100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB4655

 

Introduced , by Rep. Natalie A. Manley

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/227 new
35 ILCS 5/302  from Ch. 120, par. 3-302
35 ILCS 5/601  from Ch. 120, par. 6-601
35 ILCS 5/701  from Ch. 120, par. 7-701

    Amends the Illinois Income Tax Act. Makes changes concerning the allocation of compensation paid to nonresidents to provide that the allocation is based on the number of working days spent in this State. Makes corresponding changes concerning employer withholding requirements. Creates a credit in an amount equal to the amount of the investment made by the taxpayer during the taxable year in qualified property and qualified expenses that are used for tracking and reporting the location of resident and non-resident employees for purposes of compliance with the tracking, reporting, and income tax withholding requirements of the amendatory Act.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB4655LRB100 16339 HLH 31465 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing Sections 302, 601, and 701 and by adding Section 227
6as follows:
 
7    (35 ILCS 5/227 new)
8    Sec. 227. Credit for tracking and reporting expenses.
9    (a) For taxable years ending on and after December 31, 2018
10and prior to January 1, 2022, a taxpayer shall be allowed a
11credit against the tax imposed by subsections (a) and (b) of
12Section 201 equal to the amount of the investment made by the
13taxpayer during the taxable year in qualified property and
14qualified expenses that are used for tracking and reporting the
15location of resident and nonresident employees for purposes of
16compliance with the tracking, reporting, and income tax
17withholding requirements of this amendatory Act of the 100th
18General Assembly.
19    (b) In no event shall a credit under this Section reduce a
20taxpayer's liability to less than zero. The credit shall be
21allowed for the taxable year in which the qualified property is
22placed in service or qualified expenses are incurred, or, if
23the amount of the credit exceeds the tax liability for that

 

 

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1year, whether it exceeds the original liability or the
2liability as later amended, the excess may be carried forward
3and applied to the tax liability of the 5 taxable years
4following the excess credit years. The credit shall be applied
5to the earliest year for which there is a liability. If there
6is credit from more than one taxable year that is available to
7offset a liability, the earlier credit shall be applied first.
8    (c) As used in this Section:
9        "Qualified property" means tangible and intangible
10    personal property, including custom or canned computer
11    software that is licensed, acquired by purchase, or
12    developed internally by a taxpayer.
13        "Qualified expenses" includes, but is not limited to,
14    salary expenses and expenses of non-employee contractors.
 
15    (35 ILCS 5/302)  (from Ch. 120, par. 3-302)
16    Sec. 302. Compensation paid to nonresidents.
17    (a) In general. For taxable years beginning prior to
18January 1, 2019, all All items of compensation paid in this
19State (as determined under Section 304(a)(2)(B)) to an
20individual who is a nonresident at the time of such payment and
21all items of deduction directly allocable thereto, shall be
22allocated to this State.
23    For taxable years beginning on or after January 1, 2019,
24the amount of all items of compensation of nonresident
25individual employees, and all items of deduction directly

 

 

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1allocable thereto, allocated to this State shall be the portion
2of the individual's total compensation for services performed
3for his or her employer during the taxable year which the
4number of working days spent in this State during the taxable
5year in excess of 30 working days bears to the total number of
6working days in the taxable year regardless of location. For
7purposes of this subsection:
8        (1) A "working day" is any day during which the
9    employee performs duties on behalf of the employer.
10    Weekends, vacation days, sick days, and holidays (whether
11    or not paid) are not working days unless the employee is
12    required by the employer to perform some duties on that
13    day.
14        (2) A working day is spent in this State if:
15            (A) a greater amount of time is spent by the
16        employee in this State during that day performing
17        duties on behalf of the employer (other than traveling)
18        than is spent performing duties in any other State; or
19            (B) the only work performed by the employee on
20        behalf of the employer on that day is traveling to a
21        destination within this State, and the employee
22        arrives in this State on that day.
23        (3) A working day is not spent in this State if the
24    only activity engaged in by the employee on behalf of the
25    employer in this State on that day is traveling from or
26    through this State to a destination outside of this State.

