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The Tax State of The State: Illinois Tax Implications of the Illinois Budget Shortfall- Issues That Clients/Taxpayers are Concerned With

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Title: The Tax State of The State: Illinois Tax Implications of the Illinois Budget Shortfall- Issues That Clients/Taxpayers are Concerned With


1
The Tax State of The State Illinois Tax
Implications of the Illinois Budget Shortfall-
Issues That Clients/Taxpayers are Concerned With
  • Chicago Bar Association State and Local Tax
    Seminar
  • April 19, 2010

David J. Kupiec, Esq, CPA www.kupiecandmartin.com
2
Issues That Clients/Taxpayers are Concerned With
  • Certainty When?
  • Clarity Statutory Language.
  • Administration What Do I Have To Do?
  • Cost What Is The Financial Impact?
  • Future Impact Does It Change Business?

3
Certainty - When
  • New Illinois Law
  • Beginning Of Calendar Year
  • When Governor Signs
  • Change To Existing Illinois Law
  • Prospective
  • Retroactive
  • Expiration/Sunset
  • Federal Law Change
  • Illinois Follows/Decouples

4
Certainty - Examples
  • New Illinois Law
  • Previously Proposed Gross Receipts Tax
  • Existing Contractual Provisions?
  • Change To Existing Illinois Law
  • Increase In Income Tax Rates Deferred Taxes
  • Market Based Apportionment Sourcing Aug 2007
  • Repeal Of Existing Provisions Credits, Net Loss
    Deductions,
  • Federal Law Change
  • Bonus Depreciation Illinois Decoupling

5
Clarity Statutory Language
  • Strict Statutory Language
  • Existing Illinois Law
  • Clarifying Amendatory Language
  • Legislative Intent
  • Floor Debates
  • Committee Meetings and Hearings
  • Judicial Interpretation
  • Regulatory Provisions

6
Clarity Recent Illinois Supreme Court Opinions
  • Exelon Corporation (July 15, 2009)
  • Personal Property Tax Replacement Tax Investment
    Tax Credit What is electricity
  • Kean v. WAL-MART (November 19, 2009)
  • Sales Tax On Delivery Charges For Online Purchase
  • Provena Covenant Medical (March 18, 2010)
  • Property Tax Not For Profit Exemption For
    Religious Hospital

7
Administration What To Do
  • Financial Statement Disclosures?
  • Accounting Changes?
  • Customer/Client Notifications?
  • Additional Administrative Requirements
  • System Updates?
  • Record Keeping?
  • Additional Resources?
  • Additional Tax Filings/Payments?

8
Cost Financial Impact
  • Is There A Financial Impact?
  • Is It A Material Impact?
  • Is It An Ongoing Cost/Benefit?
  • Who Incurs The Financial Impact?
  • Is This A Timing Issue?

9
Future Impact Business Changed?
  • Reduction In My Illinois Business As A Result Of
    Statutory Change (Impact On Specific Industry).
  • Change In Illinois Market (Impact On All Illinois
    Businesses).
  • Resulting New Jobs/Downsizing.
  • Impact On Growth/Expansion Into Illinois.
  • Options?

10
Future Impact Positive Options
  • Green Incentives
  • Wind, Solar, Energy Efficient,
  • Net Operating Loss Deductions
  • Expand Carryforward Periods
  • Add Carryback Periods
  • Monetize Tax Credits
  • Film Industry Sell Credit To Third Parties
  • Auto Industry - Edge Credits For Withholding Taxes

11
2010 Proposed Tax Joint Resolution Illinois
Constitutional Amendments
  • House Joint Resolution Constitutional Amendment
    0027 Income Tax Rates Non-Graduated By
    Category.
  • Senate Joint Resolution Constitutional Amendment
    0038 Removes A Provision That Provides That A
    Tax On Income Shall Be Measured At A
    Non-Graduated Rate.
  • Senate Joint Resolution Constitutional Amendment
    0092 Authorizes A Tax On Or Measured By Income
    At A Graduated Rate.

