Illinois: Legislature overrides governor’s budget veto | KPMG | GLOBAL

Illinois: Legislature overrides governor’s budget veto; tax measures enacted

Illinois: Legislature overrides governor’s budget veto

Earlier this week, Illinois lawmakers came to an agreement on a spending and tax plan. After the budget package passed both houses of the legislature, it was vetoed by Governor Rauner on July 4, 2017. Within hours, the Senate voted to override the governor’s veto. Today, the Illinois House of Representatives did the same. A key component of the now-enacted budget is a permanent tax increase for both individuals and corporations.

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  • The legislation increases the current corporate income tax rate from 5.25% to 7% effective July 1, 2017. 
  • The individual (personal) income tax rate is increased from 3.75% to 4.95% effective July 1, 2017.  
  • The personal property replacement tax of 2.5% (imposed on top of the base corporate income tax rate) is made permanent.

KPMG observation

Because the rate changes are effective as of July 1, 2017, calendar year taxpayers and taxpayers with fiscal years that do not begin on July 1, 2017, will compute their tax liability by applying the new rates to their net income for the period after June 30, 2017, and the former rates to their net income for the period prior to July 1, 2017.  It is likely the Department of Revenue will issue guidance on the rate changes, including the effect on estimated payments. 

Other changes

There are measures included in the legislation with rules for decoupling from IRC section 199; that repeal the non-combination rule; and that reinstate the research and development credit.

 

Read a July 2017 report [PDF 38 KB] prepared by KPMG LLP

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