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| [ Introduced ] | [ House Amendment 002 ] |
90_HB2191eng
35 ILCS 5/702 from Ch. 120, par. 7-702
Amends the Illinois Income Tax Act by making the Section
concerning the amount of an employee's withholding exemption
gender neutral.
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1 AN ACT concerning reciprocal agreements.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 5. The Civil Administrative Code of Illinois is
5 amended by adding Section 39b53 as follows:
6 (20 ILCS 2505/39b53 new)
7 Sec. 39b53. Income Tax Reciprocal Agreements.
8 (a) Reciprocal agreement cost study. The Department of
9 Revenue shall study the use and cost effectiveness of all
10 reciprocal agreements entered into under the authority of
11 Sections 302 and 701 of the Illinois Income Tax Act. The
12 Department shall report to the General Assembly as to the
13 fiscal impact on Illinois income tax collections of each of
14 the reciprocal agreements by January 1, 1999 and every 5
15 years thereafter. The Department of Revenue shall have the
16 authority to require that employers provide all information
17 necessary to complete the study on income tax withholding
18 returns filed with the Department under Section 704 of the
19 Illinois Income Tax Act. The Department shall have the
20 authority to require that employees provide all information
21 necessary to complete the study on individual income tax
22 returns filed under Section 502 of the Illinois Income Tax
23 Act.
24 (b) Revocation of reciprocal agreements. Upon receipt
25 of the cost study or at any time thereafter, the General
26 Assembly may adopt a joint resolution by an affirmative vote
27 of a majority of each house directing the Director of Revenue
28 to revoke any reciprocal agreement with any other state that
29 results in a loss of revenue to the State of Illinois. Any
30 joint resolution shall specify the date upon which the
31 reciprocal agreement is to be revoked, which date shall be no
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1 sooner than the beginning of the next subsequent calendar
2 year that is at least 6 months after the adoption of the
3 joint resolution.
4 (c) Authority to enter into compensation agreements.
5 Before any revocation by joint resolution adopted by the
6 General Assembly under subsection (b), the Director of
7 Revenue shall have the authority to enter into a compensation
8 or rebating agreement with any reciprocal state. Any
9 compensation agreement shall provide that the reciprocal
10 state shall provide a rebate to the State of Illinois to
11 compensate for the loss of revenue. The Director of Revenue
12 shall have the authority to enter into agreements with
13 reciprocal states to contract with any third party mutually
14 agreed to by the Director and the reciprocal state to
15 establish a rebate or compensation amount.
16 Section 10. The Illinois Income Tax Act is amended by
17 changing Sections 302 and 701 as follows:
18 (35 ILCS 5/302) (from Ch. 120, par. 3-302)
19 Sec. 302. Compensation paid to nonresidents.
20 (a) In general. All items of compensation paid in this
21 State (as determined under Section 304(a)(2)(B)) to an
22 individual who is a nonresident at the time of such payment
23 and all items of deduction directly allocable thereto, shall
24 be allocated to this State.
25 (b) Reciprocal exemption. The Director may enter into an
26 agreement with the taxing authorities of any state which
27 imposes a tax on or measured by income to provide that
28 compensation paid in such state to residents of this State
29 shall be exempt from such tax; in such case, any compensation
30 paid in this State to residents of such state shall not be
31 allocated to this State. All reciprocal agreements shall be
32 subject to the requirements of Section 39b53 of the Civil
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1 Administrative Code of Illinois.
2 (c) Cross references.
3 (1) For allocation of amounts received by
4 nonresidents from certain employee trusts, see Section
5 301(b)(2).
6 (2) For allocation of compensation by residents,
7 see Section 301(a).
8 (Source: P.A. 77-1379.)
9 (35 ILCS 5/701) (from Ch. 120, par. 7-701)
10 Sec. 701. Requirement and Amount of Withholding.
11 (a) In General.
12 Every employer maintaining an office or transacting
13 business within this State and required under the provisions
14 of the Internal Revenue Code to withhold a tax on:
15 (1) compensation paid in this State (as determined
16 under Section 304 (a) (2) (B) to an individual; or
17 (2) payments described in subsection (b) shall
18 deduct and withhold from such compensation for each
19 payroll period (as defined in Section 3401 of the
20 Internal Revenue Code) an amount equal to the amount by
21 which such individual's compensation exceeds the
22 proportionate part of this withholding exemption
23 (computed as provided in Section 702) attributable to the
24 payroll period for which such compensation is payable
25 multiplied by a percentage equal to the percentage tax
26 rate for individuals provided in subsection (b) of
27 Section 201.
28 (b) Payment to Residents.
29 Any payment (including compensation) to a resident by a
30 payor maintaining an office or transacting business within
31 this State and on which withholding of tax is required under
32 the provisions of the Internal Revenue Code shall be deemed
33 to be compensation paid in this State by an employer to an
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1 employee for the purposes of Article 7 and Section 601 (b)
2 (1) to the extent such payment is included in the recipient's
3 base income and not subjected to withholding by another
4 state.
5 (c) Special Definitions.
6 Withholding shall be considered required under the
7 provisions of the Internal Revenue Code to the extent the
8 Internal Revenue Code either requires withholding or allows
9 for voluntary withholding the payor and recipient have
10 entered into such a voluntary withholding agreement. For the
11 purposes of Article 7 and Section 1002 (c) the term
12 "employer" includes any payor who is required to withhold tax
13 pursuant to this Section.
14 (d) Reciprocal Exemption.
15 The Director may enter into an agreement with the taxing
16 authorities of any state which imposes a tax on or measured
17 by income to provide that compensation paid in such state to
18 residents of this State shall be exempt from withholding of
19 such tax; in such case, any compensation paid in this State
20 to residents of such state shall be exempt from withholding.
