July 16, 2009—Issue 22

It was a busy week in State government. 

On Monday, July 13, the Governor signed the capital package, which provides infrastructure improvements and jobs.  The package is comprised of Public Acts 96-0034 to 96-0038 and 96-0040, all of which may be accessed at the following link:  click here.  The Governor has created a website where more information may be accessed regarding the capital package:  http://jobsnow.illinois.gov/. 

As reported in the July 1 TFI Report, the Senate President and Speaker called a Special Session for Tuesday, July 14, to take action on any gubernatorial budget vetoes and to consider budget related legislation. 

There was general concern in State government that if there was no budget on July 15, employees would not get paid and a government shut-down could occur.  After much discussion, on July 15, a budget was passed in both chambers then signed by Governor.  This action allowed State government to continue to operate.  The key bills are:

• Pension Notes Bill—SB 1292 (P.A. 96-0043):  SB 1292 is a bill to authorize $3.466 billion in pension notes to pay pension costs and help with the budget.  Under SB 1292, the notes have to be repaid in equal payments over a five year period.  $2.23 billion of available money is intended to be used to pay community-based human service providers for the programs and services they provide.  The other approximately 1.23 billion is available for the Governor to use at his discretion.  SB 1292 may be accessed at the following link:  click here.

• SB 1433—Fund Sweeps—SB 1433 (P.A. 96-0044):  SB 1433 is the main fund sweeps bill, which authorizes sweeps totaling $356,038,973.  The bill may be accessed at the following link:  click here.

• Budget Implementation Bill (“BIMP”)—SB 1912 (P.A. 96—0045):  SB 1912 provides the basis for and implements the spending in the appropriations bill.  The bill includes the following key provisions:  (1) a requirement that all members of the General Assembly take 12 furlough days in FY 2010, (2) additional fund sweeps, (3) set the Foundation Level for education at $6,119, (4) allows for emergency rules to be adopted to quickly implement the budget, and (5) allows for up to $1.1 billion to be kept as a reserve from agencies under the Governor’s control.  SB 1912 may be accessed at the following link:  click here.

• Appropriations Bill—SB 1216 (P.A. 96-0042):  SB 1216 provides lump sum appropriations, which may be spent at the Governor’s discretion.  SB 1216 may be accessed at the following link:  click here.

Now that there is a budget, it appears the Spring legislative session is over.  Veto Session has been scheduled for October 14-16 and October 28-30.  A copy of the schedule may be accessed at the following link: click here.

Department of Revenue July 2009 Regulatory Agenda

The Department of Revenue recently filed its July 2009 regulatory agenda, which can be found at 33 Ill. Reg. 10,027-10,059 (July 10, 2009).  A synopsis of some agenda items of note is attached hereto as Addendum A.  The entire regulatory agenda may be accessed at the following link:  click here.

Recently Proposed Department of Revenue Rulemakings

The Department of Revenue (“Department”) recently proposed two rulemakings regarding that can be found at 33 Ill. Reg. 9,235-9,251 & 9,252-9,264 (July 6, 2009) and also accessed at this link:  click here.  The rulemakings are as follows:

1. Income Tax Rule Changes (33 Ill. Reg. 9,235-9,251):  The rulemaking generally would require payroll service providers who are required to file their clients’ W-2 information electronically for Federal purposes to file their clients’ W-2 information electronically with the Department. 


2. Retailers’ Occupation Tax Rule Changes (33 Ill. Reg. 9,252-9,264):  The rulemaking generally would eliminate the requirement that retailers file monthly returns for the first year before they are allowed to file less frequently.  The rulemaking would require the Department to make the filing frequency determination based on information it obtains, including registration and audit information regarding the retailer’s average monthly liability.  The rulemaking would also require the Department to periodically review taxpayer information, including returns filed by the taxpayer, to make any changes in the taxpayer’s filing frequency that it deems necessary.

And Finally . . .

Until Veto Session, we will only publish additional TFI Reports if a significant governmental action occurs worthy of reporting.

