Illinois-2017-HB3812-Introduced

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,

3 represented in the General Assembly:

4 Section 5. The Illinois Income Tax Act is amended by

5 changing 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

9 January 1, 2017, all ~~All~~ items of compensation paid in this

10 State (as determined under Section 304(a)(2)(B)) to an

11 individual who is a nonresident at the time of such payment and

12 all items of deduction directly allocable thereto, shall be

13 allocated 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

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 2505-575 of the

11 Department 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

21 transacting business within this State and required under the

22 provisions 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

12 compensation, but not including a payment from which

13 withholding is required under Section 710 of this Act) to a

14 resident by a payor maintaining an office or transacting

15 business within this State (including any agency, officer, or

16 employee of this State or of any political subdivision of this

17 State) and on which withholding of tax is required under the

18 provisions of the Internal Revenue Code shall be deemed to be

19 compensation paid in this State by an employer to an employee

20 for the purposes of Article 7 and Section 601(b)(1) to the

21 extent such payment is included in the recipient's base income

22 and not subjected to withholding by another state.

23 Notwithstanding any other provision to the contrary, no amount

24 shall be withheld from unemployment insurance benefit payments

25 made to an individual pursuant to the Unemployment Insurance

26 Act unless the individual has voluntarily elected the

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1 withholding pursuant to rules promulgated by the Director of

2 Employment Security.

3 (c) Special Definitions. Withholding shall be considered

4 required under the provisions of the Internal Revenue Code to

5 the extent the Internal Revenue Code either requires

6 withholding or allows for voluntary withholding the payor and

7 recipient have entered into such a voluntary withholding

8 agreement. For the purposes of Article 7 and Section 1002(c)

9 the term "employer" includes any payor who is required to

10 withhold tax pursuant to this Section.

11 (d) Reciprocal Exemption. The Director may enter into an

12 agreement with the taxing authorities of any state which

13 imposes a tax on or measured by income to provide that

14 compensation paid in such state to residents of this State

15 shall be exempt from withholding of such tax; in such case, any

16 compensation paid in this State to residents of such state

17 shall be exempt from withholding. All reciprocal agreements

18 shall be subject to the requirements of Section 2505-575 of the

19 Department of Revenue Law (20 ILCS 2505/2505-575).

20 (e) Notwithstanding subsection (a)(2) of this Section, no

21 withholding is required on payments for which withholding is

22 required under Section 3405 or 3406 of the Internal Revenue

23 Code.

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

26 becoming law.