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90_HB2191ham002 LRB9000115DNmbam01 1 AMENDMENT TO HOUSE BILL 2191 2 AMENDMENT NO. . Amend House Bill 2191 by replacing 3 the title with the following: 4 "AN ACT concerning reciprocal agreements."; and 5 by replacing everything after the enacting clause with the 6 following: 7 "Section 5. The Civil Administrative Code of Illinois is 8 amended by adding Section 39b53 as follows: 9 (20 ILCS 2505/39b53 new) 10 Sec. 39b53. Income Tax Reciprocal Agreements. 11 (a) Reciprocal agreement cost study. The Department of 12 Revenue shall study the use and cost effectiveness of all 13 reciprocal agreements entered into under the authority of 14 Sections 302 and 701 of the Illinois Income Tax Act. The 15 Department shall report to the General Assembly as to the 16 fiscal impact on Illinois income tax collections of each of 17 the reciprocal agreements by January 1, 1999 and every 5 18 years thereafter. The Department of Revenue shall have the 19 authority to require that employers provide all information 20 necessary to complete the study on income tax withholding 21 returns filed with the Department under Section 704 of the -2- LRB9000115DNmbam01 1 Illinois Income Tax Act. The Department shall have the 2 authority to require that employees provide all information 3 necessary to complete the study on individual income tax 4 returns filed under Section 502 of the Illinois Income Tax 5 Act. 6 (b) Revocation of reciprocal agreements. Upon receipt 7 of the cost study or at any time thereafter, the General 8 Assembly may adopt a joint resolution by an affirmative vote 9 of a majority of each house directing the Director of Revenue 10 to revoke any reciprocal agreement with any other state that 11 results in a loss of revenue to the State of Illinois. Any 12 joint resolution shall specify the date upon which the 13 reciprocal agreement is to be revoked, which date shall be no 14 sooner than the beginning of the next subsequent calendar 15 year that is at least 6 months after the adoption of the 16 joint resolution. 17 (c) Authority to enter into compensation agreements. 18 Before any revocation by joint resolution adopted by the 19 General Assembly under subsection (b), the Director of 20 Revenue shall have the authority to enter into a compensation 21 or rebating agreement with any reciprocal state. Any 22 compensation agreement shall provide that the reciprocal 23 state shall provide a rebate to the State of Illinois to 24 compensate for the loss of revenue. The Director of Revenue 25 shall have the authority to enter into agreements with 26 reciprocal states to contract with any third party mutually 27 agreed to by the Director and the reciprocal state to 28 establish a rebate or compensation amount. 29 Section 10. The Illinois Income Tax Act is amended by 30 changing Sections 302 and 701 as follows: 31 (35 ILCS 5/302) (from Ch. 120, par. 3-302) 32 Sec. 302. Compensation paid to nonresidents. -3- LRB9000115DNmbam01 1 (a) In general. All items of compensation paid in this 2 State (as determined under Section 304(a)(2)(B)) to an 3 individual who is a nonresident at the time of such payment 4 and all items of deduction directly allocable thereto, shall 5 be allocated to this State. 6 (b) Reciprocal exemption. The Director may enter into an 7 agreement with the taxing authorities of any state which 8 imposes a tax on or measured by income to provide that 9 compensation paid in such state to residents of this State 10 shall be exempt from such tax; in such case, any compensation 11 paid in this State to residents of such state shall not be 12 allocated to this State. All reciprocal agreements shall be 13 subject to the requirements of Section 39b53 of the Civil 14 Administrative Code of Illinois. 15 (c) Cross references. 16 (1) For allocation of amounts received by 17 nonresidents from certain employee trusts, see Section 18 301(b)(2). 19 (2) For allocation of compensation by residents, 20 see Section 301(a). 21 (Source: P.A. 77-1379.) 22 (35 ILCS 5/701) (from Ch. 120, par. 7-701) 23 Sec. 701. Requirement and Amount of Withholding. 24 (a) In General. 