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90_HB2191ham002
LRB9000115DNmbam01
1 AMENDMENT TO HOUSE BILL 2191
2 AMENDMENT NO. . Amend House Bill 2191 by replacing
3 the title with the following:
4 "AN ACT concerning reciprocal agreements."; and
5 by replacing everything after the enacting clause with the
6 following:
7 "Section 5. The Civil Administrative Code of Illinois is
8 amended by adding Section 39b53 as follows:
9 (20 ILCS 2505/39b53 new)
10 Sec. 39b53. Income Tax Reciprocal Agreements.
11 (a) Reciprocal agreement cost study. The Department of
12 Revenue shall study the use and cost effectiveness of all
13 reciprocal agreements entered into under the authority of
14 Sections 302 and 701 of the Illinois Income Tax Act. The
15 Department shall report to the General Assembly as to the
16 fiscal impact on Illinois income tax collections of each of
17 the reciprocal agreements by January 1, 1999 and every 5
18 years thereafter. The Department of Revenue shall have the
19 authority to require that employers provide all information
20 necessary to complete the study on income tax withholding
21 returns filed with the Department under Section 704 of the
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1 Illinois Income Tax Act. The Department shall have the
2 authority to require that employees provide all information
3 necessary to complete the study on individual income tax
4 returns filed under Section 502 of the Illinois Income Tax
5 Act.
6 (b) Revocation of reciprocal agreements. Upon receipt
7 of the cost study or at any time thereafter, the General
8 Assembly may adopt a joint resolution by an affirmative vote
9 of a majority of each house directing the Director of Revenue
10 to revoke any reciprocal agreement with any other state that
11 results in a loss of revenue to the State of Illinois. Any
12 joint resolution shall specify the date upon which the
13 reciprocal agreement is to be revoked, which date shall be no
14 sooner than the beginning of the next subsequent calendar
15 year that is at least 6 months after the adoption of the
16 joint resolution.
17 (c) Authority to enter into compensation agreements.
18 Before any revocation by joint resolution adopted by the
19 General Assembly under subsection (b), the Director of
20 Revenue shall have the authority to enter into a compensation
21 or rebating agreement with any reciprocal state. Any
22 compensation agreement shall provide that the reciprocal
23 state shall provide a rebate to the State of Illinois to
24 compensate for the loss of revenue. The Director of Revenue
25 shall have the authority to enter into agreements with
26 reciprocal states to contract with any third party mutually
27 agreed to by the Director and the reciprocal state to
28 establish a rebate or compensation amount.
29 Section 10. The Illinois Income Tax Act is amended by
30 changing Sections 302 and 701 as follows:
31 (35 ILCS 5/302) (from Ch. 120, par. 3-302)
32 Sec. 302. Compensation paid to nonresidents.
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1 (a) In general. All items of compensation paid in this
2 State (as determined under Section 304(a)(2)(B)) to an
3 individual who is a nonresident at the time of such payment
4 and all items of deduction directly allocable thereto, shall
5 be allocated to this State.
6 (b) Reciprocal exemption. The Director may enter into an
7 agreement with the taxing authorities of any state which
8 imposes a tax on or measured by income to provide that
9 compensation paid in such state to residents of this State
10 shall be exempt from such tax; in such case, any compensation
11 paid in this State to residents of such state shall not be
12 allocated to this State. All reciprocal agreements shall be
13 subject to the requirements of Section 39b53 of the Civil
14 Administrative Code of Illinois.
15 (c) Cross references.
16 (1) For allocation of amounts received by
17 nonresidents from certain employee trusts, see Section
18 301(b)(2).
19 (2) For allocation of compensation by residents,
20 see Section 301(a).
21 (Source: P.A. 77-1379.)
22 (35 ILCS 5/701) (from Ch. 120, par. 7-701)
23 Sec. 701. Requirement and Amount of Withholding.
24 (a) In General.
25 Every employer maintaining an office or transacting
26 business within this State and required under the provisions
27 of the Internal Revenue Code to withhold a tax on:
28 (1) compensation paid in this State (as determined
29 under Section 304 (a) (2) (B) to an individual; or
30 (2) payments described in subsection (b) shall
31 deduct and withhold from such compensation for each
32 payroll period (as defined in Section 3401 of the
33 Internal Revenue Code) an amount equal to the amount by
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1 which such individual's compensation exceeds the
2 proportionate part of this withholding exemption
3 (computed as provided in Section 702) attributable to the
4 payroll period for which such compensation is payable
5 multiplied by a percentage equal to the percentage tax
6 rate for individuals provided in subsection (b) of
7 Section 201.
8 (b) Payment to Residents.
9 Any payment (including compensation) to a resident by a
10 payor maintaining an office or transacting business within
11 this State and on which withholding of tax is required under
12 the provisions of the Internal Revenue Code shall be deemed
13 to be compensation paid in this State by an employer to an
14 employee for the purposes of Article 7 and Section 601 (b)
15 (1) to the extent such payment is included in the recipient's
16 base income and not subjected to withholding by another
17 state.
18 (c) Special Definitions.
19 Withholding shall be considered required under the
20 provisions of the Internal Revenue Code to the extent the
21 Internal Revenue Code either requires withholding or allows
22 for voluntary withholding the payor and recipient have
23 entered into such a voluntary withholding agreement. For the
24 purposes of Article 7 and Section 1002 (c) the term
25 "employer" includes any payor who is required to withhold tax
26 pursuant to this Section.
27 (d) Reciprocal Exemption.
28 The Director may enter into an agreement with the taxing
29 authorities of any state which imposes a tax on or measured
30 by income to provide that compensation paid in such state to
31 residents of this State shall be exempt from withholding of
32 such tax; in such case, any compensation paid in this State
33 to residents of such state shall be exempt from withholding.