ADDENDUM A

July 2009 Department of Revenue Regulatory Agenda

Some Items of Note

Potential Changes to Income Tax Rules

• New rule regarding reallocation of items under Illinois Income Tax Act (“IITA”) Section 404, which allows the Director of Revenue to adjust a person’s base income if the Director deems it to be improperly or inaccurately reflected.


• New rule regarding pass-through of investment credits for partnerships and Subchapter S corporations to their partners and shareholders.


• Add and change rules governing the computation of base income under IITA Article 2 and the allocation and apportionment of base income under IITA Article 3.


• Update to provisions defining unitary business groups and computing the combined tax liability of unitary business groups.


• Guidance on the addition and subtraction modifications allowed in IITA Section 203, the section that defines base income.


• Guidance on the five percent credit for residential real property taxes paid.


• Guidance on the rounding of returns to the nearest dollar.


• Guidance on when a taxpayer is subject to tax in another state under IITA Section 303(f).


• Guidance for payment of estimated taxes during short taxable years.


• Rule changes to implement legislation enacted in the years 2004 to 2009.

Potential Changes to the Retailers’ Occupation Tax Rules

• Clarify (1) the requirement of a separate agreement between sellers and purchasers, particularly in the case of Internet, mail order, telephone, and television orders and (2) what tax rate applies to taxable handling charges for an order that contains both high tax rate and low tax rate items.


• Clarify the manner in which the tax rate on food is determined and the exemption for drugs and medical appliances is administered under rule Section 130.310.


• Amend rule Section 130.2005 regarding nonprofit service enterprises to clarify how tax-exempt organizations handle fundraising events, including occasional dinners and bake sales and similar events.


• Amend rule Section 130.2013 regarding the lessor’s credit to describe the requirements necessary for claiming the credit on sales to a customer who is purchasing an item that the customer had previously leased from the lessor.


• Amend rule Section 130.455 regarding motor vehicle trade-ins to clarify issues regarding trade-ins including how advance trade-ins apply in auction situations.


• Amend rule Section 130.2050 regarding sales and gifts by employers to employees to update the presumptive Use Tax base on meals provided to employees.


• Amend Section 130.2007 to explain the proper use by an exempt organization of its exemption identification number and consequences of an organization’s failure to use ordinary care to ensure that the exemption identification number is properly utilized (including revocation of the exemption identification number).


• Amend Section 130.502 to clarify the quarterly filing requirements.


• Amend Section 130.510 to clarify the annual filing requirements.

Potential Update to the Use Tax Rules

• Rules setting forth the Department’s policies regarding the types of activities and relationships that establish a nexus for Use Tax collection.

Potential Change to the Home Rule Municipal Retailers’ Occupation Tax Rule

• Amend Section 270.115 regarding jurisdictional questions to clarify factors used to determine where selling (and, as a result, situs of local taxes) occurs (the rulemaking would be used as a prototype to amend similar section in other Parts governing local taxes administered by the Department).

Potential Telecommunications Excise Tax Rules

• Rules that explain the manner in which DSL services are taxed.


• Rules that explain the taxation of telecommunications that are provided by cable and satellite television companies as part of internet access services and the taxation of Voice Over Internet Protocol (“VOIP”).


• Rules that explain the telecommunications tax liabilities involved when multiple parties are joined together in different conference calling arrangements.

Potential New Part Governing County School Facility Retailers’ Occupation Tax

• Rules to implement P.A. 95-675 imposing the County School Facility Retailers’ Occupation Tax.

Potential New Part Governing Electronic Filing of Corporate Income Tax Returns

• Rules providing the procedures for corporations, partnerships, and tax exempt organizations to electronically file their Illinois income tax returns.

Potential New Part Governing Internet Filing of Sales and Use Tax Returns

• Rules providing the procedures and requirements for persons using an Internet-based system to file sales and use tax returns.

Potential New Part Governing Business District Taxes

• Rules providing the procedures and requirements for the business district taxes authorized by P.A. 93-1053.

Other Notable Potential Areas of Change

• Unspecified changes to the rules under both the Cigarette Tax Act and the Cigarette Use Tax Act.


• New rules relating to the Flood Prevention District Act.


• Unspecified updates to the Special County Retailers’ Occupation Tax for Public Safety rules and the Special County Service Occupation Tax for Public Safety rules.