March 29, 2019
State and Local Tax
Illinois General Assembly
The House and Senate were in session this week Tuesday through Thursday. The House was scheduled to be in session today, Friday,.
Today is the House deadline for moving substantive legislation out of committee. As a result, a number of bills remaining in committee will be referred back to the Rules committee and in theory will be dead. Sponsors of bills that did not make it out of committee by the deadline can request extensions of the deadline. By next week's newsletter, I will know what bills were extended and remain alive in the House and Senate.
The House is in session next week Tuesday through Thursday. The Senate is in session next week Wednesday through Friday.
As of this morning, the House and Senate have not posted the committee schedules for House and Senate Revenue committees.
Senate Revenue committee
The Senate Revenue committee held a hearing on Wednesday afternoon. Here is a link to the bills that were considered by the committee. The Chamber's Data Center exemption bill SB 1591, passed out of committee unanimously on the agreed bill list,
The Senate Revenue committee considered amendment 2 to SB 1379 the Cook County Assessor's bill requiring certain information to be filed by "taxpayers" that have"income producing property." We opposed the amendment. It does not fix the problems with the legislation. The legislation remains deeply flawed, even as amended. The Assessor is a charming and articulate advocate and makes a beguiling argument to the members of the General Assembly who do not understand the Property Tax Code. But, details matter and we simply can't support this flawed legislation.
I'm linking a copy of a one page
that we provided to members of the General Assembly, along with a copy of a
that was hand-delivered to each member of the Senate in advance of the vote on SB 1379, which could occur in the Senate as early as next week.
House Revenue committee
The House Revenue committee met on Thursday. The committee held a subject matter hearing on sports gambling legislation proposals that are contained in the first four amendments filed to HB 3308 last week. There was also some discussion of the 5th amendment to the bill filed this week.
The committee took votes on other legislation. Here is a link to the bills considered by the committee.
Included in the bills considered by the House Revenue committee this week was HB 3633 which amends the "foreign tax credit" - the credit against the Illinois income tax for taxes paid by individuals on wages to other states. I filed a witness slip and testified in opposition to the current version of the legislation.
There are three major issues with the current form of the bill that I see as problems that need to be addressed. First, the bill is immediately effective and references tax years beginning January 1, 2010; which would impossible from a compliance standpoint and especially for companies who are not currently set up to track the location of their employees. I suggested to the Department of Revenue that the bill needs to be amended to make it effective no earlier than January 1, 2020. The Department seems amenable to making this change.
Second, unlike last year's legislation,
, there is no provision in HB 3633 for a waiver of the 30 day rule on withholding for employees of a company who are in Illinois for on a temporary basis for purposes of disaster relief. In last year's legislation, there was a provision that provided that if a company sends employees into Illinois to help rebuild after a disaster like the Taylorville tornado of 2018, those persons could be in Illinois for greater than 30 days without triggering a withholding requirement. The Department has agreed to amend the bill to add this provision into the bill.
Third, last year's bill had a provision, see page 10 of HB 4655, that allowed employees to "self-report." Here is pertinent language from the bill: "Withholding for nonresident employees. For taxable years beginning on or after January 1, 2018, for the purposes of determining compensation allocated to this State under subsection (a) of Section 302 of this Code: (1) an employer may rely on an employee's annual determination of the time expected to be spent by such employee in the states in which the employee will perform duties absent: (A) the employer's actual knowledge of fraud by the employee in making the determination; or (B) collusion between the employer and the employee to evade tax; . . ."
For some reason, the Department's legal and audit divisions no longer support the self-reporting provision, even though, to the best of my knowledge, they were fine with it last year. This language is similar to language in federal legislation that would create a uniform law for all states that has been before Congress for a few years now. They seem to think that this provision would open the door to fraud. I've told them that their fear is unfounded.
I will be speaking with the Department again, either tomorrow or Monday to try to work through this last issue.
Rep. Andre Thapedi introduced a transportation funding bill this week, backed by the Chamber, in the hope of further contributing to the funding discussion in Springfield. We hope the bill adds to the discussion in these ways:
- Revenue increases should be partially offset by provisions to minimize the impact on taxpayers,
- A bonding component should be included to address our bridge and expansion needs, and
- Multimodal funding is needed for transit, ports, airports, and other mode.
Updates on Chamber Tax Institute legislation
SB 1349 - (Weaver) - Amends the Uniform Penalty and Interest Act - The bill bill is in the House and is sponsored by Representative Walker.
