April 5, 2019
State and Local Tax
Illinois General Assembly
The House was in session this week Tuesday through Thursday. The Senate was scheduled to be in session Wednesday through Friday, but cancelled the Friday session.
The House and Senate are both scheduled to be in session next week Tuesday through Friday. Next Friday is the third reading deadline in both the House and Senate for bills originating in each chamber.
After next week, the House and Senate will be on Easter break for the seeks of April 15 and April 22.
Legislation of Interest
On Wednesday the Senate Judiciary committee held a subject matter hearing on SB 1564 which revises the False Claims Act. I testified in support of the legislation as did a representative of the Illinois Retail Merchants Association. Attorney Steve Diamond testified in opposition to the legislation. The Illinois Trial Lawyers Association also filed a witness slip in opposition to the legislation, but did not testify. In addition to my testimony in support of the bill the committee Chairman, Senator Mulroe ,allowed me some rebuttal time to respond to Mr. Diamond's testimony. The committee Chairman advised that the Attorney General's office is neutral on the legislation. The Department of Revenue did not participate in the hearing or file a witness slip.
The committee did not take a vote on SB 1564 on Wednesday. I am advised that the Democrat members of the committee, because of the opposition of the trial lawyers, declined to allow the bill to move out of committee to the floor.
Because the deadline for moving bills out of committee in the Senate has now passed, SB 1564 and our other False Claims Act revision legislation legislation, SB 1714 have both bee referred back to the assignments committee.
SB 1379 - Hutchinson - Assessor's information gathering bill passed out of the Senate on Thursday on a partisan vote. While the bill was amended twice in the Senate it remains deeply flawed. The Chamber remains opposed to this legislation. Here is a link to a position paper on the bill. I would note that the Civic Federation also came out in opposition to this legislation this week.
HB 270 - Murphy - Local sales tax sourcing. We oppose this legislation which has been returned to the rules committee. - SB 2049 (Castro) is identical and has been returned to the assignments committee in the Senate. Although these bills are not likely to move during the remainder of the session we will watch to make sure that this legislation doesn't end up in some end-of-session budget implementation bill.
HB 3633 - (Manley) remains on second reading in the House. This legislation changes the foreign tax credit allowed individual employees. The legislation is intended to allow a more generous foreign tax credit to Illinois resident employees who sometimes work in other states and, as a result, are subject to income taxation in those other states.
HB 2085 (Harris) and SB 1115 (Steans) - world-wide apportionment, modified waters edge legislation. The house bill has been returned to the rules committee and the senate bill has been returned to assignments. We will fight any attempts to include this legislation in an end-of-session budget implementation bill.
We opposed this Illinois Department of Revenue initiative as originally proposed. The Department has agreed to amend the legislation to move the effective date the changes to tax years beginning January 1, 2020, add a provision that out-of-state employees working in Illinois in disaster relief roles are not subject to the 30 day withholding requirement, and to allow employers that do not have systems in place to track when nonresident employees are present in Illinois to rely on statements from the employees as to their presence in the State.
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. Nothing controversial was considered by the Senate Revenue committee this week.
As of this morning, the Senate Revenue committee has not yet scheduled a hearing for next week.
House Revenue committee
The House Revenue committee did not meet this week.
As of this morning, the House Revenue committee has not yet scheduled a hearing for next week.
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.
- (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 filing 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.
Amendments to tax legislation this week
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.
HB 2461 - Replaces everything after the enacting clause with the provisions of the introduced bill with the following additional changes to the Revised Uniform Unclaimed Property Act: Makes changes concerning the time and circumstances under which financial organization deposits are presumed abandoned. Makes changes in provisions governing extending the reporting date of certain reported renewable time deposits. Deletes language requiring a holder to inform the administrator to provide a telephone number to contact the administrator to inquire about or claim property. 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 may, at reasonable times and upon reasonable notice: (1) examine the records of specified types of financial organizations under certain conditions; (2) issue an administrative subpoena requiring the financial organization to make records available for examination; and (3) bring an action seeking judicial enforcement of the subpoena. 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.
HB 3096 - Replaces everything after the enacting clause. Reinserts the provisions of the introduced bill with the following change. Provides that, as an alternative to certain other procedures, a taxing district may increase its aggregate extension if the taxing district obtains referendum approval as provided in the amendatory Act (in the introduced bill, notwithstanding those other procedures, the taxing district shall follow the provisions of the amendatory Act when seeking referendum approval to increase its aggregate extension). Removes the effective date.
SB 1035 - (Weaver) - Replaces everything after the enacting clause. Amends the Tax Increment Allocation Redevelopment Act in the Illinois Municipal Code. Provides that any ordinance adopting tax increment financing on or after the effective date of the amendatory Act shall specify a date for the dissolution of the special tax allocation fund and a date for the termination of the designation of the redevelopment project area. Provides that, within 90 days after the effective date of the amendatory Act, each municipality shall amend all existing tax increment financing ordinances to specify a date for the dissolution of the special tax allocation fund and a date for termination of the designation of the redevelopment project area. Provides that municipalities shall notify affected taxing districts of the termination of redevelopment project areas by July 1 (currently, November 1) of the calendar year in which the redevelopment project area is terminated. Amends the Property Tax Extension Limitation Law in the Property Tax Code. Provides that, if a municipality has failed to provide timely notice to all taxing bodies of the termination of a redevelopment project area and the county clerk has been notified of that failure, then "recovered tax increment value" means the amount of the current year's equalized assessed value in the first year beginning at least 60 days after the notice has been provided.
SB 1050 - (Curran) - Replaces everything after the enacting clause. Amends the Illinois Income Tax Act. Increases the income tax credit for residential real property taxes from 5% of real property taxes paid by the taxpayer to 15% of real property taxes paid by the taxpayer. Provides that the credit is exempt from the Act's automatic sunset provision. Effective immediately.
did not contain any newrulemakings by the Illinois Department of Revenue or the Illinois Department of Commerce and Economic Opportunity.
The Illinois Register contained one adopted rulemaking by the Illinois Department of Revenue. The rulemaking is "clean up" rulemaking that updates statutory references to certain statutory exemptions.
One new case was issued by the appellate court last Friday after I sent out the newsletter.
Ford Motor Co. & Affiliates v. The Department of Revenue
. This case is an appeal of a denial of a corporate income tax refund claim. Note that the opinion was issued under Supreme Court Rule 23 and may not be cited as precedent.
In 2004, Ford filed amended income tax returns and requested refund claims for a number of tax years. The basis of the claims was certain income should have been reported as nonbusiness income and not taxed by Illinois. (Business income is apportioned, nonbusiness income is allocated to the state of commercial domicile.) The Department denied the claims and, in addition, issued notices of deficiency proposing to assess additional tax.
Ford filed a protest and the matter proceeded to an administrative hearing. (This matter predated the Tax Tribunal.) The Department's ALJ recommended that the Director uphold the claim denials and the notices of deficiency. The Director accepted the recommendation.
At issue in this case deals was the level of specific documentation necessary to establish a claim of nonbusiness income.
Ford challenged the Department's refund claim denial and assessments in the circuit court and the circuit court upheld the Director's decision. Ford then appealed and the appellate court upheld the Department's determination.
In upholding the Department, the appellate court concluded "[w]e leaving standing the Director's decision that plaintiff failed to establish with competent evidence supported by its books and records the amount of interest income earned as a partner in the State Street Accounts necessary to prove its entitlement to the nonbusiness income interest deductions claimed on its amended returns."
No new decisions were posted this week.
None of the new cases filed this week raise unique issues.