Detailed Illinois Development
Illinois is currently anticipating a $3 billion deficit in the upcoming 2022 fiscal year, which, due to better than expected revenue collections, is significantly less than the $5.5 billion deficit economists originally forecasted in June 2020. In his recently released FY 2022 budget, Governor J. Pritzker outlined a proposal to fill the deficit by cutting spending and closing $932 million worth of corporate “loopholes.” The provisions the Governor proposes to revise are not necessarily items typically considered “tax loopholes.” One of the revenue raising measures would be to limit corporate NOLs to $100,000 per year and to decouple Illinois from 100 percent bonus depreciation allowed under the Tax Cuts and Jobs Act. The Governor is also proposing to align the state’s treatment of foreign source dividends to its treatment of domestic source dividends. Furthermore, the repeal of Illinois’ franchise tax imposed on paid-in capital, currently being phased out slowly through 2024, would be reversed. On the sales tax side, the proposal would cap the vendor’s discount (the amount that retailers are allowed to retain for collecting and remitting Retailer’s Occupation Tax) to $1000 per month. Another sales tax change would be to remove “production related tangible personal property” from the scope of the manufacturing machinery and equipment sales tax exemption. Production related tangible personal property has been eligible for the exemption only since July 1, 2019. A sales tax exemption for biodiesel fuel would also be eliminated, and a few credits programs (for private school scholarships and construction jobs payroll expenditures) would also be reduced. Recall, this past November, Illinois voters rejected a ballot initiative that would have adopted a graduated individual income tax regime with tax increases for higher-income individuals. The measure would have also implemented a contingent corporate income tax rate increase. Please contact Brad Wilhelmson with questions on the Governor’s proposals.
This Week's Developments
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