The following is a Legislative Update for members of the Illinois CPA Society whose practice areas include providing tax services to clients.
During the spring legislative session, the Illinois General Assembly passed Senate Bill 2531 which amends sections 201, 203 and 901 of the Illinois Income Tax Act. A quick summary of the 208-page bill is that this legislation provides for an optional entity level tax for pass-throughs shifting the tax from the individual (partners and S Corporation Shareholders) to the entity (partnerships and S Corporations).
If approved by the governor, a partnership or S Corporation may elect to pay Illinois income tax at the entity level which will be allowed as a deduction by the pass-through entity on its federal income tax return.
Each owner of the pass-through entity may claim a credit on its Illinois individual income tax return equal to its share of the amount paid by the pass-through entity, with the result of bypassing the $10,000 SALT deduction cap.
Senate Bill 2531 passed both Chambers but has not been transmitted to the governor as of this writing. Once the governor receives the legislation, he has 60 calendar days to act--signing it into law or exercising a Constitutionally provided veto.
Senate Bill 2531 passed both the House and Senate unanimously which is a contributing factor used by the governor's staff in analyzing the bill for action by the governor. It is anticipated that the governor will sign this legislation into law. The legislation has an immediate effective date once acted upon by the governor. The SALT cap deduction cap would be effective for tax year ending on or after December 31, 2021, and beginning before January 1, 2026.
This legislation was sponsored by Senator Win Stoller
(R-37, Peoria). Senator Stoller is a CPA. The Illinois CPA Society along with other business organizations and stakeholder organizations supported this legislation. Our thanks to the sponsors on the passage of this legislation during a very busy legislative cycle.