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May 29, 2020

State and Local Tax  
This Week 

Illinois General Assembly

T he General Assembly returned to Springfield on May 20 for a special session to consider a limited number of topics. The session was scheduled for three days, but the General Assembly ended up staying through Saturday into early Sunday morning.  

As noted in my updates over the weekend, no tax legislation of substance passed during the session.  I listed all of the tax-related legislation that passed in my updates last weekend.

The General Assembly passed a budget for the FY 2021 fiscal year and has adjourned until the fall veto session.  The budget is a work in progress that will, I suspect need to be revisited in the fall veto session.

The budget was "balanced" by the General Assembly authorizing the Governor to borrow up to $5 billion through the Federal Reserve.  Apparently, the hope of the members of the General Assembly who voted for the budget and the Governor is that there will be no need for borrowing, or a lesser amount of borrowing will be needed, or no borrowing will be needed, if Illinois receives additional funding from the federal government through another federal stimulus package.

Based on past history and from the rumblings out of Washington, I suspect it is likely that there will be some additional federal funding coming to the states.  As I noted a couple of weeks ago, during the Great Recession Illinois received federal funds to make up for the loss in state tax revenues caused by the recession.  In FY 2010, Illinois received $3.8 billion in federal stimulus payments.  If that amount is adjusted for inflation, it would amount to $4.52 billion in today's dollars, which would just about make up for the $4.6 million drop in tax receipts projected for FY 2021 by the Governor's Office of Management and Budget.

If there isn't any additional federal funding to make up for the loss of state tax revenues resulting from the shut down of the economy, Illinois will have to figure out how to pay back the borrowing from the Federal Reserve program.  We will know more by the time the veto session begins on November 11.

Here is a link to the Illinois Chamber's  End of Session Report.  This report contains a review of all legislation we tracked.

New legislation
HB 5791  - Meier - A mends the Illinois Income Tax Act. Provides that, if a disaster is declared by proclamation of the Governor for all counties in the State due to a public health emergency, the income tax filing and tax payment deadline required by the State of Illinois shall be extended until 90 days after the end of the Governor's declaration. Effective immediately.

HB 5792 - Williams -  Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act. Provides for the deferral of tax payments due under the Acts for businesses that meet both of the following criteria: (i) the business had an adjusted gross income of less than $3,000,000 in a taxable year beginning in calendar year 2019 and (ii) its monthly revenue in calendar year 2020 is more than 15% lower than its average monthly revenue in calendar year 2019. Sets forth the deferral period. Amends the Illinois Administrative Procedure Act to provide for emergency rulemaking. Effective immediately.

HB 5793 - Weber - Amends the Property Tax Code. Provides that, upon a resolution passed by the county board, if a person has been granted the homestead exemption for veterans with disabilities or the senior citizens assessment freeze homestead exemption, then the person qualifying need not reapply for the exemption. Effective immediately.

Illinois Department of Revenue
The Department issued an  Announcement that the Governor issued a waiver of p enalties and interest for taxpayers affected by flooding and severe weather for individuals and businesses in 4 counties if they cannot make payments or file returns on time.  The four counties are Grundy, Morgan, Pike, and Scott.  The Announcement explains the procedures for requesting penalty and interest waivers.

The Department issued Information Bulletin FY 2020-37 - Change in the County Motor Fuel Tax Rate, Effective July 1, 2020, through June 30, 2021.

City of Chicago

The City Department of Revenue recently issued  Restaurant Tax Guidance for COVID-related surcharges.  A ny "surcharge" customers are required to pay for food or beverages is considered taxable and should be included in the basis upon which the restaurant tax is calculated.

Cook County Assessor

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

The May 22 edition of the Illinois Register contained a proposed rulemaking and an emergency rulemaking by the Department of Commerce and Economic Opportunity.  The rulemakings are new rules for the Illinois Works Jobs Program Act.  

DCEO explains the subject of the new rules as follows:

"The Illinois Works Apprenticeship Initiative applies to public works projects with an estimated total project costs of $500,000 or more.  The program will impact grantees, contractors and subcontractor who receive money from appropriated capital funds for public works projects.  For those projects, the goal of the Illinois Apprenticeship Initiative is that apprentices will perform either 10% of the total labor hours actually worked in each prevailing wage classification or 10% of the estimated labor hours in each prevailing wage classification, whichever is less." 

The May 29 edition of the Illinois Register did not contain any proposed rulemaking by the Illinois Department of Revenue or the Department of Commerce and Economic Opportunity.

The May 29 Illinois Register contained on adopted rulemaking - the parking tax rules.

Court cases
No new tax-related cases this week.

Tax Tribunal 
One new decision was posted this week.  Dalisay Sulit v. Department of Revenue is a challenge to Notices of Penalty Liability issued by the Department based on a failure to pay income tax withholding.  Judge Barov ruled in favor of the Department.

One interesting portion of the decision involves Judge Barov's comments about whether the Petitioner was required to provide documentary evidence to rebut the penalty assessment.  The Department contended that the Petitioner was required to provide documentary evidence and cited Mel-Park Drugs, Inc. v. Department of Revenue, 218 Ill. App. 3rd 203 (1991).  Judge Barov stated "Illinois courts have not expressly adopted this rule in section 3-7(a) cases. Rather, Illinois courts use the term of 'sufficient evidence'. . . " and cited Branson v. Department of Revenue, 168 Ill.2d 247. Judge Barov stated "[a]lthough the Department's view of the law is doubtful, it makes no difference in this case."

One of the two new cases filed this week may be of interest.   Christopher v. Illinois Department of Revenue is an income tax case and a challenge to a Notice of Deficiency. The Department issued an audit report recharacterizing gains of a Holding Company as business income and apportioning a portion of the gains to Illinois.

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