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90_SB0856ham004
LRB9000732KDcdam
1 AMENDMENT TO SENATE BILL 856
2 AMENDMENT NO. . Amend Senate Bill 856 on page 1,
3 line 5, by changing "Section 39b52" to "Sections 39b52 and
4 39b53"; and
5 on page 1, below line 26, by inserting the following:
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
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1 Act.
2 (b) Revocation of reciprocal agreements. Upon receipt
3 of the cost study or at any time thereafter, the General
4 Assembly may adopt a joint resolution by an affirmative vote
5 of a majority of each house directing the Director of Revenue
6 to revoke any reciprocal agreement with any other state that
7 results in a loss of revenue to the State of Illinois. Any
8 joint resolution shall specify the date upon which the
9 reciprocal agreement is to be revoked, which date shall be no
10 sooner than the beginning of the next subsequent calendar
11 year that is at least 6 months after the adoption of the
12 joint resolution.
13 (c) Authority to enter into compensation agreements.
14 Before any revocation by joint resolution adopted by the
15 General Assembly under subsection (b), the Director of
16 Revenue shall have the authority to enter into a compensation
17 or rebating agreement with any reciprocal state. Any
18 compensation agreement shall provide that the reciprocal
19 state shall provide a rebate to the State of Illinois to
20 compensate for the loss of revenue. The Director of Revenue
21 shall have the authority to enter into agreements with
22 reciprocal states to contract with any third party mutually
23 agreed to by the Director and the reciprocal state to
24 establish a rebate or compensation amount."; and
25 on page 7, line 31, by changing "506," to "302, 506, 701,";
26 and
27 on page 32, below line 27, by inserting the following:
28 "(35 ILCS 5/302) (from Ch. 120, par. 3-302)
29 Sec. 302. Compensation paid to nonresidents.
30 (a) In general. All items of compensation paid in this
31 State (as determined under Section 304(a)(2)(B)) to an
32 individual who is a nonresident at the time of such payment
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1 and all items of deduction directly allocable thereto, shall
2 be allocated to this State.
3 (b) Reciprocal exemption. The Director may enter into an
4 agreement with the taxing authorities of any state which
5 imposes a tax on or measured by income to provide that
6 compensation paid in such state to residents of this State
7 shall be exempt from such tax; in such case, any compensation
8 paid in this State to residents of such state shall not be
9 allocated to this State. All reciprocal agreements shall be
10 subject to the requirements of Section 39b53 of the Civil
11 Administrative Code of Illinois.
12 (c) Cross references.
13 (1) For allocation of amounts received by
14 nonresidents from certain employee trusts, see Section
15 301(b)(2).
16 (2) For allocation of compensation by residents,
17 see Section 301(a).
18 (Source: P.A. 77-1379.)"; and
19 on page 33, below line 29, by inserting the following:
20 "(35 ILCS 5/701) (from Ch. 120, par. 7-701)
21 Sec. 701. Requirement and Amount of Withholding.
22 (a) In General.
23 Every employer maintaining an office or transacting
24 business within this State and required under the provisions
25 of the Internal Revenue Code to withhold a tax on:
26 (1) compensation paid in this State (as determined
27 under Section 304 (a) (2) (B) to an individual; or
28 (2) payments described in subsection (b) shall
29 deduct and withhold from such compensation for each
30 payroll period (as defined in Section 3401 of the
31 Internal Revenue Code) an amount equal to the amount by
32 which such individual's compensation exceeds the
33 proportionate part of this withholding exemption
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1 (computed as provided in Section 702) attributable to the
2 payroll period for which such compensation is payable
3 multiplied by a percentage equal to the percentage tax
4 rate for individuals provided in subsection (b) of
5 Section 201.
6 (b) Payment to Residents.
7 Any payment (including compensation) to a resident by a
8 payor maintaining an office or transacting business within
9 this State and on which withholding of tax is required under
10 the provisions of the Internal Revenue Code shall be deemed
11 to be compensation paid in this State by an employer to an
12 employee for the purposes of Article 7 and Section 601 (b)
13 (1) to the extent such payment is included in the recipient's
14 base income and not subjected to withholding by another
15 state.
16 (c) Special Definitions.
17 Withholding shall be considered required under the
18 provisions of the Internal Revenue Code to the extent the
19 Internal Revenue Code either requires withholding or allows
20 for voluntary withholding the payor and recipient have
21 entered into such a voluntary withholding agreement. For the
22 purposes of Article 7 and Section 1002 (c) the term
23 "employer" includes any payor who is required to withhold tax
24 pursuant to this Section.
25 (d) Reciprocal Exemption.
26 The Director may enter into an agreement with the taxing
27 authorities of any state which imposes a tax on or measured
28 by income to provide that compensation paid in such state to
29 residents of this State shall be exempt from withholding of
30 such tax; in such case, any compensation paid in this State
31 to residents of such state shall be exempt from withholding.
