101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB4492

 

Introduced 2/4/2020, by Rep. Maurice A. West, II

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/704A

    Amends the Illinois Income Tax Act. Creates a credit against withholding tax payments for employers with 250 or fewer full-time equivalent employees in an amount equal to a percentage of the compensation paid to qualified employees who received a raise from the employer.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB4492LRB101 15547 HLH 64890 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing Section 704A as follows:
 
6    (35 ILCS 5/704A)
7    Sec. 704A. Employer's return and payment of tax withheld.
8    (a) In general, every employer who deducts and withholds or
9is required to deduct and withhold tax under this Act on or
10after January 1, 2008 shall make those payments and returns as
11provided in this Section.
12    (b) Returns. Every employer shall, in the form and manner
13required by the Department, make returns with respect to taxes
14withheld or required to be withheld under this Article 7 for
15each quarter beginning on or after January 1, 2008, on or
16before the last day of the first month following the close of
17that quarter.
18    (c) Payments. With respect to amounts withheld or required
19to be withheld on or after January 1, 2008:
20        (1) Semi-weekly payments. For each calendar year, each
21    employer who withheld or was required to withhold more than
22    $12,000 during the one-year period ending on June 30 of the
23    immediately preceding calendar year, payment must be made:

 

 

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1            (A) on or before each Friday of the calendar year,
2        for taxes withheld or required to be withheld on the
3        immediately preceding Saturday, Sunday, Monday, or
4        Tuesday;
5            (B) on or before each Wednesday of the calendar
6        year, for taxes withheld or required to be withheld on
7        the immediately preceding Wednesday, Thursday, or
8        Friday.
9        Beginning with calendar year 2011, payments made under
10    this paragraph (1) of subsection (c) must be made by
11    electronic funds transfer.
12        (2) Semi-weekly payments. Any employer who withholds
13    or is required to withhold more than $12,000 in any quarter
14    of a calendar year is required to make payments on the
15    dates set forth under item (1) of this subsection (c) for
16    each remaining quarter of that calendar year and for the
17    subsequent calendar year.
18        (3) Monthly payments. Each employer, other than an
19    employer described in items (1) or (2) of this subsection,
20    shall pay to the Department, on or before the 15th day of
21    each month the taxes withheld or required to be withheld
22    during the immediately preceding month.
23        (4) Payments with returns. Each employer shall pay to
24    the Department, on or before the due date for each return
25    required to be filed under this Section, any tax withheld
26    or required to be withheld during the period for which the

 

 

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1    return is due and not previously paid to the Department.
2    (d) Regulatory authority. The Department may, by rule:
3        (1) Permit employers, in lieu of the requirements of
4    subsections (b) and (c), to file annual returns due on or
5    before January 31 of the year for taxes withheld or
6    required to be withheld during the previous calendar year
7    and, if the aggregate amounts required to be withheld by
8    the employer under this Article 7 (other than amounts
9    required to be withheld under Section 709.5) do not exceed
10    $1,000 for the previous calendar year, to pay the taxes
11    required to be shown on each such return no later than the
12    due date for such return.
13        (2) Provide that any payment required to be made under
14    subsection (c)(1) or (c)(2) is deemed to be timely to the
15    extent paid by electronic funds transfer on or before the
16    due date for deposit of federal income taxes withheld from,
17    or federal employment taxes due with respect to, the wages
18    from which the Illinois taxes were withheld.
19        (3) Designate one or more depositories to which payment
20    of taxes required to be withheld under this Article 7 must
21    be paid by some or all employers.
22        (4) Increase the threshold dollar amounts at which
23    employers are required to make semi-weekly payments under
24    subsection (c)(1) or (c)(2).
25    (e) Annual return and payment. Every employer who deducts
26and withholds or is required to deduct and withhold tax from a

 

 

