2022 Year in Review

2022 Year in Review

2022 Year in Review

January 2023 (76.1)

The General Assembly had another shortened session in 2022. The first weeks of session were cancelled due to the spread of the omicron variant of COIVD-19. Additionally, the traditional adjournment date of May 31 was moved to April 8 due to the delayed primary election on June 28.  Nevertheless, a budget was passed, and number of noteworthy tax law changes were enacted, as described in more detail below. The General Assembly is planning for a more “traditional” session in 2023, even though the Senate will be meeting in the Howlett Building for the next two years while the north wing of the Capitol is renovated.

FY2023 Budget
The General Assembly passed P.A. 102-0696 which appropriates $46 billion from the General Revenue Fund for FY2023. The General Assembly projected GRF revenues of $46.4 billion, for a projected surplus of $444 million, $312 million of which will be deposited into the “rainy day” fund. The General Assembly now expects higher revenues and has passed a supplemental appropriation.

Budget Implementation Bill
P.A. 102-0699 is the BIMP for FY2023, and as is often the case, it contained a few tax-related items. The bill extends the Invest in Kids Act to January 1, 2024. It increases income tax deposits to LGDF to 6.16% of individual income tax revenues (up from 6.06%). The individual income tax refund diversion rate remains at 9.25% and the corporate income tax diversion rate is reduced from 15% to 14.5%.

Omnibus Tax Bills
P.A. 102-0700 is an omnibus revenue bill that was passed almost unanimously during the spring. The bill:

• Creates a one-time income tax rebate equal to 5% of residential property taxes paid with a maximum amount of $300.
• Creates a one-time income tax rebate equal to $50 for single filers and $100 for joint filers, plus $100 per dependent with a maximum of 3 dependents.
• Increases the Earned Income Tax Credit from 19% to 20% of the federal EITC. It also removes age restrictions and taxpayers with an ITIN now qualify. Changes first apply to the 2023 tax year.
• Creates a temporary sales tax exemption for groceries (but not drugs) from July 1, 2022, through June 30, 2023. RTA sales tax rate still applies.
• Creates Back to School Sales Tax “Holiday” on August 5, 2022 through August 14, 2022. State rate is reduced from 6.25% to 1.25%. Local sales tax rates still apply.
• Eliminates the scheduled 2.2¢ per motor fuel tax increase scheduled for July 1. Creates a new increase on January 1, 2023 and then it reverts to the regular increases on July 1.
• Allows startups to utilize the EDGE credit to offset withholding liability. Extends DCEO’s ability to enter into EDGE agreements through June 30, 2027.
• Amends the definition of “underserved area” for EDGE & River Edge programs.
• DCEO gets 2.5% of the transferred film tax credits for out of state salary and 0.25% for other transferred credits. $500,000 of salary to out of state residents is eligible for the credit.
• Increases the maximum amount of the live theater tax credits to $4 million for FY2023.
• Expands the Reimagining Electric Vehicles Act to include (i) battery raw materials production; (ii) battery recycling and reuse; and (iii) hydrogen fuel cells.
• Extends the sales tax exemption for coal and aggregate mining equipment to July 1, 2028.
• Creates a new tax credit for agritourism. Credit is equal to 100% of the cost of liability insurance, with a maximum of $1,000. Applies to 2022 & 2023 tax years.
• Creates the Manufacturing Illinois Chips for Real Opportunity Act (MICRO Act) which creates tax incentives for semiconductors & microchip manufacturers and their suppliers.
• Gradually increases the percentage of biodiesel needed for the special sales tax rate.
• Extends the hospital income tax credit for property taxes paid and makes the sales tax exemption for hospitals permanent. (There is an inconsistency between this law and P.A. 102-0886 as to whether the sales tax exemption is permanent or valid through July 1, 2027.)
• Creates a new income tax credit for employers that give paid time off for employees to donate organs.
• Creates a sales tax exemption for breast pumps.
• Increases the teacher instructional material income tax credit from $250 to $500.
• Removes parking intermediaries from the Parking Excise Tax.
• Delays unemployment insurance “speed bumps” until January 1, 2023.
• Transfers $1 billion to the rainy-day fund and an extra $200 million to pensions.

P.A. 102-1112 is an omnibus tax bill passed during veto session which:

• Expands the Reimagining Electric Vehicles in Illinois Act to include all manufacturers of components for electric vehicles even if those components may also be used for traditional internal combustion vehicles. The bill also increases the maximum credit per employee and makes agreements renewable for an additional 15 years after the initial 15-year agreement and makes other changes.
• Creates an income tax deduction for the discharge of indebtedness attributable to student loan debt that isn’t already excluded from income by federal law.
• Extends the income tax deduction for contributions to ABLE accounts through 2027.
• Expands the live theater tax credit to include commercial touring Broadway shows.
• Delays the due date for the 2023 Spring property tax bills in Cook County from March 1 to April 1.

SB2951 is another omnibus tax bill that was passed during waning days of the 102^nd General Assembly. The most significant portion of the bill is the Invest in Illinois Act, which gives the Governor wide latitude to give grants to businesses to locate, expand, or even remain in Illinois. The bill also:

• Amends EDGE and the High Impact Business requirements to remove the “but for” clause. Currently, companies seeking these credits must show that “but for” these incentives, the projects would not proceed in Illinois. Future EDGE applicants would also no longer need to provide a cost differential study.
• EDGE credits for retained employees can increase to 50% of the incremental income tax of those employees if they are located in an underserved area.
• The Reimagining Electric Vehicles in Illinois Act is expanded and renamed to the Reimagining Energy and Vehicles in Illinois Act. Manufacturers of equipment, systems, or products used to produce renewable or nuclear energy can now qualify for incentives under this Act. The bill also changes the investment requirements.
• Creates a $1.50 per gallon credit for the purchase of sustainable aviation fuel in Illinois.
• Expands the size of enterprise zones to 14 or 20 square miles from the current 12 or 15 square miles.
• Allows businesses designated as a High Impact Business to renew that designation for an additional 20 years.
• Extends the Film Tax Credit through 2032.

