Illinois Budget 2022 to Increase New Tax Revenue – Tax
United States: Illinois Budget 2022 to Increase New Tax Revenue
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The Illinois General Assembly passed the Fiscal Year 2022 Budget Implementation Bill, SB 2017, which aims to generate $ 650 million in new tax revenue based on changes in the calculation of taxable income . Governor JB Pritzker is expected to sign the bill.
Changes to taxable income include:
- Limit the corporate net operating loss deduction to $ 100,000 per year for tax years ending on or after December 31, 2021 and before December 31, 2024.
- Require an additional adjustment for taxpayers who claim the 100% federal bonus capital cost allowance that was enacted as part of the 2017 Tax Reform Act. This adjustment applies to tax years ending on or after December 31, 2021.
- For tax years ending on or after June 30, 2021, the bill decouples Illinois from federal corporate deductions for global low-tax intangible income (GILTI) related to certain foreign-source dividends.
The bill also rescinds previous legislation to phase out the Illinois corporate franchise tax. The bill continues to exempt the first $ 1,000 from a taxpayer’s liability, but removes the wording to eliminate the tax.
ILLINOIS ASSEMBLY APPROVES SALT CAP WORKAROUND FOR PARTNERSHIPS AND CORPORATIONS
The Illinois General Assembly unanimously passed SB 2531, allowing a workaround to the federal cap of $ 10,000 on state and local tax deductions. Governor JB Pritzker is also expected to sign this bill.
For tax years ending on or after December 31, 2021 and beginning before January 1, 2026, partnerships and S corporations can elect to pay income tax at the entity level at the rate of 4 , 95%, then the partners and shareholders would claim a credit on their tax return. The entity-level tax is not subject to the SALT cap.
This entity-level tax is subject to estimated tax requirements, unlike alternative tax and withholding tax. The election could offer a significant federal tax benefit to the partners and shareholders of S Corporation, however, it should be carefully considered based on your particular tax situation.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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