SB1719eng 100TH GENERAL ASSEMBLY

SB1719 Engrossed LRB100 09524 HLH 19689 b

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Income Tax Act is amended by changing Section 205 as follows:

(35 ILCS 5/205) (from Ch. 120, par. 2-205)

Sec. 205. Exempt organizations.

(a) Charitable, etc. organizations. The base income of an organization which is exempt from the federal income tax by reason of the Internal Revenue Code shall not be determined under section 203 of this Act, but shall be its unrelated business taxable income as determined under section 512 of the Internal Revenue Code, without any deduction for the tax imposed by this Act. The standard exemption provided by section 204 of this Act shall not be allowed in determining the net income of an organization to which this subsection applies.

(b) Partnerships. A partnership as such shall not be subject to the tax imposed by subsection 201 (a) and (b) of this Act, but shall be subject to the replacement tax imposed by subsection 201 (c) and (d) of this Act and shall compute its base income as described in subsection (d) of Section 203 of this Act. For taxable years ending on or after December 31, 2004, an investment partnership, as defined in Section 1501(a)(11.5) of this Act, shall not be subject to the tax imposed by subsections (c) and (d) of Section 201 of this Act. A partnership shall file such returns and other information at such time and in such manner as may be required under Article 5 of this Act. The partners in a partnership shall be liable for the replacement tax imposed by subsection 201 (c) and (d) of this Act on such partnership, to the extent such tax is not paid by the partnership, as provided under the laws of Illinois governing the liability of partners for the obligations of a partnership. Persons carrying on business as partners shall be liable for the tax imposed by subsection 201 (a) and (b) of this Act only in their separate or individual capacities.

(c) Subchapter S corporations. A Subchapter S corporation shall not be subject to the tax imposed by subsection 201 (a) and (b) of this Act but shall be subject to the replacement tax imposed by subsection 201 (c) and (d) of this Act and shall file such returns and other information at such time and in such manner as may be required under Article 5 of this Act.

(c-5) Surcharge. Notwithstanding any provision of law to the contrary and in addition to any other tax imposed under this Act, beginning July 1, 2017, a privilege tax is imposed on partnerships, including investment partnerships, and S corporations engaged in the business of conducting investment management services at the rate of 20% of the fees calculated by reference to the performance of the investment portfolio funds and not from the investment itself. The privilege tax shall not be imposed on fees calculated by reference to the total assets under management of the business engaged in investment management services. Persons carrying on business as partners conducting investment management services shall be liable for the tax imposed by subsections 201 (a) and (b) of this Act in their separate or individual capacities in accordance with subsection 205 (b) of this Act.

For the purposes of this subsection (c-5), "investment management services" means a business which is held by any person if such person provides, directly or indirectly, in the active conduct of a trade or business, a substantial quantity of any of the following services to the business:

(1) advising the business (partnership, S corporation or any business entity) as to the advisability of investing in, purchasing, or selling any specified asset;

(2) managing, acquiring, or disposing of any specified asset;

(3) arranging financing with respect to acquiring specified assets; or

(4) any activity in support of any service described in items (1) through (3) of this paragraph.

For the purposes of this definition, the term specified asset means securities (as defined in section 475(c)(2) of the Internal Revenue Code) real estate held for rental or investment, interest in partnerships, commodities (as defined in section 475(E)(2) of the Internal Revenue Code) or options or derivative contracts to any of these.

A partner or shareholder will not be deemed to hold an investment management services interest if at least 80% of the average fair market value of the specified assets of business during the taxable year consists of real estate.

(d) Combat zone, terrorist attack, and certain other deaths. An individual relieved from the federal income tax for any taxable year by reason of section 692 of the Internal Revenue Code shall not be subject to the tax imposed by this Act for such taxable year.

(e) Certain trusts. A common trust fund described in Section 584 of the Internal Revenue Code, and any other trust to the extent that the grantor is treated as the owner thereof under sections 671 through 678 of the Internal Revenue Code shall not be subject to the tax imposed by this Act.

(f) Certain business activities. A person not otherwise subject to the tax imposed by this Act shall not become subject to the tax imposed by this Act by reason of:

(1) that person's ownership of tangible personal property located at the premises of a printer in this State with which the person has contracted for printing, or

(2) activities of the person's employees or agents located solely at the premises of a printer and related to quality control, distribution, or printing services performed by a printer in the State with which the person has contracted for printing.

(g) A nonprofit risk organization that holds a certificate of authority under Article VIID of the Illinois Insurance Code is exempt from the tax imposed under this Act with respect to its activities or operations in furtherance of the powers conferred upon it under that Article VIID of the Illinois Insurance Code.

(Source: P.A. 97-507, eff. 8-23-11.)