2019 Legislative Review - Image of the Statehouse Dome

The end of the Legislative Session marked far more activity than in recent memory.  We saw a vote to legalize marijuana, passage of a $45 billion infrastructure plan, approval of six new casinos (Chicago, Waukegan, southern Cook County, Rockford, Danville, and near Marion), legalized sports betting, $40k minimum wage for teachers, passed a state budget, began the process of instituting a graduated income tax, increased the gas tax (to 38 cents), and added a dollar per pack to the cigarette tax (to $2.98). Most bills passed with bipartisan support, with the exception of the graduated income tax (Fair Tax) ballot question.

 

BUDGET REVENUE & BLUE COLLAR JOBS ACT
Senate Bill 689 is where a chunk of the operating budget money is being generated and includes several Republican requests to secure the aforementioned bipartisan support for gaming, capital, and the budget.  We have included page numbers below for your reference, and you may use this [link to SB689]

New Amnesty Programs
From October 1 – November 15, 2019, Illinois will be offering new Amnesty Programs, and interest and penalties are waived.

  • For those owing Illinois taxes from 06/20/11 – 07/01/18. [pg143]
  • For franchise tax or license fee liabilities for tax periods 3/15/2008 – 6/30/19. [pg155-156, 309]

Repeal of the Franchise Tax
The Illinois franchise tax is being phased out. New provisions in the Business Corporation Act exempt the first $X in liability “from the tax imposed under this Section” as follows:

  • 2020: $30
  • 2021: $1,000
  • 2022: $10,000
  • 2023: $100,000
  • 2024+: No Payment Due

 

Blue Collar Jobs Act
Beginning January 1, 2021, four new (or expanded) income tax credits. For the purposes of these credits:

  • Underserved areas refer to a geographic area that meets any of the following conditions [pg170]:
    • 20% poverty rate
    • 75% of children in the federal free lunch program
    • 20% of households receive Supplemental Nutrition Assistance Program (SNAP)
    • Average Unemployment rate is more than 120% of the national average
  • The total aggregate amount of credits awarded under the Blue Collar Jobs Act shall not exceed $20,000,000 in any State fiscal year.
  • Businesses that receive a credit are required to maintain a certified payroll, as well as records for all laborers and other workers employed for a period of 5 years from the date of the last payment. [pg239]
  • Even if the taxpayer uses a subcontractor, the taxpayer shall keep all records. If records or claims are knowingly false it is a class A misdemeanor. [pg241]
  • Eligible projects include building a structure/building or making improvements to real property, undertaken and commissioned by an eligible business. This does not include the routine operation, repair, or maintenance of existing structures, buildings, or real property. [pg170]
  • A credit may not reduce the taxpayer’s liability to less than zero. If the amount of the credit exceeds the taxpayer’s liability, the excess may be carried forward and applied against succeeding years. [pg198]

High Impact Business Construction Jobs Credit
Available for up to 50% (75% in underserved areas) of the incremental income tax attributable to employees in the course of completing a High Impact Business construction jobs project. [pg168]

Enterprise Zone Construction Jobs Credit
Available within a certified Enterprise Zone up to 50% (75% in underserved areas) of the incremental income tax attributable to employees on a qualified project with a capital investment of at least $10,000,000. [pg174]

  • Must receive approval from designating municipality/county & DCEO for the EZ construction jobs credit project. The Department shall give notice of approval within 45 of receipt, specifying reasons for their decision, and allowing 60 days for amendment and resubmission. [pg175]
  • The zone organization shall report to DCEO on the programmatic and audited financial status of any approved project.

New Construction EDGE Credit
Available for certified agreements which include a capital investment of at least $10,000,000 in a New Construction EDGE Project. Applicants must meet existing criteria by the EDGE Tax Credit Act (10/5-10, 15, & 20). DCEO shall post the terms of each agreement on its website (including the business name, location, estimated value, and underserved status).  Applications for the New Construction EDGE Credit must include:

  • project description, and location/amount of the investment & jobs created or retained;
  • duration of the credit and the first taxable year it may be claimed;
  • credit amount allowed each taxable year;
  • verification authorization for tax amounts;
  • amount of capital investment, project time period, and designated location
  • acknowledgment of investment notification requirements
  • acknowledgment of completion & occupancy requirements
  • terms regarding verification of completion, and other conditions [pg237]:

River Edge Construction Jobs Credit
Available for up to 50% (75% in underserved areas) of the incremental income tax attributable to River Edge construction employees on a qualified project with a capital investment of at least $1,000,000 in a qualified rehabilitation plan. [pg242-274] The Department shall give notice of approval within 45 of receipt, specifying reasons for their decision, and allowing 60 days for amendment and resubmission. [pg246]

Manufacturing Machinery & Equipment Credit
Manufacturing machinery and equipment exemption which includes production-related tangible personal property purchased on or after July 1, 2019.  Adds to the definition of “production-related tangible personal property” to include supplies & consumables used in a manufacturing facility including fuels, coolants, solvents, oils, lubricants, and adhesives, hand tools, protective apparel and fire and safety equipment used or consumed within a manufacturing facility.  The maximum amount of the exemption may not exceed 5% of the price of the property. The aggregate amount for the exemption may not exceed 10 million. [pg250-274]

 

THE ILLINOIS CAPITAL PROJECTS (BUILDING UP & OUT)

Senate Bill 690 makes up the “vertical” portion of the capital bill, infrastructures such as schools and hospitals.  Whereas Senate Bill 1939 consists of the “horizontal” elements (roads, bridges, and transit).

