - Amends the Property Tax Code. In a Section concerning the Senior Citizens Homestead Exemption, provides that in all counties (now, in counties with less than 3,000,000 inhabitants), the county board may by resolution provide that if a person has been granted a senior citizens homestead exemption, the person qualifying need not reapply for the exemption. Provides that the county recorder of deeds shall alert the assessor whenever the transfer of ownership of any property receiving a Senior Citizens Homestead Exemption has occurred. Provides that, if such a transfer occurs, the assessor shall remove the exemption and provide the new property owner with information concerning reapplication. Effective immediately.
SB 1264 - (Aquino) - Amends the Revised Uniform Unclaimed Property Act. Provides that the Act does not apply to any annuity, pension, or benefit funds held in a fiduciary capacity by a retirement system. Provides that property assumed abandoned in an annuity, pension, or benefit fund held in a fiduciary capacity by a retirement system shall be reported by the retirement system to the administrator. Provides that no retirement system shall pay or deliver any annuity, pension, or benefit funds held in a fiduciary capacity to the administrator. Provides, with exceptions, that the provisions are retroactive to January 1, 2018.
SB 1313 - (Castro) - Amends the Revised Uniform Unclaimed Property Act. Makes changes concerning the time and circumstances under which financial organization deposits are presumed abandoned. Provides that compensation held on a payroll card is reportable one year after the date of the last indication of interest in the property by the apparent owner, except if the payroll card becomes a demand deposit, then 3 years after the date of the last indication of interest in the property by the apparent owner. Provides that the administrator does not need to notify the Department of Revenue of the names or social security numbers of apparent owners of abandoned property if he or she reasonably believes that the Department of Revenue will be unable to provide information that would provide sufficient evidence to establish that the person in the Department of Revenue's records is the apparent owner of unclaimed property in the custody of the administrator. Provides that the State Treasurer shall examine a financial organization in compliance with the visitation standards established in the National Bank Act or the Federal Credit Union Act, if applicable. Provides that records obtained in examinations of State-regulated financial organizations are subject to the same provisions concerning use and confidentiality as records obtained in examinations of other persons. Makes other changes. Effective immediately.
SB 1328 - (Holmes) - The bill is an Illinois Chamber Tax Institute initiative. Amends the Illinois Income Tax Act. Creates an income tax credit in an amount equal to 1% of the expenses claimed by the taxpayer as a federal income tax deduction pursuant to Section 179 of the Internal Revenue Code for the tax year. Provides that the taxpayer may sell, assign, or transfer the credit. Provides that the maximum aggregate amount of credits awarded for those purposes may not exceed $30,000,000 in any calendar year. Amends the Uniform Penalty and Interest Act to provide that, if the amount of the credit is reduced because the claims for credit exceed the maximum aggregate amount of the credit, then no underpayment penalty or interest shall accrue on the additional tax so long as the additional tax is paid within 60 days after the notice of reduction. Effective immediately.
Rulemaking
did not contain any new rulemakings by the Illinois Department of Commerce and Economic Opportunity.
The Department of Revenue proposed one new rulemaking this week. The Department has filed permanent rules replacing emergency rules previously filed to implement the post-Wayfair sales tax nexus standards set forth in P.A.100-587. As explained by the Department: "The Act's nexus standards are substantially similar to provisions enacted by South Dakota and upheld in the recent U.S. Supreme Court case, South Dakota v. Wayfair, Inc., No. 17-494 (U.S. June 21, 2018). Effective October 1, 2018, the Act requires remote sellers to register with the Department and collect and remit Use Tax on sales to Illinois purchasers if they meet specific selling thresholds. Retailers whose cumulative gross receipts from sales of tangible personal property to purchasers in Illinois are $100,000 or more, or who enter into 200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois, must register and collect and remit Use Tax."
The Property Tax Appeal Board adopted amendments to its rules entitled "Practice and Procedure for Appeals Before the Property Tax Appeal Board." The rulemaking amends a number of sections of these rules.
Court cases
No new tax-related cases this week.
Tax Tribunal
No new decisions were issued this week by the Tribunal. None of the new cases raise unique issues.
Publications
The Illinois General Assembly's bi-partisan Commission on Government Forecasting and Accountability has issued its Monthly Briefing for the Month Ended:
January 2019.
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