TFI Tax Facts (77.1): 2023 Year in Review

TFI Tax Facts (77.1): 2023 Year in Review

TFI Tax Facts: 2023 Year in Review

January 2024 (77.1)

The General Assembly had a “typical” session in 2023, the first since 2019. Even though revenues were strong once again in FY2023, the General Assembly put together the FY2024 budget with a conservative revenue estimate. Similar to last year, tax issues were not a focus of the session, primarily because of the revenue strength. However, there were still numerous tax bills introduced, and a fair number that passed, although the tax bills that did pass generally focused on a very specific area of the law. The following discussion covers each of the tax-related bills that became law in 2023.

FY2024 Budget
This year’s budget bill, P.A. 103-0006, appropriates $50.428 billion from the General Revenue Fund for FY2024, an increase of $1.378 billion from FY2023. The General Assembly projected GRF revenues of $50.611 billion, for a surplus of $183 million. Of the $183 million surplus, $138 million will be deposited into the “rainy day” fund. The FY2024 revenue projection is $2.523 billion lower than the actual FY2023 revenues, due mainly to the State not expecting one time transfers from the federal government related to the COVID-19.

Budget Implementation Bill
P.A. 103-0008 is the Budget Implementation Bill for FY2024, and as is often the case, it contained a few tax-related items. Most notably, it increases the franchise tax credit from $1,000 to $5,000 starting in 2024. It increases income tax deposits to LGDF to 6.47% of individual income tax revenues (up from 6.16%). The individual income tax refund diversion rate is lowered from 9.25% to 9.15% and the corporate income tax diversion rate is reduced from 14.5% to 14%.

Omnibus Tax Bill
P.A. 103-0009 is an income and sales tax omnibus bill. The bill makes the following changes:

• Extends and expands the sales tax exemption for aircraft repairs.
• Reduces the sales tax rates for motor fuel with ethanol.
• Expands the farm machinery and equipment sales tax exemption to include electrical power generation equipment used for agricultural production.
• Amends the Parking Excise Tax Act. Under the changes, a “booking intermediary” is required to collect and remit taxes for operators that are not registered with the Department. For operators that are registered, the intermediary still collects the tax, but remits the tax to the operator who remits the tax to the State. However, if the intermediary imposes a service charge, the intermediary must remit the tax on the charge to the State.
• Exempts hotel rooms rented to the Red Cross for disaster relief from the State’s Hotel Operators’ Occupation Tax.
• Transfers jurisdiction for disputes under municipal utility tax reviews to the judiciary from the Department of Revenue.
• Allows DCEO to certify Kankakee and Joliet as River Edge Redevelopment Zones.
• Extends and expands the amount of credits available under the Historic Preservation Tax Credit Act.
• Expands the definition of High Impact Business to include businesses that establish a new cultured cell material food production facility.
• Expands the definition of “startup taxpayer” for EDGE agreements to entities that have existed for less than 10 years instead of 5 years.
• Allows investment partnerships to invest in pass-through entities without subjecting the partners to additional income tax liability.
• Increases the amount of Angel Investment Tax Credits that can be awarded each year.
• Increases the amount of New Market Development Tax Credits that can be awarded each year.
• Suspends the automatic CPI increase to the individual income tax personal exemption for the 2023 tax year. The CPI increase will apply again for the 2024 tax year.
• Amends the administration of the Sustainable Aviation Fuel Sales Tax Credit.
• Creates new alternative qualification requirements for the REV Tax Incentives. Also corrects a sales tax reference.
• Reallocates how cigarette tax revenue is distributed.
• Allows municipalities to continue to use revenues from the serviceman’s occupation tax on personal property and the use tax on titled personal property for municipal operations.
• Creates a $500 income tax credit for volunteer emergency workers.
• Amounts paid for certain sales and excise taxes, other than quarterly payments, are deemed assessed upon receipt.
• For calculating the optional pass-through entity tax, payments to retired partners that are exempt from income tax are not included in the base.

Income Tax
P.A. 103-0268 creates a tax credit for certain uses of hydrogen equal to $1 per kilogram of hydrogen used.