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1person engaged in domestic service employment, as that term is
2defined in Section 3510 of the Internal Revenue Code, may
3comply with the requirements of this Section with respect to
4such employees by filing an annual return and paying the taxes
5required to be deducted and withheld on or before the 15th day
6of the fourth month following the close of the employer's
7taxable year. The Department may allow the employer's return to
8be submitted with the employer's individual income tax return
9or to be submitted with a return due from the employer under
10Section 1400.2 of the Unemployment Insurance Act.
11    (f) Magnetic media and electronic filing. With respect to
12taxes withheld in calendar years prior to 2017, any W-2 Form
13that, under the Internal Revenue Code and regulations
14promulgated thereunder, is required to be submitted to the
15Internal Revenue Service on magnetic media or electronically
16must also be submitted to the Department on magnetic media or
17electronically for Illinois purposes, if required by the
18Department.
19    With respect to taxes withheld in 2017 and subsequent
20calendar years, the Department may, by rule, require that any
21return (including any amended return) under this Section and
22any W-2 Form that is required to be submitted to the Department
23must be submitted on magnetic media or electronically.
24    The due date for submitting W-2 Forms shall be as
25prescribed by the Department by rule.
26    (g) For amounts deducted or withheld after December 31,

 

 

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12009, a taxpayer who makes an election under subsection (f) of
2Section 5-15 of the Economic Development for a Growing Economy
3Tax Credit Act for a taxable year shall be allowed a credit
4against payments due under this Section for amounts withheld
5during the first calendar year beginning after the end of that
6taxable year equal to the amount of the credit for the
7incremental income tax attributable to full-time employees of
8the taxpayer awarded to the taxpayer by the Department of
9Commerce and Economic Opportunity under the Economic
10Development for a Growing Economy Tax Credit Act for the
11taxable year and credits not previously claimed and allowed to
12be carried forward under Section 211(4) of this Act as provided
13in subsection (f) of Section 5-15 of the Economic Development
14for a Growing Economy Tax Credit Act. The credit or credits may
15not reduce the taxpayer's obligation for any payment due under
16this Section to less than zero. If the amount of the credit or
17credits exceeds the total payments due under this Section with
18respect to amounts withheld during the calendar year, the
19excess may be carried forward and applied against the
20taxpayer's liability under this Section in the succeeding
21calendar years as allowed to be carried forward under paragraph
22(4) of Section 211 of this Act. The credit or credits shall be
23applied to the earliest year for which there is a tax
24liability. If there are credits from more than one taxable year
25that are available to offset a liability, the earlier credit
26shall be applied first. Each employer who deducts and withholds

 

 

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1or is required to deduct and withhold tax under this Act and
2who retains income tax withholdings under subsection (f) of
3Section 5-15 of the Economic Development for a Growing Economy
4Tax Credit Act must make a return with respect to such taxes
5and retained amounts in the form and manner that the
6Department, by rule, requires and pay to the Department or to a
7depositary designated by the Department those withheld taxes
8not retained by the taxpayer. For purposes of this subsection
9(g), the term taxpayer shall include taxpayer and members of
10the taxpayer's unitary business group as defined under
11paragraph (27) of subsection (a) of Section 1501 of this Act.
12This Section is exempt from the provisions of Section 250 of
13this Act. No credit awarded under the Economic Development for
14a Growing Economy Tax Credit Act for agreements entered into on
15or after January 1, 2015 may be credited against payments due
16under this Section.
17    (h) An employer may claim a credit against payments due
18under this Section for amounts withheld during the first
19calendar year ending after the date on which a tax credit
20certificate was issued under Section 35 of the Small Business
21Job Creation Tax Credit Act. The credit shall be equal to the
22amount shown on the certificate, but may not reduce the
23taxpayer's obligation for any payment due under this Section to
24less than zero. If the amount of the credit exceeds the total
25payments due under this Section with respect to amounts
26withheld during the calendar year, the excess may be carried

 

 