25 Every employer maintaining an office or transacting 26 business within this State and required under the provisions 27 of the Internal Revenue Code to withhold a tax on: 28 (1) compensation paid in this State (as determined 29 under Section 304 (a) (2) (B) to an individual; or 30 (2) payments described in subsection (b) shall 31 deduct and withhold from such compensation for each 32 payroll period (as defined in Section 3401 of the 33 Internal Revenue Code) an amount equal to the amount by -4- LRB9000115DNmbam01 1 which such individual's compensation exceeds the 2 proportionate part of this withholding exemption 3 (computed as provided in Section 702) attributable to the 4 payroll period for which such compensation is payable 5 multiplied by a percentage equal to the percentage tax 6 rate for individuals provided in subsection (b) of 7 Section 201. 8 (b) Payment to Residents. 9 Any payment (including compensation) to a resident by a 10 payor maintaining an office or transacting business within 11 this State and on which withholding of tax is required under 12 the provisions of the Internal Revenue Code shall be deemed 13 to be compensation paid in this State by an employer to an 14 employee for the purposes of Article 7 and Section 601 (b) 15 (1) to the extent such payment is included in the recipient's 16 base income and not subjected to withholding by another 17 state. 18 (c) Special Definitions. 19 Withholding shall be considered required under the 20 provisions of the Internal Revenue Code to the extent the 21 Internal Revenue Code either requires withholding or allows 22 for voluntary withholding the payor and recipient have 23 entered into such a voluntary withholding agreement. For the 24 purposes of Article 7 and Section 1002 (c) the term 25 "employer" includes any payor who is required to withhold tax 26 pursuant to this Section. 27 (d) Reciprocal Exemption. 28 The Director may enter into an agreement with the taxing 29 authorities of any state which imposes a tax on or measured 30 by income to provide that compensation paid in such state to 31 residents of this State shall be exempt from withholding of 32 such tax; in such case, any compensation paid in this State 33 to residents of such state shall be exempt from withholding. 34 All reciprocal agreements shall be subject to the -5- LRB9000115DNmbam01 1 requirements of Section 39b53 of the Civil Administrative 2 Code of Illinois. 3 (e) Notwithstanding subsection (a) (2) of this Section, 4 no withholding is required on payments for which withholding 5 is required under Section 3405 or 3406 of the Internal 6 Revenue Code of 1954. 7 (Source: P.A. 85-731; 86-1475.) 8 Section 15. The Uniform Penalty and Interest Act is 9 amended by changing Section 3-3 as follows: 10 (35 ILCS 735/3-3) (from Ch. 120, par. 2603-3) 11 Sec. 3-3. Penalty for failure to file or pay. 12 (a) This subsection (a) is applicable before January 1, 13 1996. A penalty of 5% of the tax required to be shown due on 14 a return shall be imposed for failure to file the tax return 15 on or before the due date prescribed for filing determined 16 with regard for any extension of time for filing (penalty for 17 late filing or nonfiling). If any unprocessable return is 18 corrected and filed within 21 days after notice by the 19 Department, the late filing or nonfiling penalty shall not 20 apply. If a penalty for late filing or nonfiling is imposed 21 in addition to a penalty for late payment, the total penalty 22 due shall be the sum of the late filing penalty and the 23 applicable late payment penalty. Beginning on the effective 24 date of this amendatory Act of 1995, in the case of any type 25 of tax return required to be filed more frequently than 26 annually, when the failure to file the tax return on or 27 before the date prescribed for filing (including any 28 extensions) is shown to be nonfraudulent and has not occurred 29 in the 2 years immediately preceding the failure to file on 30 the prescribed due date, the penalty imposed by section 31 3-3(a) shall be abated. 