Senate Bill 690
Leveling the Playing Field for Illinois Retail 
After the Wayfair v South Dakota decision, Illinois can now require that remote retailers (Amazon, Ebay, Facebook, etc) collect State and local Retailers’ Occupation Tax (ROT) rather than use tax.  The Illinois Retail Merchants Association states (more information here) that Illinois would raise $460 million annually, with $368 million to the state and $92 million to localities by formula, plus any additional ROT where applicable.  IRMA states that local governments win with an increase in their tax share, and they get all of any locally-imposed ROT. Finally, there is no change in this matter for Illinois retailers or anyone with a warehouse or distribution center in Illinois. [pg1-7, 126-129, 155]

Parking Excise Tax
Beginning on January 1, 2020, a tax is imposed on the privilege of using in this State a parking space in a parking area or garage for the use of parking one or more motor vehicles, recreational vehicles, or other self-propelled vehicles, at the rate of 6% for a parking space paid for on an hourly, daily, or weekly basis; and 9% when on a monthly or annual basis. [pg7-20]

Data Center Investments
Two new tax benefits apply to data centers that make a capital investment of $250 million over a 5-year period, create 20 new jobs, and is either carbon neutral or green building certified. If the data center is in an economically disadvantaged area, there is a data center construction employment tax credit equal to 20% of the wages paid to construction contractor employees. Additionally, there is a sales/use tax exemption for property used in the construction or operation of a certified data center. [pg37-44, 81, 97, 113, 150]

Cigarette Taxes
As of July 1, 2019, taxes on cigarettes will increase to $1 per pack and Illinois imposed a floor tax.  Electronic cigarettes are now subject to a 15% tax on the wholesale price. [pg170-196]

Sports Wagering and More
Although the IEDA was not engaged in the gambling components of any legislation, we wanted to point it out in this bill. A new income tax surcharge was created on income from the sale or exchange of gaming-related assets equal to the federal income tax on that sale.  You can find more on pages 227 – 816.

Senate Bill 1939
Motor Fuel Tax
Illinois hasn’t passed an infrastructure bill in a decade.  However, this weekend a bipartisan effort in the Senate (12 of 19 Republicans and 36 of 40 Democrats) voted to increase the tax on fuel and increase vehicle registration and title fees to gather money for $45 billion statewide construction program. Also, as a concession to Republicans, the state will begin shifting 80% of its gasoline sales tax to the Illinois Road Fund.

SB1939 increases the motor fuel tax by 19¢ to 38¢ a gallon for regular fuel and 26¢ a gallon for diesel. Also, municipalities in Cook County may impose up to a 3¢ per gallon tax. DuPage, Kane, McHenry, Lake, and Will can now impose up to 8¢ a gallon (from 4¢).  Finally, the annual vehicle registration fee from $101 per year to $151 beginning with the 2021 registration year, and the commercial distribution fee is being eliminated July 1, 2020.

 

OTHER LEGISLATIVE HIGHLIGHTS

Senate Bill 687 – The Fair Tax
Changing the Illinois Tax Structure has been long discussed in Illinois, but after this session, a question about graduated income tax will be put to voters on the 2020 ballot. This is seen as a win for Gov. Pritzker. Expect a huge public battle to be waged via on the airwaves, television channels, and online media on both sides of this issue.  Both sides are expected to spend large amounts of money to sway public opinion.  Senate Bill 687 proposes the following to be put before voters:

Non-Joint Filers

  • $0-$10,000 – 4.75%
  • $10,001-$100,000 – 4.9%
  • $100,001-$250,000 – 4.95%
  • $250,001-$350,000 – 7.75%
  • $350,001-$750,000 – 7.85%
  • More than $750,000 – 7.99% of all income

Joint Filers

  • $0-$10,000 – 4.75%
  • $10,001-$100,000 – 4.9%
  • $100,001-$250,000 – 4.95%
  • $250,001-$350,000 – 7.75%
  • $350,001-$1,000,000 – 7.85%
  • More than $1,000,000 – 7.99% of all income

Senate Bill 687 increases the corporate income tax rate from 7% to 7.99% (or 10.49% with the personal property tax replacement income tax). The residential property tax credit is increased from 5% of property taxes paid to 6%. A new Child Tax Credit for children under the age of seventeen is created and the credit is equal to $100 and begins to phase out for joint filers with an income of $60,000.

Cannabis Legalization
Under the passed House Bill 1438, not only will possession up to 30 grams will be legalized for adult use, but clemency will be granted to people charged with possession of up to that amount in the past.  There are various taxes and fees applied to fund social, economic, and health programs – including a 7% tax on the gross receipts by a cultivator to a dispensing organization, and retail taxes.

Non-Resident Income Taxes
Senate Bill 1515 taxes non-resident that spend more than 30 working days in Illinois. Illinois Residents will receive a credit for income taxes paid to other states.