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HomeNews & EventsBusiness Tax Bill and Personal Tax Bill Passed By the Illinois House, December 2011
Tuesday, December 13, 2011
Business Tax Bill and Personal Tax Bill Passed By the Illinois House
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Yesterday, the Illinois House approved two tax bills: Amendment #6 Senate Bill 397 ("SB 397") and Amendment #2 to Senate Bill 400 ("SB 400"). SB 397 addresses changes to the corporate income tax, sales and use tax, and estate tax. SB 400 address changes to the personal income tax. As approved, Amendment #6 to SB 397 provides for various changes, including:
- Removal of any provisions which would require decoupling from the federal bonus depreciation for tax years ending on or after December 31, 2011.
- The net loss carryover deduction remains suspended for tax years ending after December 31, 2010 and prior to December 31, 2012. However, Amendment #6 to SB 397 allows a net operating loss carryover deduction for tax years ending on or after December 31, 2012, but caps the deduction at $100,000 for all tax years ending prior to December 31, 2014. Years in which the net loss deduction cannot be used or years in which the taxpayer has more than $100,000 in net loss deduction will operate as an automatic extension of the 12 year limitation on carry forwards.
- An automatic 5 year extension of all corporate income and sales tax exemptions, credits and deductions scheduled to expire in 2011, 2012, or 2013 under the automatic sunset laws.
- An extension of the Research and Development Credit which expired for years ending prior to January 1, 2011 for another 5 years with a full 5 year carry forward allowed.
- A mandate for an Independent Tax Tribunal Board to replace the administrative hearings program at the Illinois Department of Revenue by July 1, 2013. There are no details or operating procedures yet, but with such proposal, the Legislature indicated that it would like to improve the business climate in Illinois.
- Incentives for Sears, the Chicago Mercantile Exchange (CME), and Champion Labs to remain in Illinois.
- Extension of the Sears Economic Development Area (EDA) an additional 15 years and would allow Sears to use available EDGE credit against current withholding tax liability. Impacts only local government and not the state.
- Sears also eligible to apply existing earned EDGE credits to employee withholding amounts for the next 10 years, but cannot do so until after July 1, 2012.
- Federally-regulated exchanges, such as CME, may elect to be subject to a new apportionment formula whereby only a percentage of receipts attributable to transactions not executed on the physical trading floor are sourced to Illinois (for tax years ending on or after December 31, 2012, 63.77% and for tax years ending on or after December 31, 2013, 27.54%).
- Champion Labs will be eligible to apply existing earned EDGE credits to employee withholding amounts.
- A 5 year extension of the favorable sales tax treatment afforded sales of gasohol, majority blended ethanol products, and certain biodiesel blended products.
- An extension of the investment tax credit against the personal property tax replacement income set to expire in 2013 to 2018.
- A new income tax Live Theater Production Tax Credit for pre-Broadway or long-run stage productions in Illinois. The credit is capped at $2 million per year and applies to tax years beginning on or after January 1, 2012.
- An increase in the estate tax exemption which will occur in the following phases: (i) $3,000,000 for persons dying prior to January 1, 2013, and (ii) $4,000,000 for persons dying on or after January 1, 2013.
As approved, Amendment #2 to SB 400 provides for various changes, including:
- An increase in the standard deduction for individuals from $2000 to $2050 per year for the tax year ending December 31, 2012. For tax years ending on or after December 31, 2013, the $2,050 standard deduction will be automatically increased based on increases in the consumer price index.
- An increase in the earned income tax credit from the current rate of 5.0% to 7.5% for the calendar year 2012 and to 10% the calendar year 2013 and thereafter.
HMB COMMENT
The key to passage of both bills was separating the large omnibus bill into two parts: tax changes for employers and tax changes for individuals. SB 397 and SB 400 now go back to the Senate for an expected concurrence vote since the Senate was involved in the House negotiations. Assuming the bills pass through the Senate, then they will go to the Governor for his likely signature.