Crossing the Finish Line: Survey of the Spring Legislative Session

Marty Green, Esq. Senior VP and Legislative Counsel, Illinois CPA Society
The Latest on Advocacy and Legislation

While summer blazes ahead, and another legislative season looms, I’d like to recap some highlights from the spring legislative session. As most of you know, the state’s fiscal year began July 1, and the process of passing a budget was a bit rocky for legislators. Even with a brighter fiscal picture than usual thanks to significant savings from retiring long-term debt and increased tax revenues, designated members of the General Assembly, key staff from the Governor’s Office of Management and Budget, and the deputy governor encountered difficulties reaching a state operating budget for fiscal year 2024 by its May 19 adjournment date. Of course, we know that the appropriation of funds (i.e., state operating budget) and legal authority to spend those funds (i.e., budget implementation bill) are needed for Illinois state government to operate. By the time this publication mails, we’ll likely see progress on this front—and hopefully with minimal collateral damage.

Despite the headline budget challenges, the spring legislative session did see some successes. Most importantly, the Illinois CPA Society (ICPAS) was successful in getting its agenda across the finish line, including passing the Illinois Public Accounting Act’s sunset extension, increasing the attorney general’s audit threshold for charitable organizations, and making a technical correction to the optional pass-through entity tax and treatment of retired partner income. Additionally, we supported the business community by helping to minimize the impact of progressive legislation.

Accounting Act Sunset Extension

House Bill (HB) 2395 extends the sunset of the Illinois Public Accounting Act from 2024 to 2029. As required by the Regulatory Sunset Act, professional and occupational licensure acts sunset every 10 years. The purpose of this regulatory requirement is twofold: First, to evaluate the act to see if it’s still necessary. Second, to provide needed updates for ensuring the act reflects contemporary professional standards. Both actions provide an opportunity for the Illinois Department of Financial and Professional Regulation (IDFPR) to make updates and changes for conformity purposes for all professions and occupations that it regulates.

ICPAS’ changes to the Public Accounting Act include a specific provision requiring that a CPA coordinator, which was added to the act in 2017, be classified as a full-time state employee. Due to IDFPR’s classification of the position as a professional service contract with a capped number of hours without benefits, the position has remained unfilled. We also worked to include a provision requiring CPA firms and sole practitioners undergoing peer review to be required to post specified peer review documents in the Facilitated State Board Access database. This ensures that the parameters of peer review are preserved while providing regulators with access to specified peer review documents for proper oversight.

Additionally, IDFPR added several conformity changes to the act. Notably, gender references were eliminated, and additional language was added to specify electronic communications and notices between the department and licensees.

Lastly, on behalf of the House of Representatives, the speaker’s staff requested all professional and occupational sunsets be changed from 10 years to five years. The intent behind this change is a more balanced flow of sunsetting throughout the legislative process. A 10-year cycle significantly bogs down the legislative apparatus; whereas a five-year cycle will create balance to allow legislative staff and committees to effectuate the sunsetting process.

ICPAS and IDFPR were successful in getting the Public Accounting Act sunset extension through the House and the Senate License Committee. As the third reading deadline approached in the Senate, our legislative sponsor, Sen. Suzy Glowiak Hilton (D-23, Oakbrook Terrace), informed us that for purposes of Senate passage, our sunset act extension would be consolidated with other professions in an omnibus bill.

Attorney General Charity Audit Threshold

HB 1197 increases the attorney general audit threshold for nonprofits required to file with the Illinois Attorney General Charitable Trust Bureau from $300,000 to $500,000. Charities raising funds from $300,000 to $500,000 will now file a financial statement review with the Office of the Attorney General (OAG).