 

 

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1        (4) Working days spent in this State do not include any
2    day in which the employee is performing services in this
3    State during a disaster period solely in response to a
4    request made to his or her employer by the government of
5    this State or of any political subdivision of this State,
6    or by a person conducting business in this State, to
7    perform disaster or emergency-related services in this
8    State. For purposes of this paragraph (4):
9            "Declared State disaster or emergency" means a
10        disaster or emergency event (i) for which a Governor's
11        proclamation of a state of emergency has been issued or
12        (ii) for which a Presidential declaration of a federal
13        major disaster or emergency has been issued.
14            "Disaster period" means a period that begins 10
15        days prior to the date of the Governor's proclamation
16        or the President's declaration (whichever is earlier)
17        and extends for a period of 60 calendar days after the
18        end of the declared disaster or emergency period.
19            "Disaster or emergency-related services" means
20        repairing, renovating, installing, building, or
21        rendering services or conducting other business
22        activities that relate to infrastructure that has been
23        damaged, impaired, or destroyed by the declared State
24        disaster or emergency.
25            "Infrastructure" means property and equipment
26        owned or used by a public utility, communications

 

 

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1        network, broadband and internet service provider,
2        cable and video service provider, electric or gas
3        distribution system, or water pipeline that provides
4        service to more than one customer or person, including
5        related support facilities. Infrastructure includes
6        real and personal property such as buildings, offices,
7        power lines, cable lines, poles, communications lines,
8        pipes, structures, and equipment.
9    Notwithstanding the provisions of this subsection,
10compensation of a nonresident individual who is a member of a
11professional athletic team, and all items of deduction directly
12allocable thereto, shall be allocated to this State as
13determined under item (iv) of subparagraph (B) of paragraph (2)
14of subsection (a) of Section 304.
15    (b) Reciprocal exemption. The Director may enter into an
16agreement with the taxing authorities of any state which
17imposes a tax on or measured by income to provide that
18compensation paid in such state to residents of this State
19shall be exempt from such tax; in such case, any compensation
20paid in this State to residents of such state shall not be
21allocated to this State. All reciprocal agreements shall be
22subject to the requirements of Section 2505-575 of the
23Department of Revenue Law (20 ILCS 2505/2505-575).
24    (c) Cross references.
25        (1) For allocation of amounts received by nonresidents
26    from certain employee trusts, see Section 301(b)(2).

 

 

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1        (2) For allocation of compensation by residents, see
2    Section 301(a).
3(Source: P.A. 90-491, eff. 1-1-98; 91-239, eff. 1-1-00.)
 
4    (35 ILCS 5/601)  (from Ch. 120, par. 6-601)
5    Sec. 601. Payment on Due Date of Return.
6    (a) In general. Every taxpayer required to file a return
7under this Act shall, without assessment, notice or demand, pay
8any tax due thereon to the Department, at the place fixed for
9filing, on or before the date fixed for filing such return
10(determined without regard to any extension of time for filing
11the return) pursuant to regulations prescribed by the
12Department. If, however, the due date for payment of a
13taxpayer's federal income tax liability for a tax year (as
14provided in the Internal Revenue Code or by Treasury
15regulation, or as extended by the Internal Revenue Service) is
16later than the date fixed for filing the taxpayer's Illinois
17income tax return for that tax year, the Department may, by
18rule, prescribe a due date for payment that is not later than
19the due date for payment of the taxpayer's federal income tax
20liability. For purposes of the Illinois Administrative
21Procedure Act, the adoption of rules to prescribe a later due
22date for payment shall be deemed an emergency and necessary for
23the public interest, safety, and welfare.
24    (b) Amount payable. In making payment as provided in this
25section there shall remain payable only the balance of such tax

 

 

