2021 Year in Review – Maurice Scholten
2021 Year in Review
December 2021 (74.7)
by Maurice Scholten*
In 2020, the General Assembly had a truncated session due to COVID-19 and passed only twenty-two bills into law. While COVID-19 still affected the operations of the General Assembly in 2021, as of this writing, 691 bills have become law this year. One of the most notable legislative developments of the year was not bill-related, however: the House elected a new Speaker of the House for the first time since 1997.
FY 2022 Budget
The General Assembly passed a budget for the fiscal year ending June 30, 2022, SB 2800, on June 1. The Governor amendatorily vetoed the bill on June 15 due to incorrect effective dates. The General Assembly voted to accept the changes on June 15 & 16 and SB 2800 became P.A. 102-0017. P.A. 102-0017 appropriates $41.3 billion from the General Revenue Fund, an increase of $649 million from FY 2021. Base revenues for FY 2022 are estimated to be $42.4 billion, creating a $61 million surplus. The budget also plans on using $2 billion of American Rescue Plan Act funds to pay back the loan from the federal Municipal Liquidity Facility and to repay interfund borrowing.
Budget Implementation Bill
P.A. 102-0016 is the FY 2022 Budget Implementation Bill. The law makes a number of law changes related to the budget, including the following tax changes:
- Limits net operating losses to only $100,000 per year for 2021, 2022, & 2023 (see P.A. 102-0669, below, for an extension to the NOL carryover period).
- Eliminates the phase out of the corporate franchise tax, stopping at a $1,000 per entity tax reduction for 2021 and future years.
- Decouples Illinois from federal bonus depreciation.
- Disallows the federal GILTI (Global Intangible Low-Taxed Income) “haircut,” currently at 50% (GILTI income can still be eligible for the foreign dividends received deduction, however).
- Expands the Invest in Kids Act to cover technical academies and extends the credit through 2024
- Allows the extension of EDGE credits.
- Increases deposits into the Income Tax Refund Fund, from 9% to 9.25% for individual income tax payments and from 14% to 15% for corporate income tax payments.
- Extends the following tax credits or exemptions through 2026:
o Angel Investment Tax Credit
o Historic River Edge Redevelopment Tax Credit
o Live Theater Production Tax Credit
o Affordable Housing Donation Tax Credit
o Sales tax exemption for feminine hygiene products
- Prepared food sold prepared by an entity licensed by the Assisted Living and Shared Housing Act or an entity that holds a permit issued pursuant to the Life Care Facilities Act is now taxed at 1%, similarly to prepared food sold by similar facilities licensed under other Acts.
- When assessing a supportive living facility, its gross potential income cannot exceed the maximum individual Supplement Security Income minus a resident’s personal allowance, times the number of apartments.
- Creates a property tax exemption for trade schools.
Department of Revenue Omnibus Bill
P.A. 102-0040 is an initiative of the Department of Revenue and makes the following changes:
- Recaptured EDGE credits increase the company’s tax liability for the current year, rather than disallowing the credit for the tax year for which the credits were claimed. This ensures recapture of the credits even if the statute of limitations for the tax year when originally claimed has closed. This does not expand the scenarios for credits to be recaptured.
- Payments for winnings from sports wagering conducted pursuant to the Sports Wagering Act are sourced to Illinois. Withholding requirements also apply to these winnings.
- Changes the notice requirements of bulk sales in the Income Tax Code to match the requirements in the Retailers’ Occupation Tax Act. Notice of sales is to be 10 days before the sale, rather than within 10 days after the sale.
- Extends the statute of limitations for a taxpayer’s entire tax return by 6 months if a refund claim is filed when there is less than six months left in the original statute of limitations. This change is made to multiple tax types.
- Electronic cigarette substances with cannabis are not subject to cigarette tax.
- Allows IDOR to look back 23 years (rather than 20) for any outstanding tax liability when issuing certificates of registration.
- Makes technical changes to the Local Government Revenue Recapture Act. Institutes a $2,500 fee for participants in the Certified Audit Program.
Sales Tax Bills
P.A. 102-0634 excludes auctioneers from the definition of a marketplace facilitator, but this exclusion does not apply to Internet auction listing services. It also creates a Retailers’ Occupation Tax exemption for Illinois retailers that sold items through a marketplace facilitator during 2020, and collected and paid use tax for those transactions instead of the ROT. It also provides that certified service providers are entitled to the 1.75% discount for sales tax collections they remit to the State.
P.A. 102-0353 fully reinstates the sales tax trade in credit for motor vehicles, which was previously limited to $10,000. It also increases the motor vehicle tax for sales between private parties.
P.A. 102-0004 updates the Retailers’ Occupation Tax Act and related acts to clarify that all human diabetes testing materials are subject to the lower food and drug tax rate.
P.A. 102-0427 gives data centers two years (rather than 90 days) to become carbon neutral or to receive certain green building standards in order to qualify a sales tax exemption.