34 All reciprocal agreements shall be subject to the
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1 requirements of Section 39b53 of the Civil Administrative
2 Code of Illinois.
3 (e) Notwithstanding subsection (a) (2) of this Section,
4 no withholding is required on payments for which withholding
5 is required under Section 3405 or 3406 of the Internal
6 Revenue Code of 1954.
7 (Source: P.A. 85-731; 86-1475.)
8 Section 15. The Uniform Penalty and Interest Act is
9 amended by changing Section 3-3 as follows:
10 (35 ILCS 735/3-3) (from Ch. 120, par. 2603-3)
11 Sec. 3-3. Penalty for failure to file or pay.
12 (a) This subsection (a) is applicable before January 1,
13 1996. A penalty of 5% of the tax required to be shown due on
14 a return shall be imposed for failure to file the tax return
15 on or before the due date prescribed for filing determined
16 with regard for any extension of time for filing (penalty for
17 late filing or nonfiling). If any unprocessable return is
18 corrected and filed within 21 days after notice by the
19 Department, the late filing or nonfiling penalty shall not
20 apply. If a penalty for late filing or nonfiling is imposed
21 in addition to a penalty for late payment, the total penalty
22 due shall be the sum of the late filing penalty and the
23 applicable late payment penalty. Beginning on the effective
24 date of this amendatory Act of 1995, in the case of any type
25 of tax return required to be filed more frequently than
26 annually, when the failure to file the tax return on or
27 before the date prescribed for filing (including any
28 extensions) is shown to be nonfraudulent and has not occurred
29 in the 2 years immediately preceding the failure to file on
30 the prescribed due date, the penalty imposed by section
31 3-3(a) shall be abated.
32 (a-5) This subsection (a-5) is applicable on and after
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1 January 1, 1996. A penalty equal to 2% of the tax required to
2 be shown due on a return, up to a maximum amount of $250,
3 determined without regard to any part of the tax that is paid
4 on time or by any credit that was properly allowable on the
5 date the return was required to be filed, shall be imposed
6 for failure to file the tax return on or before the due date
7 prescribed for filing determined with regard for any
8 extension of time for filing. However, if any return is not
9 filed within 30 days after notice of nonfiling mailed by the
10 Department to the last known address of the taxpayer
11 contained in Department records, an additional penalty amount
12 shall be imposed equal to the greater of $250 or 2% of the
13 tax shown on the return. However, the additional penalty
14 amount may not exceed $5,000 and is determined without regard
15 to any part of the tax that is paid on time or by any credit
16 that was properly allowable on the date the return was
17 required to be filed (penalty for late filing or nonfiling).
18 If any unprocessable return is corrected and filed within 30
19 days after notice by the Department, the late filing or
20 nonfiling penalty shall not apply. If a penalty for late
21 filing or nonfiling is imposed in addition to a penalty for
22 late payment, the total penalty due shall be the sum of the
23 late filing penalty and the applicable late payment penalty.
24 In the case of any type of tax return required to be filed
25 more frequently than annually, when the failure to file the
26 tax return on or before the date prescribed for filing
27 (including any extensions) is shown to be nonfraudulent and
28 has not occurred in the 2 years immediately preceding the
29 failure to file on the prescribed due date, the penalty
30 imposed by section 3-3(a) shall be abated.
31 (b) A penalty of 15% of the tax shown on the return or
32 the tax required to be shown due on the return shall be
33 imposed for failure to pay:
34 (1) the tax shown due on the return on or before
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1 the due date prescribed for payment of that tax, an
2 amount of underpayment of estimated tax, or an amount
3 that is reported in an amended return other than an
4 amended return timely filed as required by subsection (b)
5 of Section 506 of the Illinois Income Tax Act (penalty
6 for late payment or nonpayment of admitted liability); or
7 (2) the full amount of any tax required to be shown
8 due on a return and which is not shown (penalty for late
9 payment or nonpayment of additional liability), within 30
10 days after a notice of arithmetic error, notice and
11 demand, or a final assessment is issued by the
12 Department. In the case of a final assessment arising
13 following a protest and hearing, the 30-day period shall
14 not begin until all proceedings in court for review of
15 the final assessment have terminated or the period for
16 obtaining a review has expired without proceedings for a
17 review having been instituted. In the case of a notice
18 of tax liability that becomes a final assessment without
19 a protest and hearing, the penalty provided in this
20 paragraph (2) shall be imposed at the expiration of the
21 period provided for the filing of a protest.
22 (c) For purposes of the late payment penalties, the
23 basis of the penalty shall be the tax shown or required to be
24 shown on a return, whichever is applicable, reduced by any
25 part of the tax which is paid on time and by any credit which
26 was properly allowable on the date the return was required to
27 be filed.
28 (d) A penalty shall be applied to the tax required to be
29 shown even if that amount is less than the tax shown on the
30 return.
31 (e) If both a subsection (b)(1) penalty and a subsection
32 (b)(2) penalty are assessed against the same return, the
33 subsection (b)(2) penalty shall be assessed against only the
34 additional tax found to be due.
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1 (f) If the taxpayer has failed to file the return, the
2 Department shall determine the correct tax according to its
3 best judgment and information, which amount shall be prima
4 facie evidence of the correctness of the tax due.
5 (g) The time within which to file a return or pay an
6 amount of tax due without imposition of a penalty does not
7 extend the time within which to file a protest to a notice of
8 tax liability or a notice of deficiency.
9 (h) No return shall be determined to be unprocessable
10 because of the omission of any information requested on the
11 return pursuant to Section 39b53 of the Civil Administrative
12 Code of Illinois.
13 (Source: P.A. 88-480; 89-379, eff. 8-18-95; 89-436, eff.
14 1-1-96.)".