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1remaining due after giving effect to the following:
2        (1) Withheld tax. Any amount withheld during any
3    calendar year pursuant to Article 7 from compensation paid
4    to a taxpayer shall be deemed to have been paid on account
5    of any tax imposed by subsections 201(a) and (b) of this
6    Act on such taxpayer for his taxable year beginning in such
7    calendar year. If more than one taxable year begins in a
8    calendar year, such amount shall be deemed to have been
9    paid on account of such tax for the last taxable year so
10    beginning.
11        (2) Estimated and tentative tax payments. Any amount of
12    estimated tax paid by a taxpayer pursuant to Article 8 for
13    a taxable year shall be deemed to have been paid on account
14    of the tax imposed by this Act for such taxable year.
15        (3) Foreign tax. The aggregate amount of tax which is
16    imposed upon or measured by income and which is paid by a
17    resident for a taxable year to another state or states on
18    income which is also subject to the tax imposed by
19    subsections 201(a) and (b) of this Act shall be credited
20    against the tax imposed by subsections 201(a) and (b)
21    otherwise due under this Act for such taxable year. For
22    taxable years ending prior to December 31, 2009, the
23    aggregate credit provided under this paragraph shall not
24    exceed that amount which bears the same ratio to the tax
25    imposed by subsections 201(a) and (b) otherwise due under
26    this Act as the amount of the taxpayer's base income

 

 

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1    subject to tax both by such other state or states and by
2    this State bears to his total base income subject to tax by
3    this State for the taxable year. For taxable years ending
4    on or after December 31, 2009, the credit provided under
5    this paragraph for tax paid to other states shall not
6    exceed that amount which bears the same ratio to the tax
7    imposed by subsections 201(a) and (b) otherwise due under
8    this Act as the amount of the taxpayer's base income that
9    would be allocated or apportioned to other states if all
10    other states had adopted the provisions in Article 3 of
11    this Act (other than the provisions of paragraph (4) of
12    subsection (a) of Section 302 and the 30-day threshold set
13    forth in subsection (a) of Section 302) bears to the
14    taxpayer's total base income subject to tax by this State
15    for the taxable year. The credit provided by this paragraph
16    shall not be allowed if any creditable tax was deducted in
17    determining base income for the taxable year. Any person
18    claiming such credit shall attach a statement in support
19    thereof and shall notify the Director of any refund or
20    reductions in the amount of tax claimed as a credit
21    hereunder all in such manner and at such time as the
22    Department shall by regulations prescribe.
23        (4) Accumulation and capital gain distributions. If
24    the net income of a taxpayer includes amounts included in
25    his base income by reason of Section 667 of the Internal
26    Revenue Code (relating to accumulation and capital gain

 

 

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1    distributions by a trust, respectively), the tax imposed on
2    such taxpayer by this Act shall be credited with his pro
3    rata portion of the taxes imposed by this Act on such trust
4    for preceding taxable years which would not have been
5    payable for such preceding years if the trust had in fact
6    made distributions to its beneficiaries at the times and in
7    the amounts specified in Sections 666 and 669 of the
8    Internal Revenue Code. The credit provided by this
9    paragraph shall not reduce the tax otherwise due from the
10    taxpayer to an amount less than that which would be due if
11    the amounts included by reason of Section 667 of the
12    Internal Revenue Code were excluded from his or her base
13    income.
14    (c) Cross reference. For application against tax due of
15overpayments of tax for a prior year, see Section 909.
16(Source: P.A. 96-468, eff. 8-14-09; 97-507, eff. 8-23-11.)
 