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1forward and applied against the taxpayer's liability under this
2Section in the 5 succeeding calendar years. The credit shall be
3applied to the earliest year for which there is a tax
4liability. If there are credits from more than one calendar
5year that are available to offset a liability, the earlier
6credit shall be applied first. This Section is exempt from the
7provisions of Section 250 of this Act.
8    (i) Each employer with 50 or fewer full-time equivalent
9employees during the reporting period may claim a credit
10against the payments due under this Section for each qualified
11employee in an amount equal to the maximum credit allowable.
12The credit may be taken against payments due for reporting
13periods that begin on or after January 1, 2020, and end on or
14before December 31, 2027. An employer may not claim a credit
15for an employee who has worked fewer than 90 consecutive days
16immediately preceding the reporting period; however, such
17credits may accrue during that 90-day period and be claimed
18against payments under this Section for future reporting
19periods after the employee has worked for the employer at least
2090 consecutive days. In no event may the credit exceed the
21employer's liability for the reporting period. Each employer
22who deducts and withholds or is required to deduct and withhold
23tax under this Act and who retains income tax withholdings
24under this subsection must make a return with respect to such
25taxes and retained amounts in the form and manner that the
26Department, by rule, requires and pay to the Department or to a

 

 

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1depositary designated by the Department those withheld taxes
2not retained by the employer.
3    For each reporting period, the employer may not claim a
4credit or credits for more employees than the number of
5employees making less than the minimum or reduced wage for the
6current calendar year during the last reporting period of the
7preceding calendar year. Notwithstanding any other provision
8of this subsection, an employer shall not be eligible for
9credits for a reporting period unless the average wage paid by
10the employer per employee for all employees making less than
11$55,000 during the reporting period is greater than the average
12wage paid by the employer per employee for all employees making
13less than $55,000 during the same reporting period of the prior
14calendar year.
15    For purposes of this subsection (i):
16    "Compensation paid in Illinois" has the meaning ascribed to
17that term under Section 304(a)(2)(B) of this Act.
18    "Employer" and "employee" have the meaning ascribed to
19those terms in the Minimum Wage Law, except that "employee"
20also includes employees who work for an employer with fewer
21than 4 employees. Employers that operate more than one
22establishment pursuant to a franchise agreement or that
23constitute members of a unitary business group shall aggregate
24their employees for purposes of determining eligibility for the
25credit.
26    "Full-time equivalent employees" means the ratio of the

 

 

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1number of paid hours during the reporting period and the number
2of working hours in that period.
3    "Maximum credit" means the percentage listed below of the
4difference between the amount of compensation paid in Illinois
5to employees who are paid not more than the required minimum
6wage reduced by the amount of compensation paid in Illinois to
7employees who were paid less than the current required minimum
8wage during the reporting period prior to each increase in the
9required minimum wage on January 1. If an employer pays an
10employee more than the required minimum wage and that employee
11previously earned less than the required minimum wage, the
12employer may include the portion that does not exceed the
13required minimum wage as compensation paid in Illinois to
14employees who are paid not more than the required minimum wage.
15        (1) 25% for reporting periods beginning on or after
16    January 1, 2020 and ending on or before December 31, 2020;
17        (2) 21% for reporting periods beginning on or after
18    January 1, 2021 and ending on or before December 31, 2021;
19        (3) 17% for reporting periods beginning on or after
20    January 1, 2022 and ending on or before December 31, 2022;
21        (4) 13% for reporting periods beginning on or after
22    January 1, 2023 and ending on or before December 31, 2023;
23        (5) 9% for reporting periods beginning on or after
24    January 1, 2024 and ending on or before December 31, 2024;
25        (6) 5% for reporting periods beginning on or after
26    January 1, 2025 and ending on or before December 31, 2025.