- (Wheeler) - Amends the False Claims Act to correct abuses allowed under current law - assigned to House Executive committee, The bill remains assigned to House Executive committee.
- (Weaver) -
Amends the False Claims Act to correct abuses allowed under current law - assigned to Senate Judiciary committee. The bill remains assigned to Judiciary committee.
- (Sims) - Creates sales and use tax and electricity excise tax exemptions for data centers - assigned to Senate Revenue committee. As noted above, the bill passed out of committee and is now on the floor. We are negotiating an amendment to the bill, which will include among other things moving certification of the exemption to the Department of Commerce and Economic Opportunity from the Department of Revenue.
SB 1656 - (Weaver) - Amends the Illinois Income Tax Act to reinstate and extend the sunset date of the personal property tax replacement income tax - assigned to Senate Revenue committee. The bill was postponed from consideration and remains before the committee.
Amendments to tax legislation this week
- (Morrison) -
Amends the Illinois Income Tax Act. Provides for a credit against withholding taxes in an amount equal to 25% of the wages or salary paid by a private employer to an Illinois employee while the employee is on organ donation leave if the employer grants all of its employees the option of taking a paid leave of absence of at least 30 days for the purpose of serving as an organ donor or bone marrow donor. Makes changes to update the statutory base. Reinserts the provisions of the bill as amended by Senate Amendment No. 2, but provides that the credit may not exceed $1,000 in withholdings for each employee (in Senate Amendment No. 2, $20,833.33).
HB 527 - (Hutchinson) - Replaces everything after the enacting clause. Amends the Property Tax Code. Provides that the amount paid to the Will County Treasurer from the Tax Recovery Fund to compensate taxing districts for the loss of revenue on real property in Will County that is owned by the State of Illinois for the purpose of developing an airport shall be based on the amount of taxes that would have been extended for the current tax year for the exempt parcel if the parcel had been owned by a person whose property is not exempt (currently, the amount of leasehold taxes extended for the 2002 property tax year). Amends the State Finance Act to provide that compensation from the Tax Recovery Fund shall continue through December 31, 2030 (currently, December 31, 2020).
HB 584 - (McGuire) - Replaces everything after the enacting clause. Amends the Non-Home Rule Municipal Retailers' Occupation Tax Act of the Illinois Municipal Code. Extends the date (from December 31, 2020 to July 1, 2030) allowing the corporate authorities of a non-home rule municipality to use the proceeds of the non-home rule municipal retailers' occupation tax for expenditure on municipal operations, in addition to or in lieu of any expenditure on public infrastructure or for property tax relief, for such a tax approved on or after July 14, 2010.
SB 686 - (Manar) - Replaces everything after the enacting clause. Amends the Illinois Procurement Code. Provides that the Code does not apply to the leasing of State-owned facilities by a wireless carrier. Amends the Illinois Income Tax Act. Creates credit for the cost of equipment and materials used in the business of providing broadband services in Illinois. Provides that the credit does not apply to equipment and materials placed in service after December 31, 2023. Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act to exempt equipment and materials used to provide broadband services in Illinois from taxation under the Acts. Defines terms. Effective immediately.
SB 1041 - (DeWitte) - Replaces everything after the enacting clause. Amends the Property Tax Code. Provides that, in a county with more than 800,000 inhabitants but fewer than 1,000,000 inhabitants, if a lessee is liable for the payment of property taxes extended against property that is owned by a taxing district, the county treasurer shall promptly notify the taxing district that owns the property if the property taxes are delinquent 60 days after the second installment due date. Provides that the taxing district shall promptly notify the county supervisor of assessments upon the execution of a new lease or the termination of a lease. Provides that the State's Attorney of the county in which the property is located may bring an action against the lessee in the circuit court to recover the full amount of delinquent taxes, interest, penalties, and costs.
SB 1042 - (Weaver) - Replaces everything after the enacting clause. Amends the Property Tax Code. Provides that the abatement for property located in an area of urban decay also applies to newly remodeled single-family or duplex residential dwelling units (currently, only newly constructed single-family or duplex dwelling units).
SB 1379 - (Hutchinson) - Replaces everything after the enacting clause. Reinserts the provisions of Senate Amendment 1 with changes. Removes conforming changes concerning income and expense data, but retains the new Article concerning income-producing property. Provides that the term "income and expense data" include specific federal income tax returns (in Senate Amendment 1, federal income tax returns generally). Provides that "income-producing property" means property that is not exclusively owner-occupied (in Senate Amendment 1, non-owner-occupied). Removes a reference to gas stations. Defines "owner-occupied" and "taxpayer". Provides that the chief county assessment officer shall notify taxpayers of their obligation to submit income and expense data. Makes changes concerning the submission of federal tax forms. Provides that the penalty for failure to submit income and expense data shall be 0.05% (instead of 0.5%) of the prior year's market value. Adds provisions concerning administrative hearings. Makes other changes. Effective immediately.
