On November 14, the second day of its 2018 veto session, the Illinois Senate voted unanimously to override Governor Rauner’s amendatory veto of Senate Bill 1737 (Bill). As we have previously reported, the Bill is a proposed new law that would reform the Illinois Insurance Code’s regulatory framework for captive insurance companies and significantly drop the state’s current premium tax rate on self-procured insurance. The Illinois General Assembly passed the Bill on May 31, 2018, with bi-partisan support. The Illinois Department of Insurance, key industry groups and several large Illinois-based taxpayers also support the legislation.

If it becomes law, the Bill would create a much more favorable regulatory framework for Illinois captives, following the lead of multiple jurisdictions, including Vermont, Hawaii, South Carolina and the District of Columbia.
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The Illinois Department of Revenue (Department) announced that it will grant abatement of late filing penalties for taxpayers that file their Illinois business income tax returns on or before November 15 and request penalty waivers for reasonable cause. The Department stated that it will waive late penalties due to the “complexity” of recent federal tax

In June 2018, just before the US Supreme Court ruling in Wayfair, Illinois enacted an economic nexus standard modeled after South Dakota’s law (see our prior coverage). The new Illinois standard takes effect on October 1, 2018. On September 11, the Illinois Department of Revenue (Department) issued an emergency rule (Regulation 150.803), together with other guidance found on its website, intended to assist remote retailers with compliance with the new law.

The Regulation was effective immediately. Retailers should note the following key features of the Regulation.
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Illinois Governor Bruce Rauner has until August 28 to sign or veto Senate Bill 1737, a proposed new law that would reform the Illinois Insurance Code’s regulatory framework for captive insurance companies and significantly drop the state’s current premium tax rate on self-procured insurance.

If enacted, this new law would provide a substantially improved environment

Top June Hits You May Have Missed

BREAKING NEWS: US Supreme Court Overrules Quill

Illinois Budget Bill Makes Few Tax Changes except the Adoption of an Economic Nexus Standard

Circuit Court of Cook County Upholds City of Chicago’s Imposition of Amusement Tax on Internet-Based Streaming Services

Looking Forward to July

July 16, 2018: Alysse McLoughlin

On June 4, Illinois Governor Bruce Rauner signed into law the state’s fiscal year (FY) 2019 budget implementation bill, Public Act 100-0587 (the Act). The Act makes a significant change to the Illinois sales/use tax nexus standard by adopting an “economic nexus” standard for a sales/use tax collection obligation. The economic nexus language was added

On May 24, 2018, the Circuit Court of Cook County granted the City of Chicago’s Motion for Summary Judgment in the case captioned Labell v. City of Chicago, No. 15 CH 13399 (Ruling), affirming the City’s imposition of its amusement tax on internet-based streaming services.

City’s Amusement Tax and Amusement Tax Ruling #5

The City imposes a 9 percent tax on “admission fees or other charges paid for the privilege to enter, to witness, to view or to participate in such amusement. …” Mun. Code of Chi., tit. 4, ch. 4-156 (Code), § 4-156-020(A); see also id. § 4-156-010 (defining “amusement” in part as a performance or show for entertainment purposes, an entertainment or recreational activity offered for public participation and paid television programming). On June 9, 2015, the City Department of Finance (Department) issued Amusement Tax Ruling #5, taking the position that the amusement tax is imposed “not only [on] charges paid for the privilege to witness, view or participate in amusements in person but also [on] charges paid for the privilege to witness, view or participate in amusements that are delivered electronically [emphasis in original].” Amusement Tax Ruling #5, ¶ 8.

The Ruling sought to impose an amusement tax on subscription fees or per-event fees for the privilege of: (1) watching electronically delivered television, shows, movies or videos; (2) listening to electronically delivered music; and (3) participating in online games, provided the streamed content (i.e., movies, music, etc.) was delivered to a customer in the City. See id. ¶¶ 8, 10. The Ruling stated that “this means that the amusement tax will apply to customers whose residential street address or primary business street address is in Chicago, as reflected by their credit card billing address, zip code or other reliable information.” Id. ¶ 13. A copy of the City’s Amusement Tax Ruling #5 is linked here.
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McDermott hosted the first Tax in the City® meeting of 2018 in its Chicago office on March 15, 2018. Tax in the City® is a discussion and networking group for women in tax aimed at fostering collaboration and mentorship, and facilitating in-person connections and roundtable events around the country.

The Chicago program was one of

On Wednesday, the Illinois Department of Revenue (Department) issued additional guidance concerning its treatment of the new deemed repatriated foreign earnings provisions found in Internal Revenue Code Section 965, enacted in the federal tax reform bill (known as the Tax Cuts and Jobs Act, or “TCJA”).  The Department confirmed key aspects of Illinois’ treatment of the repatriation provisions, including:

  • Both the income inclusion and deduction provided for in the deemed repatriated foreign earnings provisions will be taken into account in determining a taxpayer’s tax base, so that the inclusion in Illinois will be net. The Department’s guidance references the new federal IRC 965 Transition Tax Statement, which a taxpayer must file with its 2017 federal return when reporting deemed repatriated foreign earnings; that statement includes both income under IRC 965(a) and the corresponding participation deduction under IRC 965(c).
  • Additionally, the Department’s guidance also confirms that the net amount included as deemed repatriated foreign earnings will be treated as a foreign dividend eligible for Illinois’ dividend-received deduction, which can be a 70 percent, 80 percent or 100 percent deduction depending on a taxpayer’s percentage share of ownership of the foreign subsidiary subject to the repatriation provisions. See 35 ILCS 5/203(b)(2)(O). (For tax periods beginning on or after January 1, 2018, 80 percent is reduced to 65 percent and 70 percent is reduced to 50 percent because this provision incorporates the federal dividend-received deduction rates found in IRC 243, which was amended as such by the TCJA.)


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States are moving to advance different solutions in their efforts to address federal tax reform. Illinois recently introduced legislation to addback the new deduction for foreign-derived intangible income (a topic we’ve previously covered), and its Department of Revenue has issued its position on other aspects of federal reform. Oregon, after resolving a controversy between