 

 

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1    The amount computed under this subsection may continue to
2be claimed for reporting periods beginning on or after January
31, 2026 and:
4        (A) ending on or before December 31, 2026 for employers
5    with more than 5 employees; or
6        (B) ending on or before December 31, 2027 for employers
7    with no more than 5 employees.
8    "Qualified employee" means an employee who is paid not more
9than the required minimum wage and has an average wage paid per
10hour by the employer during the reporting period equal to or
11greater than his or her average wage paid per hour by the
12employer during each reporting period for the immediately
13preceding 12 months. A new qualified employee is deemed to have
14earned the required minimum wage in the preceding reporting
15period.
16    "Reporting period" means the quarter for which a return is
17required to be filed under subsection (b) of this Section.
18    (j) Each employer with 250 or fewer full-time equivalent
19employees during the reporting period may claim a credit
20against the payments due under this Section for each qualified
21employee in an amount equal to the credit amount. The credit
22may be taken against payments due for reporting periods that
23begin on or after January 1, 2021 and end on or before December
2431, 2029. Credits for a particular qualified employee may not
25be taken for reporting periods that begin more than 2 years
26after the effective date of the raise. An employer may not

 

 

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1claim a credit for an employee who has worked fewer than 180
2consecutive days immediately preceding the first day of the
3first pay period during which the raise is in effect. In no
4event may the credit exceed the employer's liability for the
5reporting period. Each employer who deducts and withholds or is
6required to deduct and withhold tax under this Act and who
7retains income tax withholdings under this subsection must make
8a return with respect to such taxes and retained amounts in the
9form and manner that the Department, by rule, requires and pay
10to the Department or to a depositary designated by the
11Department those withheld taxes not retained by the employer.
12    Notwithstanding any other provision of this subsection, an
13employer is not eligible for credits under this subsection for
14a reporting period unless the average wage paid by the employer
15per employee for all employees making less than $52,000 during
16the reporting period is greater than the average wage paid by
17the employer per employee for all employees making less than
18$52,000 during the same reporting period of the prior calendar
19year.
20    For purposes of this subsection (j):
21    "Base period" means the employer's reporting period that
22immediately precedes the reporting period in which the
23qualified employee's raise takes effect.
24    "Compensation paid in Illinois" has the meaning ascribed to
25that term under paragraph (B) of item (2) of subsection (a) of
26Section 304 of this Act.

 

 

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1    "Credit amount" means the amount listed below:
2        (1) 25% of the difference between the amount of
3    compensation paid in Illinois by the employer to the
4    qualified employee in the base period and the portion of
5    the compensation paid in Illinois by the employer to the
6    qualified employee in the reporting period for which the
7    credit is taken that does not exceed $37,400 when
8    annualized; plus
9        (2) 20% of the compensation paid in Illinois by the
10    employer to the qualified employee in the reporting period
11    for which the credit is taken that exceeds the greater of
12    (i) the amount of compensation paid in Illinois by the
13    employer to the qualified employee in the base period or
14    (ii) $37,400 when annualized but does not exceed $41,600
15    when annualized; plus
16        (3) 15% of the compensation paid in Illinois by the
17    employer to the qualified employee in the reporting period
18    for which the credit is taken that exceeds the greater of
19    (i) the amount of compensation paid in Illinois by the
20    employer to the qualified employee in the base period or
21    (ii) $41,600 when annualized but does not exceed $52,000
22    when annualized.
23    "Employer" and "employee" have the meanings ascribed to
24those terms in the Minimum Wage Law, except that "employee"
25also includes employees who work for an employer with fewer
26than 4 employees. Employers that operate more than one

 

 

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1establishment pursuant to a franchise agreement or that
2constitute members of a unitary business group shall aggregate
3their employees for purposes of determining eligibility for the
4credit.
5    "Full-time equivalent employee" means an individual who is
6employed for a basic wage for at least 35 hours each week or
7who renders any other standard of service generally accepted by
8industry custom or practice as full-time employment.
9    "Qualified employee" means an employee who receives a raise
10from an employer, whose post-raise annual salary attributable
11to that employer is not less than $31,200, and who continues to
12be employed by the employer during the reporting period for
13which the credit is taken.
14    "Raise" means a permanent increase in an employee's hourly
15pay or salary that does not result in reduced hours or reduced
16benefits and is not a temporary bonus.
17    "Reporting period" means the quarter for which a return is
18required to be filed under subsection (b) of this Section.
19(Source: P.A. 100-303, eff. 8-24-17; 100-511, eff. 9-18-17;
20100-863, eff. 8-14-18; 101-1, eff. 2-19-19.)