SB 1755 - (McConchie) - Makes changes to the introduced bill to provide that "sale at retail" does not include the selling of food at retail to students, teachers, or staff, and not to the general public, during a school designated breakfast or lunch period, on the premises of a public or non-public school serving some or all of grades kindergarten through 12 that has an active identification number issued by the Department of Revenue.
HB 114 - (Madigan) - Replaces everything after the enacting clause. Amends the Property Tax Code. Provides that upon establishing the compensation of board of review employees fixed by the county board, the county shall, at all times, ensure that each of the commissioners on the board of review receives equitable resources and staffing. Effective immediately.
HB 250 - (Walsh) - Replaces everything after the enacting clause. Amends the Property Tax Code and the Mobile Home Local Services Tax Enforcement Act. Provides that a county with fewer than 3,000,000 inhabitants may, by joint agreement, combine its tax sale with the tax sale of one or more other contiguous counties. Provides that a joint tax sale shall be held at a location in one of the participating counties.
HB 826 - (Zalewski) - Replaces everything after the enacting clause. Reinserts the provisions of the introduced bill with the following changes: Provides that the municipal gas use tax applies to non-home rule municipalities. In the definition of "purchase of out-of-state gas", changes a reference from the Gas Revenue Tax Act to a tax imposed under the Illinois Municipal Code for gas in municipalities with a population under 500,000. Allows the non-home rule municipality to establish the rate of the tax (rather than setting the rate at 2.4 cents per therm). Provides requirements for the non-home rule municipality when establishing the alternate tax rate. Provides that purchasers who do not elect the alternate tax rate to be paid to a delivering supplier shall register with the municipality imposing the tax (rather than the Department of Revenue), including obtaining a certificate of registration, and pay the tax directly to the municipally (rather than the Department of Revenue). Makes conforming changes. Amends the Public Utilities Act. Allows a public utility to charge non-exempt customers an additional charge related to the non-home rule municipal gas use tax. Effective January 1, 2020.
HB 833 - (Crespo) - Replaces everything after the enacting clause. Amends the Property Tax Code. Provides that, in a county with 3,000,000 or more inhabitants, a taxpayer who has been granted a senior citizens homestead exemption shall reapply every 4 years (currently, annually). Provides that, if the property ceases to be qualified for that exemption in any year for which a reapplication is not required, then the owner of record of the property shall notify the chief county assessment officer that the property is no longer qualified. Provides that the chief county assessment officer shall enter into intergovernmental agreements with the county clerk of his or her county and the Department of Public Health, as well as any other appropriate governmental agency, to obtain information that documents the death of a taxpayer who has been granted a senior citizens homestead exemption. Makes conforming changes in provisions concerning erroneous homestead exemptions. Effective immediately.
HB 2085 - (Harris) - Removes provisions from the introduced bill concerning the definition of "unitary business group". Provides that, for taxable years ending on or after December 31, 2019, the term "unitary business group" does not include any member whose business activity outside the United States is 80% or more of any that member's total business activity and (in the case of a member other than an individual) who is not a "United States Person" within the meaning of Section 7701(a)(30) of the Internal Revenue Code.
HB 2217 - (Davis) - Replaces everything after the enacting clause. Reinserts the provisions of the introduced bill with the following changes: (1) removes conforming changes concerning income and expense data, but retains the new Article concerning income-producing property; (2) provides that the term "income-producing property" means property that is not exclusively owner-occupied property and is owned for the purpose of generating income from the property itself; (3) defines "property"; (4) provides that failure to submit income and expense data shall result in a penalty of 0.05% (in the introduced bill, 2%) of the prior year's assessed value; (5) provides that the taxpayer shall not be required to pay more than $100,000 in penalties per property; (6) removes provisions from the introduced bill providing that, if the taxpayer fails to submit income and expense data, the taxpayer shall not be permitted to appeal the assessment of that income producing property for the applicable taxable year; and (7) provides that the chief county assessment officer is not prohibited from disclosing compiled and anonymized income and expense data; however, that data shall not indicate individual property characteristics in a manner that reveals the identity of individual properties. Effective immediately.
