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Nick Furtwengler focuses his practice on state and local tax matters. Read Nick Furtwengler's full bio.

Overview

Illinois’ July 2017 Revenue Bill for the 2018 fiscal year included the Invest in Kids Act (Act), which creates a new program, effective January 1, 2018, that provides up to $75 million in income tax credits for Illinois taxpayers making contributions to eligible organizations that grant scholarships to students attending private and parochial schools in Illinois. The Act allows approved Illinois taxpayers to receive state income tax credits of 75 percent of their total qualified contributions to Scholarship Granting Organizations (SGOs), up to $1 million annually per taxpayer. For example, a contribution of $100,000 to an SGO allows an approved taxpayer to claim a $75,000 income tax credit. The program is administered by the Illinois Department of Revenue (Department). The Department will allocate the credits among taxpayers on a first-come, first-served basis.

Who Benefits?

The Act is intended to benefit students who are members of households whose federal adjusted gross income does not exceed 300 percent of the federal poverty level before the scholarship and does not exceed 400 percent of the federal poverty level once the scholarship is received. The Illinois State Board of Education will annually provide the Department with a list of eligible private and parochial schools that may participate in the program and receive scholarship contributions from SGOs. As of December 18, 2017, the list of eligible private and parochial schools for 2018 has not been published. Continue Reading Illinois’ Invest in Kids Tax Credit

The Illinois Department of Revenue (Department) has issued a proposed new administrative rule addressing the nexus implications for out-of-state retailers attending trade shows in Illinois. The proposed rule, linked here, reaffirms the Department’s long-standing position that all sales made at an Illinois trade show are subject to Illinois Retailers Occupation Tax and any applicable local taxes. In a move welcomed by taxpayers, the proposed rule goes on to delineate a “safe harbor” of activities that will not create nexus for out-of-state retailers with respect to their other Illinois sales.

Under the safe harbor provision, an out-of-state retailer’s presence at an Illinois trade show will not create nexus for its other Illinois sales if each of the following conditions is met:

  1. The retailer attends no more than two trade shows per calendar year;
  2. The retailer is physically present at the two trade shows for an aggregate total of no more than eight days during any calendar year; and
  3. Combined gross receipts from sales made at the two trade shows during any single calendar year do not exceed $10,000.

Continue Reading Illinois DOR Proposes Use Tax Nexus Standards for Trade Show Retailers

In two recent General Information Letters (GILs), the Illinois Department of Revenue (Department) reaffirmed that computer software provided through a cloud-based delivery system is not subject to tax in Illinois. The Department announced that while it continues to review cloud-based arrangements and may determine they are taxable at some point, any decision to tax cloud-based services will be applied prospectively only. The GILs also recognize Quill’s physical presence requirement for Commerce Clause nexus. Continue Reading Illinois Department of Revenue Reaffirms Cloud-Based Services Not Taxable

In June of 2015, Connecticut passed legislation that implements combined reporting for tax years beginning on, or after January 1, 2016. Part of the new regime, which is codified by Conn. Gen. Stat. P.A. 15-5, § 144 (2015), requires water’s-edge combined groups to include entities incorporated in tax havens in the combined group. Just before the holidays, the Connecticut General Assembly passed legislation that narrowed the definition of a “tax haven” from the originally adopted definition. Under the originally passed combined reporting law, the determination of whether a jurisdiction was a “tax haven” was made using five different definitions. If any one definition was satisfied, the jurisdiction was a “tax haven.” None of the five definitions is entirely clear and each generally required an analysis of facts related to the jurisdiction’s government rather than the activities of a taxpayer in the jurisdiction. The original definition of tax haven was similar, but not identical to the Multistate Tax Commission Proposed Model Statute for Combined Reporting. The new law required the commissioner of revenue to publish a list of jurisdictions determined to be tax havens by September 30, 2016. In December, the Connecticut General Assembly convened a special session and passed Public Act 15-1, which amends the newly enacted tax haven law in section 37. As amended, the Connecticut statute still contains the five different definitions. However, the amended law excludes from the definition of a tax haven “a jurisdiction that has entered into a comprehensive income tax treaty with the United States” and which meets certain other requirements. Additionally, the December legislation also repealed the requirement for the commissioner to publish a list of tax havens. In sum, the limiting amendment to the tax haven law should provide taxpayers with some clarity, although that will be somewhat offset by the lack of a formal list. Connecticut is one of four New England states that considered and/or passed legislation adding tax haven provisions to their combined reporting regimes. Tax haven legislation passed in Rhode Island in 2015, as part of Rhode Island’s adoption of combined reporting effective for tax years beginning on or after January 1, 2015. The Maine and Massachusetts legislatures considered tax haven provisions, but ultimately did not pass such laws in 2015.

Chicago’s Department of Finance currently is offering an amnesty program called the Debt Relief Program (Program).  The Program gives individuals and businesses the opportunity to resolve outstanding debt and avoid certain interest and penalties. The Program is outlined in Article IV of the Management Ordinance enacted with the City of Chicago’s (City’s) Fiscal Year 2016 Budget.   It is unrelated to the Chicago Department of Finance’s recent Voluntary Disclosure offer to providers and customers with respect to the Personal Property Lease Transaction Tax, which we covered in a previous blog post.

The Program runs from November 15, 2015 to December 31, 2015, and offers amnesty for three types of “debt,” defined as follows:

  1. Unregistered Taxpayers or Unregistered Tax Collectors: Includes tax liabilities for tax periods prior to January 1, 2012, for any taxpayer or tax collector that is not currently registered with the City for the tax.
  1. Final Tax Assessments: Includes tax assessments issued prior to January 1, 2012, where the taxpayer failed to respond to the Department of Finance’s findings that taxes were owed.
  1. Real Property Transfer Taxes: Includes real property transfers that took place prior to January 1, 2012.

We think the better reading of the City’s reference to “unregistered” taxpayers is that the registration is tax specific, meaning that a taxpayer registered to pay a particular tax would not, by the fact of that registration, be precluded from participating in the amnesty program with respect to another type of tax for which the taxpayer had not registered.  (City of Chicago Debt Relief Ordinance of 2015, Section 2; Form 2015 Debt Relief Application – Unregistered Taxpayers and Tax Collectors, Section 2).

The Program’s main benefit includes the waiving of interest and penalties. In order to receive this benefit, the eligible tax debt must be paid in full and the applicable tax returns must be filed with the City by December 31, 2015. If the eligible tax debt is not paid in full by December 31, 2015, regular interest and penalty amounts will be assessed.

The following taxes are not eligible for the Program:  regulatory, compensation or franchise fees, special assessments, the cigarette tax, the automatic amusement device tax, wheel tax license fees, the Chicago Transit Authority portion of the real property transfer tax, and the Metropolitan Pier and Exposition Authority airport departure tax. Also ineligible are tax debts in pending legal activity or for which the City has obtained an order from the Department of Administrative Hearings or a judgment from a court of competent jurisdiction. All other taxes imposed under the Municipal Code of Chicago or by ordinance passed by the Chicago City Council are eligible for the Program.

Unregistered taxpayers and taxpayers with outstanding tax debts to the City of Chicago should consider whether to participate in the Program. To apply for tax debt relief through the Program, taxpayers need to complete a Tax Debt Relief application with the City, accompanied by the applicable tax returns. The Tax Debt Relief applications can be found here.