12
2009 Proposed Senate Bill 2252 Not Passed
  • 2 Year Temporary Income Tax Rate Increase (2010
    and 2011)
  • Individual Income Tax Rate Would Increase From 3
    to 4.5 and Earned Income Tax Credit Would
    Increase from 5 to 10 of the Federal Tax
    Credit.
  • Corporate Income Tax Rate Would Increase From
    4.8 to 7.2 (Personal Property Tax Replacement
    Tax Combined Rate of 9.7)
  • Status Illinois House Voted Against (May 31,
    2009).

13
2009 Proposed House Bill 0174 (750) Not Passed
  • Individual Income Tax Rate Would Increase From 3
    to 5 on July 1, 2009.
  • Corporate Income Tax Rate Would Increase From
    4.8 to 5 (Personal Property Tax Replacement Tax
    Combined Rate of 7.5).
  • Increase Property Tax Credit on Income Taxes From
    5 to 10 and Earned Income Tax Credit From 5 to
    15 of the Federal tax credit.
  • Expand Sales Tax Based - 39 Additional Services.
  • Status Illinois Senate Passed 31-27 (May 30,
    2009).

14
2009 - House Bill 0174(750) Sales Tax Base
Increase To 39 Services
  • Other warehousing and storage
  • Travel agent services
  • Carpet and upholstery cleaning services
  • Dating services
  • Dry cleaning and laundry (except coin operated)
  • Consumer goods rental
  • Health clubs, tanning parlors, reducing salons
  • Linen supply
  • Interior design services
  • Other business services, including copy shops
  • Bowling Centers
  • Coin operated video games and pinball machines
  • Membership fees in private clubs
  • Admission to spectator sports (excluding horse
    tracks)
  • Admission to cultural events
  • Billiard Parlors
  • Scenic and sightseeing transportation
  • Taxi and Limousine services
  • Pet grooming
  • Landscaping services (including lawn care)
  • Income from intrastate transportation of persons
  • Mini-storage
  • Household goods storage
  • Cold storage
  • Marina Service (docking, storage, cleaning,
    repair)
  • Marina towing service (including tugboats)
  • Gift and package wrapping service
  • Laundry and dry cleaning services, coin operated
  • Other services to buildings and dwellings
  • Water softening and conditioning
  • Internet Service Providers
  • Short term auto rental
  • Information Service
  • Amusement park admission and rides
  • Circuses and fairs admission and games
  • Cable and other program distribution
  • Rental of video tapes for home viewing

15
2009 TAX BILLS ENACTED
  • SB 1912 (PA 096-0045) Amendment to Partnership
    Replacement Tax Computation. (Repealed)
  • SB 0081 (PA 096-0120) Tuition Savings Refund
    Addition Modification.
  • HB 0255 (PA 096-0034) - Revenue Component of
    Capital Package. In part, revenue proceeds from
    video poker machines weekly lottery games
    management sales tax from candy, coffee, tea
    beverages and beauty products at 6.25 rate
    beer, wine and spirits tax increases and drivers
    license fee increase. (Effective 7/1/09)

16
2009 TAX BILLS ENACTED
  • SB 1691 (PA 096-0116) Tax Credit/Exemption
    Extensions Graphic Arts Machinery and
    Equipment, Manufacturers Purchase Investment
    Tax.
  • SB 0256 (PA 096-0115) Excludes Electricity from
    Investment Tax Credit.
  • SB 1923 (PA 096-0028) Wind Energy High Impact
    Business Designation.

17
2009 TAX BILLS ENACTED
  • SB 1739 (PA 96-0763) Broadcasting Sourcing
    Charities Property Tax Exemption Continuation.
  • SB 1975 (PA 96-0641) - Amends Captive REIT
    Definition.
  • SB 0089 (PA 96-0609) Property Tax Settlement
    Agreements.

18
2009 TAX BILLS ENACTED
  • SB 0450 (PA 96-0759) Exempts Certain Airplane
    Repairs and Maintenance from Sales and Use Tax.
  • HB 3854 (PA 96-0754) - Establishes Carbon
    Capture and Sequestration Commission.

