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Full Text of HB3393  100th General Assembly




State of Illinois
2017 and 2018


Introduced , by Rep. Emanuel Chris Welch


35 ILCS 5/205  from Ch. 120, par. 2-205

    Amends the Illinois Income Tax. Imposes a privilege tax at a rate of 20% on partnerships and S corporations engaged in the business of conducting investment management services, until such time as a federal law with an identical effect has been enacted. Provides for the determination of the tax due, defines "investment management services". Effective immediately, but this Act does not take effect at all unless the states of Connecticut, New Jersey, and New York enact laws having an effect identical to this Act.

LRB100 10498 HLH 20712 b





HB3393LRB100 10498 HLH 20712 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 Section 205 as follows:
6    (35 ILCS 5/205)  (from Ch. 120, par. 2-205)
7    Sec. 205. Exempt organizations.
8    (a) Charitable, etc. organizations. The base income of an
9organization which is exempt from the federal income tax by
10reason of the Internal Revenue Code shall not be determined
11under section 203 of this Act, but shall be its unrelated
12business taxable income as determined under section 512 of the
13Internal Revenue Code, without any deduction for the tax
14imposed by this Act. The standard exemption provided by section
15204 of this Act shall not be allowed in determining the net
16income of an organization to which this subsection applies.
17    (b) Partnerships. A partnership as such shall not be
18subject to the tax imposed by subsection 201 (a) and (b) of
19this Act, but shall be subject to the replacement tax imposed
20by subsection 201 (c) and (d) of this Act and shall compute its
21base income as described in subsection (d) of Section 203 of
22this Act. For taxable years ending on or after December 31,
232004, an investment partnership, as defined in Section



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11501(a)(11.5) of this Act, shall not be subject to the tax
2imposed by subsections (c) and (d) of Section 201 of this Act.
3A partnership shall file such returns and other information at
4such time and in such manner as may be required under Article 5
5of this Act. The partners in a partnership shall be liable for
6the replacement tax imposed by subsection 201 (c) and (d) of
7this Act on such partnership, to the extent such tax is not
8paid by the partnership, as provided under the laws of Illinois
9governing the liability of partners for the obligations of a
10partnership. Persons carrying on business as partners shall be
11liable for the tax imposed by subsection 201 (a) and (b) of
12this Act only in their separate or individual capacities.
13    (c) Subchapter S corporations. A Subchapter S corporation
14shall not be subject to the tax imposed by subsection 201 (a)
15and (b) of this Act but shall be subject to the replacement tax
16imposed by subsection 201 (c) and (d) of this Act and shall
17file such returns and other information at such time and in
18such manner as may be required under Article 5 of this Act.
19    (c-5) Surcharge. Notwithstanding any provision of law to
20the contrary and in addition to any other tax imposed under
21this Act, a privilege tax is imposed on partnerships, including
22investment partnerships, and S corporations engaged in the
23business of conducting investment management services of 20%
24until such time as the United States Congress has passed and
25the President of the United States has signed legislation
26having an identical effect with this act applicable to such



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1income earned in all of the states and territories. Persons
2carrying on business as partners conducing investment
3management services shall be liable for the tax imposed by
4subsections 201 (a) and (b) of this Act in their separate or
5individual capacities in accordance with subsection 205 (b) of
6this Act.
7    For the purposes of this subsection (c-5), "Investment
8Management Services" means a business which is held by any
9person if such person provides, directly or indirectly, in the
10active conduct of a trade or business, a substantial quantity
11of any of the following services to the business:
12        (1) advising the business (partnership, S corporation
13    or any business entity) as to the advisability of investing
14    in, purchasing, or selling any specified asset;
15        (2) managing, acquiring, or disposing of any specified
16    asset;
17        (3) arranging financing with respect to acquiring
18    specified assets; or
19        (4) any activity in support of any service described in
20    items (1) through (3) of this paragraph.
21    For the purposes of this definition, the term specified
22asset means securities (as defined in section 475(c)(2) of the
23Internal Revenue Code) real estate held for rental or
24investment, interest in partnerships, commodities (as defined
25in section 475(E)(2) of the Internal Revenue Code) or options
26or derivative contracts to any of these.



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1    A partner or shareholder will not be deemed to hold an
2investment management services interest if at least 80% of the
3average fair market value of the specified assets of business
4during the taxable year consists of real estate.
5    (d) Combat zone, terrorist attack, and certain other
6deaths. An individual relieved from the federal income tax for
7any taxable year by reason of section 692 of the Internal
8Revenue Code shall not be subject to the tax imposed by this
9Act for such taxable year.
10    (e) Certain trusts. A common trust fund described in
11Section 584 of the Internal Revenue Code, and any other trust
12to the extent that the grantor is treated as the owner thereof
13under sections 671 through 678 of the Internal Revenue Code
14shall not be subject to the tax imposed by this Act.
15    (f) Certain business activities. A person not otherwise
16subject to the tax imposed by this Act shall not become subject
17to the tax imposed by this Act by reason of:
18        (1) that person's ownership of tangible personal
19    property located at the premises of a printer in this State
20    with which the person has contracted for printing, or
21        (2) activities of the person's employees or agents
22    located solely at the premises of a printer and related to
23    quality control, distribution, or printing services
24    performed by a printer in the State with which the person
25    has contracted for printing.
26    (g) A nonprofit risk organization that holds a certificate



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1of authority under Article VIID of the Illinois Insurance Code
2is exempt from the tax imposed under this Act with respect to
3its activities or operations in furtherance of the powers
4conferred upon it under that Article VIID of the Illinois
5Insurance Code.
6(Source: P.A. 97-507, eff. 8-23-11.)
7    Section 99. Effective date. This Act takes effect upon
8becoming law.