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"For too long, working families have shouldered more and more of
the tax burden, while big business pays less and less. By saying no
to special interests and closing these corporate tax loopholes, we
can make key investments in our schools and expand access to health
care for more middle-class families," Blagojevich.
In 2004, the average individual tax filer paid $1,500 in taxes,
while 12,500 businesses, representing some of the largest
corporations in Illinois, with billions in annual revenue, paid an
average of $151 in corporate income tax.
Senate Bill 1544, sponsored by Rep. Barbara Flynn Currie,
D-Chicago, and Sen. Ricky Hendon, D-Chicago, goes into effect
immediately.
The changes in corporate income tax will reduce the opportunity
for companies making money in Illinois to hide or transfer income to
subsidiaries doing business in other states. Often, a business that
could be operated within a single corporation will break into
numerous subsidiaries that are then spread throughout tax havens in
other states or Bermuda to avoid tax liabilities. In essence, these
subsidiary businesses are performing their role for the larger
parent company and have only been separated on paper, for tax
purposes. With the changes in the income tax code, funds can no
longer be transferred to other subsidiaries solely to reduce the
corporate taxes owed in Illinois.
A variety of accounting moves will also be disallowed, including
the transfer of interest, royalties and insurance premiums to
another state to avoid payment of taxes in Illinois. The law will
prohibit multistate companies doing business in Illinois from
reducing their Illinois income tax liability by creating affiliated
corporations in tax havens and paying interest, insurance premiums
and royalty payments to those companies. These arrangements, which
create artificial deductions, cost the state tens of millions of
dollars every year.
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 The law will also modify the apportionment rules for multistate
corporations to ensure that gross receipts for the sale or use of
real and intangible property will be taxed in the state in which
that property is located. For example, if a company leases patented
programming technology for stores in Illinois, the benefit of that
technology is experienced in Illinois and taxes will be due in
Illinois.
For insurance and financial companies, the law ensures that
revenue earned in premium payments and interest income through
business done for Illinois customers is included as taxable income
when these firms pay their Illinois corporate taxes. It bans the
practice of insurance companies using special rules to avoid payment
of taxes for Illinois premium income. Financial service companies
will be required to pay income taxes for all revenues earned from
Illinois residents. If a loan is made for Illinois property or
interest is paid on credit cards by Illinois residents, the income
taxes would be paid in Illinois.
The franchise and license tax amnesty program is estimated to
generate a one-time $25 million in unpaid back taxes in fiscal 2008,
as businesses that had not paid these taxes in the past would now
participate in the amnesty program and begin to file their taxes in
a timely manner. The amnesty program will run for 45 days, from Feb.
1 through March 15, 2008. Participants in the amnesty program will
pay taxes for only the four most recent years that are due, and no
penalties or interest will be charged. However, if identified by the
secretary of state after refusing to take part in the program, the
last seven years of tax liability will be due, plus penalties, fees
and interest, and the possibility of criminal charges.
[Text from file received from
the
Illinois Office of
Communication and Information] |