21 All reciprocal agreements shall be subject to the
22 requirements of Section 39b53 of the Civil Administrative
23 Code of Illinois.
24 (e) Notwithstanding subsection (a) (2) of this Section,
25 no withholding is required on payments for which withholding
26 is required under Section 3405 or 3406 of the Internal
27 Revenue Code of 1954.
28 (Source: P.A. 85-731; 86-1475.)
29 Section 15. The Uniform Penalty and Interest Act is
30 amended by changing Section 3-3 as follows:
31 (35 ILCS 735/3-3) (from Ch. 120, par. 2603-3)
32 Sec. 3-3. Penalty for failure to file or pay.
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1 (a) This subsection (a) is applicable before January 1,
2 1996. A penalty of 5% of the tax required to be shown due on
3 a return shall be imposed for failure to file the tax return
4 on or before the due date prescribed for filing determined
5 with regard for any extension of time for filing (penalty for
6 late filing or nonfiling). If any unprocessable return is
7 corrected and filed within 21 days after notice by the
8 Department, the late filing or nonfiling penalty shall not
9 apply. If a penalty for late filing or nonfiling is imposed
10 in addition to a penalty for late payment, the total penalty
11 due shall be the sum of the late filing penalty and the
12 applicable late payment penalty. Beginning on the effective
13 date of this amendatory Act of 1995, in the case of any type
14 of tax return required to be filed more frequently than
15 annually, when the failure to file the tax return on or
16 before the date prescribed for filing (including any
17 extensions) is shown to be nonfraudulent and has not occurred
18 in the 2 years immediately preceding the failure to file on
19 the prescribed due date, the penalty imposed by section
20 3-3(a) shall be abated.
21 (a-5) This subsection (a-5) is applicable on and after
22 January 1, 1996. A penalty equal to 2% of the tax required to
23 be shown due on a return, up to a maximum amount of $250,
24 determined without regard to any part of the tax that is paid
25 on time or by any credit that was properly allowable on the
26 date the return was required to be filed, shall be imposed
27 for failure to file the tax return on or before the due date
28 prescribed for filing determined with regard for any
29 extension of time for filing. However, if any return is not
30 filed within 30 days after notice of nonfiling mailed by the
31 Department to the last known address of the taxpayer
32 contained in Department records, an additional penalty amount
33 shall be imposed equal to the greater of $250 or 2% of the
34 tax shown on the return. However, the additional penalty
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1 amount may not exceed $5,000 and is determined without regard
2 to any part of the tax that is paid on time or by any credit
3 that was properly allowable on the date the return was
4 required to be filed (penalty for late filing or nonfiling).
5 If any unprocessable return is corrected and filed within 30
6 days after notice by the Department, the late filing or
7 nonfiling penalty shall not apply. If a penalty for late
8 filing or nonfiling is imposed in addition to a penalty for
9 late payment, the total penalty due shall be the sum of the
10 late filing penalty and the applicable late payment penalty.
11 In the case of any type of tax return required to be filed
12 more frequently than annually, when the failure to file the
13 tax return on or before the date prescribed for filing
14 (including any extensions) is shown to be nonfraudulent and
15 has not occurred in the 2 years immediately preceding the
16 failure to file on the prescribed due date, the penalty
17 imposed by section 3-3(a) shall be abated.
18 (b) A penalty of 15% of the tax shown on the return or
19 the tax required to be shown due on the return shall be
20 imposed for failure to pay:
21 (1) the tax shown due on the return on or before
22 the due date prescribed for payment of that tax, an
23 amount of underpayment of estimated tax, or an amount
24 that is reported in an amended return other than an
25 amended return timely filed as required by subsection (b)
26 of Section 506 of the Illinois Income Tax Act (penalty
27 for late payment or nonpayment of admitted liability); or
28 (2) the full amount of any tax required to be shown
29 due on a return and which is not shown (penalty for late
30 payment or nonpayment of additional liability), within 30
31 days after a notice of arithmetic error, notice and
32 demand, or a final assessment is issued by the
33 Department. In the case of a final assessment arising
34 following a protest and hearing, the 30-day period shall
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1 not begin until all proceedings in court for review of
2 the final assessment have terminated or the period for
3 obtaining a review has expired without proceedings for a
4 review having been instituted. In the case of a notice
5 of tax liability that becomes a final assessment without
6 a protest and hearing, the penalty provided in this
7 paragraph (2) shall be imposed at the expiration of the
8 period provided for the filing of a protest.
9 (c) For purposes of the late payment penalties, the
10 basis of the penalty shall be the tax shown or required to be
11 shown on a return, whichever is applicable, reduced by any
12 part of the tax which is paid on time and by any credit which
13 was properly allowable on the date the return was required to
14 be filed.
15 (d) A penalty shall be applied to the tax required to be
16 shown even if that amount is less than the tax shown on the
17 return.
18 (e) If both a subsection (b)(1) penalty and a subsection
19 (b)(2) penalty are assessed against the same return, the
20 subsection (b)(2) penalty shall be assessed against only the
21 additional tax found to be due.
22 (f) If the taxpayer has failed to file the return, the
23 Department shall determine the correct tax according to its
24 best judgment and information, which amount shall be prima
25 facie evidence of the correctness of the tax due.
26 (g) The time within which to file a return or pay an
27 amount of tax due without imposition of a penalty does not
28 extend the time within which to file a protest to a notice of
29 tax liability or a notice of deficiency.
30 (h) No return shall be determined to be unprocessable
31 because of the omission of any information requested on the
32 return pursuant to Section 39b53 of the Civil Administrative
33 Code of Illinois.
34 (Source: P.A. 88-480; 89-379, eff. 8-18-95; 89-436, eff.
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1 1-1-96.)