On June 1, 2021, the Illinois Senate passed an Illinois House budget implementation bill which contained several tax provisions. Governor Pritzker is expected to sign the legislation into law. This FGMK article provides highlights the legislation
Closure of Corporate Tax Loopholes
The legislation includes provisions that would modify tax code provisions often referred to as “corporate loopholes” by tax pundits. The following are some highlights:
- The bill restricts the use of corporate net operating losses to $100,000 per year for any taxable year ending on or after December 31, 2021 and prior to December 31, 2024.
- The bill does this by reinstating the $100,000 limitation on the use of net operating losses that previously was imposed for taxable years ending on or after December 31, 2012 and prior to December 31, 2014.
- The bill requires an addback for taxable years ending on or after June 30, 2021 of global intangible low-taxed income (“GILTI”) and an amount equal to the deduction allowed under IRC Section 243(e) (certain dividends received from foreign corporations) and IRC Section 245A (deduction for foreign source-portion of dividends received by domestic corporations from specified 10 percent owned foreign corporations).
- The bill modifies the foreign dividends subtraction to provide that for taxable years ending on or after June 30, 2021, for purposes of the subtraction, "the term 'dividend' does not include any amount treated as a dividend under Section 1248 of the Internal Revenue Code" (gain from certain sales or exchanges of stock in certain foreign corporations).
- The bill decouples from federal bonus depreciation (100 percent expensing - Illinois previously decoupled from bonus depreciation of less than 100 percent expensing) by requiring an addback.
- The bill has a corresponding annual subtraction modification for the property subject to the new addback.
- The bill eliminates the phase-out of the Franchise Tax.
- It retains the exemption of the first $1,000 of liability that became effective on or after January 1, 2021 but deletes the subsequent annual increases in the phase-out that were designed to eliminate the tax completely.
Other Tax Provisions
The following provides a summary of other key tax provisions included in the legislation:
- The tax credit for affordable housing donations is extended through December 31, 2026;
- The Angel Investment Credit is extended through December 31, 2026;
- The River Edge Redevelopment Zone tax credit is extended for tax years ending prior to January 1, 2027.
- The sales tax exemption for menstrual pads, tampons, and menstrual cups is extended through December 31, 2026.
- The sales tax is amended to provide that the tax imposed on food prepared for immediate consumption and transferred to residents by entities licensed under the Assisted Living and Shared Housing Act and an entity that holds a permit issued pursuant to the Life Care Facilities Act is 1 percent.
- The Property Tax Code is amended to modify the method for valuation of supportive living facilities.
- The Property Tax Code is also amended to exempt property used for certain educational trade schools.
For additional information regarding this new legislation and its impact on your tax situation, please contact FGMK’s SALT team.
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