Income Tax Bills
P.A. 102-1059 gives higher priority for Invest in Kids scholarships to children who received a scholarship for the previous school year.

P.A 102-1060 creates a new checkoff box on the individual income tax form for donations to the 100 Club of Illinois.

P.A. 102-0799 requires the Department of Revenue to print on the individual income tax return an option for the taxpayer to request information for their eligibility for health insurance benefits and allows the Department of Revenue to share that taxpayer’s information with the health insurance exchange.

P.A. 102-0741 makes numerous technical changes to the Historic Preservation Tax Credit Act.

P.A. 102-1053 creates the Recovery and Mental Health Tax Credit. The credit is available to qualified employers that hire qualified individuals (a person with a substance abuse disorder or a mental illness). The credit is equal to $1 per hour worked.

Sales Tax Bills
P.A. 102-0886 extends the sunset date for the sales tax exemption for hospitals to July 1, 2027. The bill also extends the sunset exemption for the income tax credit for property taxes paid by hospitals through 2027. (There is an inconsistency between this law and P.A. 102-0700 as to whether the sales tax exemption is permanent or valid through July 1, 2027.)

P.A. 102-1019 requires sales tax returns for certain motor vehicles to be filed electronically. Also allows the Department of Revenue to hold training for assessors and hearings on the equalization factor electronically. Requires all entities involved in the dyed diesel supply chain, except for end users, to be licensed by the State of Illinois.

P.A. 102-1026 exempts unclaimed property sold by the Treasurer from sales tax.

Property Tax Bills
P.A. 102-0895 is a property tax omnibus bill. It makes the following changes:

• Increases the senior homestead exemption in the collar counties from $5,000 to $8,000.
• Increases the general homestead exemption in the collar counties from $6,000 to $8,000.
• Allows the maximum potential levy of certain taxing districts (park districts, library districts, community college districts, and most school districts) subject to PTELL to continue to increase regardless of the actual levy of the taxing district, reducing the “use it or lose it” concern associated with the PTELL limitation.
• Creates a veterans property tax study which will examine the impact of veterans’ homestead exemptions in a handful of counties.
• Allows automatic renewal of homestead exemptions for people with disabilities.
• Expands the definition of surviving spouse for the disabled veterans’ homestead exemption.
• In Cook County, allows seniors that receive SNAP benefits, LIHEAP, or a handful of other income-based benefits to automatically qualify for the senior freeze.
• Decreases the interest rate of the Senior Citizens Real Estate Tax Deferral Program from 6% to 3%.

P.A. 102-0707 exempts an extension for Municipal Water Reclamation District bond payments for bonds issued for making contributions to the MWRD pension fund from the PTELL.

P.A. 102-0815 exempts properties held for future development by 3 specific land banks from property taxes.

P.A. 102-1000 allows a homeowners’ association to file property tax appeals with PTAB.

P.A. 102-1003 amends the Property Code and removes a requirement that county clerks mail notice in the tax sale process (which was just added in 2021).

P.A. 102-1010 creates the Southland Reactivation Property program, which allows commercial and industrial properties sold by a land bank to receive preferential property tax treatment for twelve years.

P.A. 102-0839 validates any property tax referenda that passed after 1994 for community mental health programs and eliminates a conflict in law regarding the referenda.

P.A. 102-0893 is a clean up bill for the special assessment of affordable rental housing.

Miscellaneous Tax Bills
SB1794 makes numerous changes to the administration of the municipal utility tax. The bill extends the statute of limitations from four years to five years and an audit or review tolls the statute up to one year. The records the utility provides to the municipality or agent must include: (i) the premises address and zip code; (ii) the classification of the premises; (iii) monthly usage information; (iv) the taxes assessed, collected, and remitted to the municipality; (v) the first date of service if within the period being audited; and (vi) any tax exemption claimed for the property. The Department of Revenue can resolve disputes between the public utility and the municipality regarding the sharing of information. For areas annexed after the effective dates, the municipality must notify the public utility if the utility has provided the municipality with an e-mail address. Allows for a web portal to be used for notices of annexations and boundary changes. The Department of Revenue is to develop a written process to assist with disputes, including the creation of a master list.

HB268 was passed in the waning days of the 102^nd General Assembly. It creates the Tourism Preservation and Sustainability District Act. The Act allows hotel owners to create a district that imposes a “transaction charge” which is a fixed dollar or percentage rate per hotel room per night. The proceeds of the charge will go to the local tourism and convention bureau and be spent on promotion, marketing, and other similar activities as stated in the petition creating the district.

P.A. 102-0920 exempts parking for the Illinois State Fair and DuQuoin State Fair from the Parking Excise Tax and codifies additional exemptions that are currently only in the Administrative Rules.

P.A.102-0941 requires the Secretary of State to license sellers of manufactured homes and allows the Director of Revenue to share information with the Secretary of State to assist with the licensure.

P.A. 102-0851 amends the Motor Fuel Tax Law to repeal the requirement that deliveries of reportable motor fuel either in interstate commerce or intrastate commerce to points within Illinois have to be reported to the Department of Revenue.

P.A. 102-0762 clarifies that the private party motor vehicle transfer tax is $15 when the transfer is part of an inter vivos trust that becomes irrevocable upon death.

P.A. 102-0769 only requires the Department of Revenue to submit for publication (rather than publish) an index of informal rulings, opinions, or letters. The Secretary of State does the official publishing of the Illinois Register.