17    (35 ILCS 5/701)  (from Ch. 120, par. 7-701)
18    Sec. 701. Requirement and Amount of Withholding.
19    (a) In General. Every employer maintaining an office or
20transacting business within this State and required under the
21provisions of the Internal Revenue Code to withhold a tax on:
22        (1) for taxable years beginning prior to January 1,
23    2019, compensation paid in this State (as determined under
24    Section 304(a)(2)(B) to an individual; or
25        (1.1) for taxable years beginning on or after January

 

 

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1    1, 2019, compensation allocated to this State under Section
2    302 of this Code; or
3        (2) for all taxable years, payments described in
4    subsection (b) shall deduct and withhold from such
5    compensation for each payroll period (as defined in Section
6    3401 of the Internal Revenue Code) an amount equal to the
7    amount by which such individual's compensation exceeds the
8    proportionate part of this withholding exemption (computed
9    as provided in Section 702) attributable to the payroll
10    period for which such compensation is payable multiplied by
11    a percentage equal to the percentage tax rate for
12    individuals provided in subsection (b) of Section 201.
13    (a-5) Withholding for nonresident employees. For taxable
14years beginning on or after January 1, 2018, for the purposes
15of determining compensation allocated to this State under
16subsection (a) of Section 302 of this Code:
17        (1) an employer may rely on an employee's annual
18    determination of the time expected to be spent by such
19    employee in the states in which the employee will perform
20    duties absent:
21            (A) the employer's actual knowledge of fraud by the
22        employee in making the determination; or
23            (B) collusion between the employer and the
24        employee to evade tax;
25        (2) except as provided in paragraph (3), if records are
26    maintained by an employer in the regular course of business

 

 

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1    that record the location of an employee, those records
2    shall not preclude an employer's ability to rely on an
3    employee's determination under paragraph (1); and
4        (3) notwithstanding paragraph (2), if an employer, in
5    its sole discretion, maintains a time and attendance system
6    that tracks where the employee performs duties on a daily
7    basis, data from the time and attendance system shall be
8    used instead of the employee's determination under
9    paragraph (1). For purposes of this paragraph, the term
10    "time and attendance system" means a system in which:
11            (A) the employee is required on a contemporaneous
12        basis to record his or her work location for every day
13        worked outside of the State in which the employee's
14        employment duties are primarily performed; and
15            (B) the system is designed to allow the employer to
16        allocate the employee's wages for income tax purposes
17        among all states in which the employee performs
18        employment duties for such employer.
19    (b) Payment to Residents. Any payment (including
20compensation, but not including a payment from which
21withholding is required under Section 710 of this Act) to a
22resident by a payor maintaining an office or transacting
23business within this State (including any agency, officer, or
24employee of this State or of any political subdivision of this
25State) and on which withholding of tax is required under the
26provisions of the Internal Revenue Code shall be deemed to be

 

 

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1compensation paid in this State by an employer to an employee
2for the purposes of Article 7 and Section 601(b)(1) to the
3extent such payment is included in the recipient's base income
4and not subjected to withholding by another state.
5Notwithstanding any other provision to the contrary, no amount
6shall be withheld from unemployment insurance benefit payments
7made to an individual pursuant to the Unemployment Insurance
8Act unless the individual has voluntarily elected the
9withholding pursuant to rules promulgated by the Director of
10Employment Security.
11    (c) Special Definitions. Withholding shall be considered
12required under the provisions of the Internal Revenue Code to
13the extent the Internal Revenue Code either requires
14withholding or allows for voluntary withholding the payor and
15recipient have entered into such a voluntary withholding
16agreement. For the purposes of Article 7 and Section 1002(c)
17the term "employer" includes any payor who is required to
18withhold tax pursuant to this Section.
19    (d) Reciprocal Exemption. The Director may enter into an
20agreement with the taxing authorities of any state which
21imposes a tax on or measured by income to provide that
22compensation paid in such state to residents of this State
23shall be exempt from withholding of such tax; in such case, any
24compensation paid in this State to residents of such state
25shall be exempt from withholding. All reciprocal agreements
26shall be subject to the requirements of Section 2505-575 of the

 

 

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1Department of Revenue Law (20 ILCS 2505/2505-575).
2    (e) Notwithstanding subsection (a)(2) of this Section, no
3withholding is required on payments for which withholding is
4required under Section 3405 or 3406 of the Internal Revenue
5Code.
6(Source: P.A. 97-507, eff. 8-23-11; 98-496, eff. 1-1-14.)