32 (a-5) This subsection (a-5) is applicable on and after -6- LRB9000115DNmbam01 1 January 1, 1996. A penalty equal to 2% of the tax required to 2 be shown due on a return, up to a maximum amount of $250, 3 determined without regard to any part of the tax that is paid 4 on time or by any credit that was properly allowable on the 5 date the return was required to be filed, shall be imposed 6 for failure to file the tax return on or before the due date 7 prescribed for filing determined with regard for any 8 extension of time for filing. However, if any return is not 9 filed within 30 days after notice of nonfiling mailed by the 10 Department to the last known address of the taxpayer 11 contained in Department records, an additional penalty amount 12 shall be imposed equal to the greater of $250 or 2% of the 13 tax shown on the return. However, the additional penalty 14 amount may not exceed $5,000 and is determined without regard 15 to any part of the tax that is paid on time or by any credit 16 that was properly allowable on the date the return was 17 required to be filed (penalty for late filing or nonfiling). 18 If any unprocessable return is corrected and filed within 30 19 days after notice by the Department, the late filing or 20 nonfiling penalty shall not apply. If a penalty for late 21 filing or nonfiling is imposed in addition to a penalty for 22 late payment, the total penalty due shall be the sum of the 23 late filing penalty and the applicable late payment penalty. 24 In the case of any type of tax return required to be filed 25 more frequently than annually, when the failure to file the 26 tax return on or before the date prescribed for filing 27 (including any extensions) is shown to be nonfraudulent and 28 has not occurred in the 2 years immediately preceding the 29 failure to file on the prescribed due date, the penalty 30 imposed by section 3-3(a) shall be abated. 31 (b) A penalty of 15% of the tax shown on the return or 32 the tax required to be shown due on the return shall be 33 imposed for failure to pay: 34 (1) the tax shown due on the return on or before -7- LRB9000115DNmbam01 1 the due date prescribed for payment of that tax, an 2 amount of underpayment of estimated tax, or an amount 3 that is reported in an amended return other than an 4 amended return timely filed as required by subsection (b) 5 of Section 506 of the Illinois Income Tax Act (penalty 6 for late payment or nonpayment of admitted liability); or 7 (2) the full amount of any tax required to be shown 8 due on a return and which is not shown (penalty for late 9 payment or nonpayment of additional liability), within 30 10 days after a notice of arithmetic error, notice and 11 demand, or a final assessment is issued by the 12 Department. In the case of a final assessment arising 13 following a protest and hearing, the 30-day period shall 14 not begin until all proceedings in court for review of 15 the final assessment have terminated or the period for 16 obtaining a review has expired without proceedings for a 17 review having been instituted. In the case of a notice 18 of tax liability that becomes a final assessment without 19 a protest and hearing, the penalty provided in this 20 paragraph (2) shall be imposed at the expiration of the 21 period provided for the filing of a protest. 22 (c) For purposes of the late payment penalties, the 23 basis of the penalty shall be the tax shown or required to be 24 shown on a return, whichever is applicable, reduced by any 25 part of the tax which is paid on time and by any credit which 26 was properly allowable on the date the return was required to 27 be filed. 28 (d) A penalty shall be applied to the tax required to be 29 shown even if that amount is less than the tax shown on the 30 return. 31 (e) If both a subsection (b)(1) penalty and a subsection 32 (b)(2) penalty are assessed against the same return, the 33 subsection (b)(2) penalty shall be assessed against only the 34 additional tax found to be due. -8- LRB9000115DNmbam01 1 (f) If the taxpayer has failed to file the return, the 2 Department shall determine the correct tax according to its 3 best judgment and information, which amount shall be prima 4 facie evidence of the correctness of the tax due. 5 (g) The time within which to file a return or pay an 6 amount of tax due without imposition of a penalty does not 7 extend the time within which to file a protest to a notice of 8 tax liability or a notice of deficiency. 9 (h) No return shall be determined to be unprocessable 10 because of the omission of any information requested on the 11 return pursuant to Section 39b53 of the Civil Administrative 12 Code of Illinois. 13 (Source: P.A. 88-480; 89-379, eff. 8-18-95; 89-436, eff. 14 1-1-96.)".
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