P.A. 102-0658 creates an optional entity level tax for pass-through businesses. The tax is equal to 4.95% of the electing entity’s net income attributable to Illinois. Owners of the business would then receive a credit on their individual income tax return equal to their distributive share of the tax paid by the entity. This optional tax is a way for these business’s owners to get around the federal $10,000 state and local tax deduction limit. This tax first applies for the 2021 tax year.
P.A. 102-0669 creates the Reimagining Electric Vehicles in Illinois Act which establishes a number of tax incentives for electric vehicle manufacturers and their suppliers. Eligible businesses can receive a tax credit based on the incremental income tax attributable to new or retained employees. Eligible businesses can also receive an income tax credit for training costs. The bill also provides potential exemptions from the electricity excise tax, telecommunications excise tax, sales tax exemption for building materials, and a property tax abatement.
P.A. 102-0669 also allows all companies to carry forward net operating losses for twenty years.
P.A. 102-0061 allows the Department of Revenue to provide the Auditor General and their agents income tax returns for official use.
P.A. 102-0289 extends the student assistance income tax credit through 2024. The credit allows taxpayers that make matching contributions to an employee’s College Savings Pool Account or the Illinois Prepaid Tuition Trust Fund to receive a tax credit equal to 25% of the contribution with a maximum credit of $500.
P.A. 102-0519 creates a new property tax levy equal to the amount of property tax refunds issued by the taxing district during the previous year for taxing districts subject to PTELL.
P.A. 102-0263 allows the Chicago Park District to issue $250 million in bonds to make additional pension contributions. The district can also levy an amount to pay off the bonds, without triggering PTELL limitations.
P.A. 102-0265 requires taxing districts with a property tax levy of more than $5 million to make a good faith effort to collect and publish whether vendors and contractors of the taxing district are minority-owned, women-owned, or veteran-owned business.
P.A. 102-0175 changes how low-income housing that qualifies for the Low-Income Housing Tax Credit is assessed in Cook County. It also creates a reduction in assessed value for new or newly renovated affordable rental properties.
P.A. 102-0136 allows counties to not require people that received the senior freeze, veterans with disabilities, or the persons with disabilities homestead exemptions to reapply for the exemption for 2021, if they received the exemption in 2020.
P.A. 102-0311 precludes a home equity assurance program from levying a property tax in 2021. For 2022, the aggregate extension base for the home equity assurance program is the amount the program would have levied, absent this limitation.
P.A. 102-0127 is an initiative of the State Comptroller and requires municipalities to report job creation numbers in TIFs.
P.A. 102-0625 allows taxing districts to certify their levy to county clerks electronically.
P.A. 102-0363 amends the tax sale process and clarifies the powers of the county if the county, as trustee, takes ownership of a property on behalf of the taxing districts. The bill also lowers the maximum penalty bid amount from 18% to 9%.
P.A. 102-0528 requires the owner of a certificate of purchase (tax sale) to file with the county clerk the names and addresses of owners entitled to service.
P.A. 102-0644 amends the Senior Citizen’s Real Estate Tax Deferral Act. It increases the maximum income to qualify from $55,000 to $65,000. It also increases the maximum amount of taxes to be deferred in a year from $5,000 to $7,500.
P.A. 102-0662 is a significant energy bill that passed the legislature during the summer. The bill makes three tax changes. First, spent fuel pools and dry cask storage systems from a nuclear power plant decommissioned before January 1, 2021 is real property and assessable. It also expands the definition of solar energy system for property tax purposes. Finally, it extends the special assessment for wind energy devices through 2035.
Miscellaneous Tax Changes
P.A. 102-0108 allows DCEO to award partial points to a municipality when applying for an Enterprise Zone. It also allows a municipality to apply for an Enterprise Zone five years before an existing zone expires. Finally, it changes the methods to identify underserved areas.
P.A. 102-0129 allows the Department of Revenue to exchange information with the State’s Treasurer’s Office for the purpose of administering the Illinois Higher Education Savings Program.
P.A. 102-0330 repeals the Business Investment Committee that was required to be created by the Illinois Economic Development Board, which was itself repealed in 2018.
P.A. 102-0002 allows Kane County to enact a county cannabis tax effective May 1, 2021 instead of July 1.
P.A. 102-0288 makes changes to the Revised Uniform Unclaimed Property Act. The new law requires businesses of a certain size that do not have unclaimed property, to file a report with the Treasurer indicating as much. It also amends the definition of virtual currency to specifically include cryptocurrency. It changes the periods of time for items to be presumed abandoned for financial organization deposits. Finally, it allows the Treasurer to enter into agreements with the Secretary of State and the State Board of Elections to share information to help locate owners of unclaimed property.
*Maurice Scholten is the Legislative Director of the Taxpayers’ Federation of Illinois.