19
SB 1912 (Public Act 096-0045)
  • Public Act 096-0045 enacted on July 15, 2009.
  • Amends Illinois Income Tax Act Section
    203(d)(2)(C) no longer requires add back of
    guaranteed payments to individual partners.
  • Amends Illinois Income Tax Act Section
    203(d)(2)(H) no longer allows partnerships to
    subtract the greater of income that constitutes
    personal service income as defined in Internal
    Revenue Code 1348(b)(1) or a reasonable
    compensation paid or accrued for services
    rendered by the partners to the partnership.
  • Effective for tax years ending on or after
    December 31, 2009.

20
SB 0081 (Public Act 096-0120)
  • Public Act 096-0120 enacted on August 4, 2009.
  • Amends Section 203(a)(2)(D-22) of the Illinois
    Income Tax Act.
  • Requires an addition modification to base income
    of an amount equal to the contribution component
    of any nonqualified withdrawal or refund from a
    tuition savings program that was previously
    deducted from base income and that did not result
    from the death or disability of the beneficiary.
  • Effective for taxable years ending on of after
    January 1, 2009.

21
HB 0255 (Public Act 096-0034)
  • Public Act 096-0034 enacted on July 13, 2009.
  • Amends the Use Tax and Occupation Tax Acts to
    (1) provide clarity that candy, certain
    beverages, and grooming and hygiene products are
    taxed at the 6.25 rate instead of the 1 rate
    and (2) require the deposit of the increased
    revenue into the Capital Projects Fund.
  • Amends the Motor Fuel Tax Law to make changes
    concerning the Grade Crossing Protection Fund.
  • Amends the Liquor Control Act of 1934 to increase
    the tax on wine, beer and alcohol and spirits.
  • Other non tax items contained in the Act not
    listed above.

22
SB 1691 (Public Act 096-0116)
  • Public Act 096-0116 enacted on July 31, 2009.
  • Amends Retailers Occupation Tax - extends the
    graphics arts machinery and equipment exemption
    which expired on July 30, 2009 to August 30,
    2014.
  • Amends Retails Occupation Tax manufacturers
    purchase credit which expired on July 30, 2009 to
    August 30, 2014.
  • Amends Illinois Income Tax Act Section 201(e)
    extends the Illinois personal property tax
    replacement income tax investment tax credit
    which expired on December 31, 2008 to December
    31, 2013.

23
SB 0256 (Public Act 096-0115)
  • Public Act 096-0115 enacted on July 31, 2009.
  • Amends Illinois Income Tax Act Section 201(e)
    for tax years ending after December 31, 2008 and
    for purposes of the investment credit, the term
    tangible personal property does not include the
    generation, transmission or distribution of
    electricity, and has the same meaning as when
    used in the Retailers Occupation Tax Act.
  • Amends Illinois Income Tax Act Section 201(e)
    for tax years ending after December 31, 2008 and
    for purposes of the investment credit, the term
    retailing means the sale of tangible personal
    property for use or consumption and not for
    resale, or services rendered in conjunction with
    the sale of tangible personal property for use or
    consumption and not for resale.

24
SB 1923 (Public Act 096-0028)
  • Public Act 096-0028 enacted on June 30, 2009.
  • Amends Illinois Enterprise Zone Act and Illinois
    Prevailing Wage Act.
  • Provides that businesses that intend to establish
    a new wind power facility in Illinois may be
    considered a high impact business and qualify
    for certain tax exemptions.
  • Effective July 1, 2009.

25
IL General Assembly - Next Steps
  • Current Session Scheduled To End Early May
  • Fall Veto Session After Elections
  • 2011

26
Questions?
  • For Additional Information Concerning This
    Presentation You May Contact
  • David Kupiec Natalie Martin
  • (312) 632-1022 (312) 632-1023
  • dkupiec_at_kupiecandmartin.com nmartin_at_kupiecandmart
    in.com

27
CIRCULAR 230 DISCLOSURE
  • CIRCULAR 230 DISCLOSURE - To comply with Treasury
    Department regulations, we inform you that,
    unless otherwise expressly indicated, any tax
    advice contained in this communication (including
    any attachments) is not intended or written to be
    used, and cannot be used, for the purpose of (1)
    avoiding penalties that may be imposed under the
    Internal Revenue Code or any other applicable tax
    law, or (2) promoting, marketing or recommending
    to another party any transaction, arrangement or
    other matter.
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