100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB3812

 

Introduced , by Rep. Natalie A. Manley

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/302  from Ch. 120, par. 3-302
35 ILCS 5/701  from Ch. 120, par. 7-701

    Amends the Illinois Income Tax Act. Provides that the amount of compensation allocated to this State for nonresident individuals (other than professional athletes) shall be the portion of the individual's total compensation for services performed for his or her employer during the taxable year which the number of working days spent within this State performing services for the employer in any manner during the taxable year bears to the total number of working days spent both within and without this State during the taxable year (currently, all items of compensation paid in the State are allocated to the State). Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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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 Sections 302 and 701 as follows:
 
6    (35 ILCS 5/302)  (from Ch. 120, par. 3-302)
7    Sec. 302. Compensation paid to nonresidents.
8    (a) In general. For taxable years beginning prior to
9January 1, 2017, all All items of compensation paid in this
10State (as determined under Section 304(a)(2)(B)) to an
11individual who is a nonresident at the time of such payment and
12all items of deduction directly allocable thereto, shall be
13allocated to this State.
14    For taxable years beginning on or after January 1, 2017:
15        (1) all items of compensation of a nonresident
16    individual who is a member of a professional athletic team,
17    and all items of deduction directly allocable thereto,
18    shall be allocated to this State as determined under
19    Section 304(a)(2)(B)(iv); and
20        (2) the amount of all items of compensation of all
21    other nonresident individuals, and of all items of
22    deduction directly allocable thereto, allocated to this
23    State shall be the portion of the individual's total

 

 

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1    compensation for services performed for his or her employer
2    during the taxable year which the number of working days
3    spent within this State performing services for the
4    employer in any manner during the taxable year bears to the
5    total number of working days spent both within and without
6    this State during the taxable year. For purposes of this
7    paragraph:
8            (A) A "working day" is any day on which the
9        employee performs duties on behalf of the employer.
10        Weekends, vacation days, sick days, and holidays
11        (whether or not paid) are not working days unless the
12        employee is required by the employer to perform some
13        duties on that day.
14            (B) A working day is spent in this State if:
15                (i) a greater amount of time is spent by the
16            employee in this State during that day performing
17            duties on behalf of the employer (other than
18            travelling) than is spent performing duties in any
19            other State; or
20                (ii) the only work performed by the employee on
21            behalf of the employer on that day is travelling to
22            a destination within this State, and the employee
23            arrives on that day.
24            (C) A working day is not spent in this State if the
25        only activity engaged in by the employee on behalf of
26        the employer in this State on that day is travelling

 

 

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1        from or through this State to a destination outside
2        this State.
3    (b) Reciprocal exemption. The Director may enter into an
4agreement with the taxing authorities of any state which
5imposes a tax on or measured by income to provide that
6compensation paid in such state to residents of this State
7shall be exempt from such tax; in such case, any compensation
8paid in this State to residents of such state shall not be
9allocated to this State. All reciprocal agreements shall be
10subject to the requirements of Section 2505-575 of the
11Department of Revenue Law (20 ILCS 2505/2505-575).
12    (c) Cross references.
13        (1) For allocation of amounts received by nonresidents
14    from certain employee trusts, see Section 301(b)(2).
15        (2) For allocation of compensation by residents, see
16    Section 301(a).
17(Source: P.A. 90-491, eff. 1-1-98; 91-239, eff. 1-1-00.)
 
18    (35 ILCS 5/701)  (from Ch. 120, par. 7-701)
19    Sec. 701. Requirement and Amount of Withholding.
20    (a) In General. Every employer maintaining an office or
21transacting business within this State and required under the
22provisions of the Internal Revenue Code to withhold a tax on:
23        (1) compensation allocated to this State under
24    subsection (a) of Section 302 paid in this State (as
25    determined under Section 304(a)(2)(B) to an individual; or

 

 

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1        (2) payments described in subsection (b) shall deduct
2    and withhold from such compensation for each payroll period
3    (as defined in Section 3401 of the Internal Revenue Code)
4    an amount equal to the amount by which such individual's
5    compensation exceeds the proportionate part of this
6    withholding exemption (computed as provided in Section
7    702) attributable to the payroll period for which such
8    compensation is payable multiplied by a percentage equal to
9    the percentage tax rate for individuals provided in
10    subsection (b) of Section 201.
11    (b) Payment to Residents. Any payment (including
12compensation, but not including a payment from which
13withholding is required under Section 710 of this Act) to a
14resident by a payor maintaining an office or transacting
15business within this State (including any agency, officer, or
16employee of this State or of any political subdivision of this
17State) and on which withholding of tax is required under the
18provisions of the Internal Revenue Code shall be deemed to be
19compensation paid in this State by an employer to an employee
20for the purposes of Article 7 and Section 601(b)(1) to the
21extent such payment is included in the recipient's base income
22and not subjected to withholding by another state.
23Notwithstanding any other provision to the contrary, no amount
24shall be withheld from unemployment insurance benefit payments
25made to an individual pursuant to the Unemployment Insurance
26Act unless the individual has voluntarily elected the

 

 

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1withholding pursuant to rules promulgated by the Director of
2Employment Security.
3    (c) Special Definitions. Withholding shall be considered
4required under the provisions of the Internal Revenue Code to
5the extent the Internal Revenue Code either requires
6withholding or allows for voluntary withholding the payor and
7recipient have entered into such a voluntary withholding
8agreement. For the purposes of Article 7 and Section 1002(c)
9the term "employer" includes any payor who is required to
10withhold tax pursuant to this Section.
11    (d) Reciprocal Exemption. The Director may enter into an
12agreement with the taxing authorities of any state which
13imposes a tax on or measured by income to provide that
14compensation paid in such state to residents of this State
15shall be exempt from withholding of such tax; in such case, any
16compensation paid in this State to residents of such state
17shall be exempt from withholding. All reciprocal agreements
18shall be subject to the requirements of Section 2505-575 of the
19Department of Revenue Law (20 ILCS 2505/2505-575).
20    (e) Notwithstanding subsection (a)(2) of this Section, no
21withholding is required on payments for which withholding is
22required under Section 3405 or 3406 of the Internal Revenue
23Code.
24(Source: P.A. 97-507, eff. 8-23-11; 98-496, eff. 1-1-14.)
 
25    Section 99. Effective date. This Act takes effect upon
26becoming law.