Bill Text: IL HB4655 | 2017-2018 | 100th General Assembly | Introduced

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Bill Title: 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.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2019-01-08 - Session Sine Die [HB4655 Detail]

Download: Illinois-2017-HB4655-Introduced.html

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

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

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

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

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

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

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

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

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

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

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

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

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