HB 2974 - (Moeller) - Income Tax Caregiver Credit - Makes changes to the introduced bill to provide that the eligible expenditures shall be verified by the Department on Aging. Provides that the Department of Revenue and the Department on Aging shall jointly adopt rules for the implementation of the credit.
HB 3308 - (Zalewski) - Sports Wagering - Replaces everything after the enacting clause. Creates the Sports Wagering Act. Authorizes sports wagering to be conducted by Internet sports wagering vendors and casinos and racetracks licensed as sports wagering operators. Allows sports wagering to be conducted in sports wagering lounges in licensed casinos and racetracks and over the Internet. Requires the person participating in sports wagering to be physically located in the State. Allows a sports wagering operator to accept wagers at a sports wagering lounge located within specific sports facilities or within a 5-block radius of specific sports facilities. Includes provisions concerning the eligibility to conduct sports wagering, licensing of sports wagering operators and Internet sports wagering vendors, consumer protections, interactive sports wagering skins, integrity requirements, recordkeeping and information sharing, annual reports, tax rate and distribution, civil penalties, and reconciliation with other State law. Makes conforming changes in the Riverboat Gambling Act and the Criminal Code of 2012. Effective immediately.
HB 3318 - (Walker) - Venture Capital Credit - Replaces everything after the enacting clause. Reinserts the provisions of the introduced bill with these changes: (1) provides that the credit applies for taxable years beginning on or after January 1, 2020 and beginning prior to January 1, 2025; (2) makes changes concerning partners, shareholders of Subchapter S corporations, and owners of limited liability companies; and (3) in provisions concerning requirements for qualified new business ventures, provides that the business must be engaged in (in the introduced bill, "engaged in or committed to engage in") manufacturing, agriculture, or processing or assembling products and conducting research and development or developing a new product or business process.
HB 3319 - (Walker) Edge Transfer Credit - Removes provisions from the introduced bill concerning the transfer of the credit under the Economic Development for a Growing Economy Tax Credit Act. Provides that a transfer of the credit may be made by the taxpayer earning the credit within one year after the credit is awarded in accordance with rules adopted by the Department of Commerce and Economic Opportunity. Provides that the credit retains its original expiration date. Provides that the transferee shall first use the credit during the taxable year in which the transfer is made. Provides that the transferor and transferee shall each attach a copy of the certificate of transfer to their respective tax returns.
HB 3497 - (Connor) - Income Tax Apprentice Credit - Replaces everything after the enacting clause. Reinserts the provisions of the introduced bill with changes. Provides that the Department of Commerce and Economic Opportunity shall award apprenticeship credits on a first-come, first-served basis and may not award more than $50,000,000 in credits in any 5-year period. Provides that the applicant must demonstrate that the applicant would not participate in a qualified apprenticeship program if not for the credit. Provides that proof that a construction apprenticeship program is registered with the United States Department of Labor's Employment and Training Administration shall be sufficient for certification. Makes changes concerning the number of eligible apprentices. Effective immediately.
The March 29 edition of the Illinois
did not contain any new or adopted rulemakings by the Illinois Department of Revenue or the Illinois Department of Commerce and Economic Opportunity.Replaces everything after the enacting clause.
No new cases this week.
No new decisions were posted this week.
Two new cases filed this week may be of interest:
Tadano America Corporation v. Illinois Department of Revenue - is a protest of a denial of a sales and use tax refund claim. The taxpayer filed a claim for refund of an amount of credits identified on Taxpayer Statements issued by IDOR to the taxpayer. IDOR denied the refund claim stating the refund claim is out of statute.
Tadano is represented by Adam Beckerink of new Illinois Chamber Tax Institute member law firm Morgan Lewis.
SCI Illinois Services, LLC v. The Illinois Department of Revenue
- is a protest of a $20 million dollar income tax notice of deficiency. According to the petition, the taxpayer made a "presentation error" on the UB (unitary business) schedule of its combined return. In response, the Department's processing division changed the taxpayer's apportionment percentage to 100% apportionment to Illinois and issued the $20 million notice of deficiency.
I continue to be baffled as to why the Department issues absurd notices of deficiency that change a taxpayer's apportionment percentage to 100% in these types of situations, rather than making more of an effort to work with taxpayers to correct these types of errors. In this case, the Return Correction Notice to the taxpayer was dated the day after Christmas and the Notice of Deficiency is dated February 11 so it appears there was only around 30 days between the receipt of the correction notice and the issuance of the Notice of Deficiency.
SCI Illinois is represented by Marilyn Wethekam and Samantha Breslow of Illinois Chamber Tax Institute member law firm Horwood Marcus & Berk.