Admittedly, stakeholder organizations, including Forefront and ICPAS, would have preferred the threshold amount be changed to $750,000, but that simply was a bridge too far. Despite continued negotiations and discussions with OAG, we were unsuccessful in pushing two pieces of legislation (introduced during the 102nd General Assembly) with that threshold amount forward due to opposition by the attorney general. During our discussions, OAG provided data on enforcement actions by the Charitable Trust Bureau based on amounts of monies raised by charitable organizations. They also provided insight on how audits triggered greater scrutiny by OAG or were the basis of the enforcement action. As our negotiations were breaking off and neither of the $750,000 threshold bills had moved, we asked if they would consider alternate reports and filings for the $300,000 amounts. This resulted in an agreement for financial statement reviews and a $200,000 increase in the threshold amount for audits. Notably, the legislation includes a sunsetting, which specifically requires an ongoing review of the threshold amounts to reflect inflation and time value of money.

Aside from the increased charitable audit thresholds included in HB 1197, the Not-for-Profit Organizations Committee formed an ad hoc working group to produce a white paper on suggested improvements to charity filing with OAG. We’ve already initiated communications with OAG leadership and will formally present the suggestions to OAG once reviewed and approved by ICPAS’ Legislative and Regulation Subcommittee.

Optional Pass-Through Entity Tax Treatment of Retired Partner Income

In 2022, the Illinois General Assembly passed Public Act 102-0658 (a state and local tax cap workaround) to allow partnerships and S corporations to pay an optional pass-through entity tax for partner distributions with the partner being able to take a credit on their individual returns for the optional tax paid by the entity. However, the treatment of retired partner income, which it specifically exempts as outlined in Section 203 of the Illinois Revenue Code (see 35 ILCS 5/203(a)(2)(F)), wasn’t considered in this legislation. Senate Bill (SB) 1147 made a technical correction to the optional pass-through entity tax to ensure that the retired partner distribution was treated as retired income and not included as base income and not taxed. While this sounds simple, it can be very technical.

Ultimately, the technical correction was included at the end of session in an omnibus revenue bill. During the closing hours of the spring legislative session, the omnibus revenue package (SB 1963, House Amendment No. 2) was exposed, amended several times, and eventually passed by both chambers for presentation to the governor.

Minimal Impact on the Business Community

With 30 new members in the Illinois General Assembly, there was a large volume of legislation introduced, including many bills that directly impacted employers and businesses. Fortunately, the ICPAS Government Relations team was successful in engaging with legislative sponsors, regulatory agencies, and stakeholder organizations to minimize some negative impacts on the business community. Many of these bills, including the tax bills that were considered, are included in legislative and regulatory updates, which are accessible via the Advocacy section of the ICPAS website. I encourage you to review these postings, as we commit a great deal of time and effort to keep these updated for your reference.

Additionally, several high-profile issues were in the mix throughout the spring session. In response to Cothron v. White Castle Systems Inc., there were extensive meetings and negotiations to revise the Biometric Information Privacy Act, which resulted in a $17 billion liability for White Castle. Atypical of higher court opinions, the Illinois Supreme Court included language specifying that the General Assembly needs to revisit and amend the remedy portion of the act.

Another big item was related to state assistance for the Chicago Bears’ move to a new venue at Arlington Park. So far, there’s been three tax proposals floated on this move: 1) freezing property taxes at Arlington Park; 2) a $3 tax on each ticket to be distributed to units of local government impacted by the property tax freeze; and 3) an assessment on each online sports gaming transaction that would go to the City of Chicago to help retire the outstanding bond balance used to fund Soldier Field improvements.

At this time, it’s uncertain if agreements on these issues were reached for consideration and passage. Though, most likely they’ll be revisited during the fall veto session.

Of course, before we look ahead on the legislative calendar, I’d like to express my appreciation to our legislative sponsors for getting us to the finish line. Without their leadership and efforts, we couldn’t be successful in advocating on behalf of the accounting profession.

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• State Government Refresh and the Public Accounting Act: With the new year upon us, changes are headed to Illinois state government. Here’s an overview on the legislative efforts we’re bringing to the new 103rd General Assembly.