Bill Text: IL SB1719 | 2017-2018 | 100th General Assembly | Engrossed


Bill Title: 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.

Spectrum: Partisan Bill (Democrat 10-0)

Status: (Engrossed) 2017-06-22 - Added Alternate Chief Co-Sponsor Rep. Mary E. Flowers [SB1719 Detail]

Download: Illinois-2017-SB1719-Engrossed.html



SB1719 EngrossedLRB100 09524 HLH 19689 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, beginning July 1, 2017, a privilege tax is imposed on
22partnerships, including investment partnerships, and S
23corporations engaged in the business of conducting investment
24management services at the rate of 20% of the fees calculated
25by reference to the performance of the investment portfolio
26funds and not from the investment itself. The privilege tax

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1shall not be imposed on fees calculated by reference to the
2total assets under management of the business engaged in
3investment management services. Persons carrying on business
4as partners conducting investment management services shall be
5liable for the tax imposed by subsections 201 (a) and (b) of
6this Act in their separate or individual capacities in
7accordance with subsection 205 (b) of this Act.
8 For the purposes of this subsection (c-5), "investment
9management services" means a business which is held by any
10person if such person provides, directly or indirectly, in the
11active conduct of a trade or business, a substantial quantity
12of any of the following services to the business:
13 (1) advising the business (partnership, S corporation
14 or any business entity) as to the advisability of investing
15 in, purchasing, or selling any specified asset;
16 (2) managing, acquiring, or disposing of any specified
17 asset;
18 (3) arranging financing with respect to acquiring
19 specified assets; or
20 (4) any activity in support of any service described in
21 items (1) through (3) of this paragraph.
22 For the purposes of this definition, the term specified
23asset means securities (as defined in section 475(c)(2) of the
24Internal Revenue Code) real estate held for rental or
25investment, interest in partnerships, commodities (as defined
26in section 475(E)(2) of the Internal Revenue Code) or options

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

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1 (g) A nonprofit risk organization that holds a certificate
2of authority under Article VIID of the Illinois Insurance Code
3is exempt from the tax imposed under this Act with respect to
4its activities or operations in furtherance of the powers
5conferred upon it under that Article VIID of the Illinois
6Insurance Code.
7(Source: P.A. 97-507, eff. 8-23-11.)
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