P.A. 103-0478 creates cause of action for fertility fraud where a medical provider provided fertility treatment with the provider’s own reproductive material without consent. The bill then creates an income tax subtraction for any awards under the act that are included in income.

P.A. 103-0098, an initiative of the Department of Revenue, amends the Uniform Penalty and Interest Act and requires the payment of a liability resulting from a federal change to be paid when the amended return is filed.

Sales Tax
P.A. 103-0384, an initiative of the Department of Revenue, creates a sales tax exemption if the purchaser (i) presents a valid military identification and (ii) uses a form of payment where the federal government is the payor. The existing military exemption had become difficult to administer.

Property Tax
P.A. 103-0565 validates the creation of and an increase in levies for community mental health boards that were voted on after May 13, 2022 and before the effective date of this bill.

P.A. 103-0369 creates a task force to look at payment plans for owner-occupied housing whose property taxes have been sold in order to prevent the owner from losing the house.

P.A. 103-0083 allows assessors in counties other than Cook County to require an application for the establishment of a common area of a condo or other similar property type which is assessed at $1.

P.A. 103-0555 reduces the interest rate for delinquent property taxes in Cook County and amends the sale in error provisions for tax sales.

P.A. 103-0583 requires the Cook County Assessor to accept assessment appeals for at least 30 business days after (i) the date the assessment notice is mailed or (ii) publication on the assessor’s website, whichever is later.

HB2507 was a property tax omnibus bill that passed both chambers in May but was amendatorily vetoed by the Governor. The House did not take action on the veto therefore the bill did not become law. The Governor objected to a provision that reduced the assessment rate for nursing homes in Cook County. During veto session, the House amended SB2315 with substantially similar language as HB2507 (omitting the provision the Governor objected to). The House passed SB2315 but the Senate has not voted on it as of this writing. Below are the provisions of HB2507:

• Allows for a petroleum refinery in a county with a population of less than 1,000,000 to enter into a multi-year settlement agreement for their assessment.
• Amends the valuation method for pollution control facilities to match current practice, meaning the value of the facility is equal to the net value if the facility was removed and sold after accounting for the cost of removal.
• Exempts those who served in the military during World War II from property taxes.
• Creates a 50% homestead exemption for the surviving spouse of a police officer or rescue worker whose dies as a result of or in the course of their employment.
• Creates a 50% homestead exemption for 8 years for municipality-constructed single family
• Creates a special valuation method for regional wastewater treatment facilities.
• Exempts property tax levies made for aquarium or museum purposes from PTELL.
• Establishes that for the historic resident assessment freeze, the assessment is the lower of the current fair cash value or the base year valuation with appropriate adjustments.
• Townships of 3,000 or less residents will have multi-township assessors.
• Creates a new referendum question for PTELL, allowing taxing districts to ask for a set amount of money, instead of asking for a specific tax rate.

Other Taxes
P.A. 103-0520 exempts peer to peer car sharing from the automobile renting tax if sales tax was paid when the car was purchased.

P.A. 103-0148 makes unclaimed property tax refunds subject to the Revised Uniform Unclaimed Property Act after 3 years. The bill also makes other changes for abandoned property held by local governments.

P.A. 103-0318 streamlines the payment and accounting of bonuses and stipends by the State to county and township officials by having the State transfer the money to the county or township who would then make the payment to the officials (and also withhold for federal and state income taxes).

P.A. 103-0319, a Department of Revenue initiative, allows the Department to deny a certificate of registration, permit, or license if the applicant or owner fails to file any tax return with the Department.

P.A. 103-0360 amends the Public Utilities Act and amends the definition of video service to specifically exclude direct to home satellite services and streaming content. This change clarifies that these types of services are not liable for local government franchise fees.

P.A. 103-0005 requires legal actions filed against the State that are seeking declaratory judgement or injunctive relief based on a constitutional claim to be filed in either Cook or Sangamon County. While this does not directly affect taxes, it will affect a taxpayer’s ability to file suit in other counties under the State Officers and Employees Money Disposition Act (the “Protest Moneys Act”).