32 All reciprocal agreements shall be subject to the
33 requirements of Section 39b53 of the Civil Administrative
34 Code of Illinois.
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1 (e) Notwithstanding subsection (a) (2) of this Section,
2 no withholding is required on payments for which withholding
3 is required under Section 3405 or 3406 of the Internal
4 Revenue Code of 1954.
5 (Source: P.A. 85-731; 86-1475.)"; and
6 on page 84, below line 9, by inserting the following:
7 "Section 80. The Uniform Penalty and Interest Act is
8 amended by changing Section 3-3 as follows:
9 (35 ILCS 735/3-3) (from Ch. 120, par. 2603-3)
10 Sec. 3-3. Penalty for failure to file or pay.
11 (a) This subsection (a) is applicable before January 1,
12 1996. A penalty of 5% of the tax required to be shown due on
13 a return shall be imposed for failure to file the tax return
14 on or before the due date prescribed for filing determined
15 with regard for any extension of time for filing (penalty for
16 late filing or nonfiling). If any unprocessable return is
17 corrected and filed within 21 days after notice by the
18 Department, the late filing or nonfiling penalty shall not
19 apply. If a penalty for late filing or nonfiling is imposed
20 in addition to a penalty for late payment, the total penalty
21 due shall be the sum of the late filing penalty and the
22 applicable late payment penalty. Beginning on the effective
23 date of this amendatory Act of 1995, in the case of any type
24 of tax return required to be filed more frequently than
25 annually, when the failure to file the tax return on or
26 before the date prescribed for filing (including any
27 extensions) is shown to be nonfraudulent and has not occurred
28 in the 2 years immediately preceding the failure to file on
29 the prescribed due date, the penalty imposed by section
30 3-3(a) shall be abated.
31 (a-5) This subsection (a-5) is applicable on and after
32 January 1, 1996. A penalty equal to 2% of the tax required to
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1 be shown due on a return, up to a maximum amount of $250,
2 determined without regard to any part of the tax that is paid
3 on time or by any credit that was properly allowable on the
4 date the return was required to be filed, shall be imposed
5 for failure to file the tax return on or before the due date
6 prescribed for filing determined with regard for any
7 extension of time for filing. However, if any return is not
8 filed within 30 days after notice of nonfiling mailed by the
9 Department to the last known address of the taxpayer
10 contained in Department records, an additional penalty amount
11 shall be imposed equal to the greater of $250 or 2% of the
12 tax shown on the return. However, the additional penalty
13 amount may not exceed $5,000 and is determined without regard
14 to any part of the tax that is paid on time or by any credit
15 that was properly allowable on the date the return was
16 required to be filed (penalty for late filing or nonfiling).
17 If any unprocessable return is corrected and filed within 30
18 days after notice by the Department, the late filing or
19 nonfiling penalty shall not apply. If a penalty for late
20 filing or nonfiling is imposed in addition to a penalty for
21 late payment, the total penalty due shall be the sum of the
22 late filing penalty and the applicable late payment penalty.
23 In the case of any type of tax return required to be filed
24 more frequently than annually, when the failure to file the
25 tax return on or before the date prescribed for filing
26 (including any extensions) is shown to be nonfraudulent and
27 has not occurred in the 2 years immediately preceding the
28 failure to file on the prescribed due date, the penalty
29 imposed by section 3-3(a) shall be abated.
30 (b) A penalty of 15% of the tax shown on the return or
31 the tax required to be shown due on the return shall be
32 imposed for failure to pay:
33 (1) the tax shown due on the return on or before
34 the due date prescribed for payment of that tax, an
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1 amount of underpayment of estimated tax, or an amount
2 that is reported in an amended return other than an
3 amended return timely filed as required by subsection (b)
4 of Section 506 of the Illinois Income Tax Act (penalty
5 for late payment or nonpayment of admitted liability); or
6 (2) the full amount of any tax required to be shown
7 due on a return and which is not shown (penalty for late
8 payment or nonpayment of additional liability), within 30
9 days after a notice of arithmetic error, notice and
10 demand, or a final assessment is issued by the
11 Department. In the case of a final assessment arising
12 following a protest and hearing, the 30-day period shall
13 not begin until all proceedings in court for review of
14 the final assessment have terminated or the period for
15 obtaining a review has expired without proceedings for a
16 review having been instituted. In the case of a notice
17 of tax liability that becomes a final assessment without
18 a protest and hearing, the penalty provided in this
19 paragraph (2) shall be imposed at the expiration of the
20 period provided for the filing of a protest.
21 (c) For purposes of the late payment penalties, the
22 basis of the penalty shall be the tax shown or required to be
23 shown on a return, whichever is applicable, reduced by any
24 part of the tax which is paid on time and by any credit which
25 was properly allowable on the date the return was required to
26 be filed.
27 (d) A penalty shall be applied to the tax required to be
28 shown even if that amount is less than the tax shown on the
29 return.
30 (e) If both a subsection (b)(1) penalty and a subsection
31 (b)(2) penalty are assessed against the same return, the
32 subsection (b)(2) penalty shall be assessed against only the
33 additional tax found to be due.
34 (f) If the taxpayer has failed to file the return, the
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1 Department shall determine the correct tax according to its
2 best judgment and information, which amount shall be prima
3 facie evidence of the correctness of the tax due.
4 (g) The time within which to file a return or pay an
5 amount of tax due without imposition of a penalty does not
6 extend the time within which to file a protest to a notice of
7 tax liability or a notice of deficiency.
8 (h) No return shall be determined to be unprocessable
9 because of the omission of any information requested on the
10 return pursuant to Section 39b53 of the Civil Administrative
11 Code of Illinois.
12 (Source: P.A. 88-480; 89-379, eff. 8-18-95; 89-436, eff.
13 1-1-96.)".