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Legislation

Partnership tax deduction passed by General Assembly

Posted on October 29, 2009 by James R. Covington
This spring's budget bill, Public Act 96-45, changed tax policy effective for tax years ending Dec. 31, 2009 by limiting partnerships’ deduction to “guaranteed payments” instead of “reasonable compensation” for the Personal Property Replacement Tax. That change generally limits the deduction to income partners because equity partners’ income is based on their share of the distributable income of the partnership. House Bill 2239 (Currie, D-Chicago; Harmon, D-Oak Park) restores this deduction.  It has passed both chambers today and will be sent to the Governor within 30 days for his signature, amendatory  veto, or veto.

Fee to petition state government

Posted on October 27, 2009 by James R. Covington
Recently enacted Public Act 96-555 increased the fees to petition Illinois government for registered lobbyists and their clients to a $1,000 per year. The fees had been $150 for Sec. 501(c)(3) corporations and $350 for everybody else. This applies to any person or group that falls under the definitions of the Lobbyist Registration Act. Part of the revenue currently generated goes to enforcement of the Act and part goes to the General Revenue Fund. The dedicated part of the enforcement fund now has a $400,000 balance. There is an effort underway to persuade the General Assembly to reduce these fees back to $150 and $350 this week in veto session using Senate Bill 2109 as a vehicle.

House repeals Red Flag Rule for small businesses

Posted on October 21, 2009 by James R. Covington
Yesterday in Washington the House of Representatives sent the Senate HR 3763 that repeals the Red Flag Rule for small businesses in which lawyers and others would be treated as creditors for identity theft. Under a rule effective August 1, 2009, the Federal Trade Commission requires  lawyers, including solo practitioners, to have in place written protocols to detect and address the "red flags" of identity theft. Bar associations, including the ABA and ISBA, are registering objections. Helen Gunnarsson's August 2009 piece in the Illinois Bar Journal goes into more detail on the Red Flag Rule.

Repeal of partnership tax change

Posted on October 18, 2009 by James R. Covington
Last week in veto session the Senate repealed a part of a the budget bill enacted into law in June. The budget bill, Public Act 96-45, changed tax policy effective for tax years ending Dec. 31, 2009 by limiting partnerships’ deduction to “guaranteed payments” instead of “reasonable compensation” for the Personal Property Replacement Tax. That change generally limits the deduction to income partners because equity partners’ income is based on their share of the distributable income of the partnership. Last week the Senate passed 57-0-0 a repeal of this part of PA 96-45 in House Bill 2239.  The House will consider the bill the week of Oct. 26th.

Change in taxation of personal-service income

Posted on October 6, 2009 by James R. Covington
There is an effort underway during October's veto session in Springfield  to repeal part of a recently enacted budget bill (Public Act 96-45). Currently, the Federal Government and most states do not tax income of partnerships, “S” corporations, and limited liability companies (LLCs) that elect to be treated as partnerships. Instead, the income is taxed after it flows through to individual partners or shareholders. Illinois has followed this practice for regular income tax purposes but does tax these entities with the PPRT. (Personal-Property Replacement-Income Tax.) This tax was meant to be a replacement for the property tax revenue lost by municipalities when the tax on personal property was repealed in the 1980s. The municipalities receive the revenue generated by the PPRT. Illinois has allowed “S” and “C” corporations to deduct compensation paid to owners, but partnerships were not allowed to do so. To treat partnerships in the same way as S and C corporations, Illinois has allowed partnerships to deduct a portion of their distributable income that represented reasonable compensation. In calculating the tax base for the PPRT, partnerships that generate their income through the personal services of its partners and employees (like law firms) are allowed a deduction for the profits of the partnership distributed to the partners (both equity and stipend) so that their PPRT tax base is essentially zero. This deduction was meant to parallel the compensation deduction allowed to C and S corporations in arriving at the PPRT tax base. Public Act 96-45 changes this tax policy effective for tax years ending Dec. 31, 2009 for the PPRT.

$1,000 fee to lobby in Springfield

Posted on September 14, 2009 by James R. Covington
Public Act 96-555 increases the fee for any entity or lobbyist that wishes to lobby in Springfield from $350 to $1,000. Not-for-profits that are Sec. 501(c)(3) corporations were increased from $150 to $1,000. Quite a hit for State Farm, the Red Cross and the United Way, ISBA, or anyone else before being allowed to petition our own government.

QTIP trust legislation signed

Posted on September 9, 2009 by James R. Covington
Governor Quinn signed the QTIP trust legislation into law yesterday to take effect immediately. It may be found at the General Assembly website under Senate Bill 2115 or Public Act 96-789. by clicking here. Public Act 96-789 creates QTIP trust legislation for an Illinois surviving spouse if the other spouse dies in 2009. It addresses the issues caused by the decoupling of federal and Illinois exemptions for estate taxes for 2009.

Summary of new laws

Posted on September 8, 2009 by James R. Covington
The Legislative Research Unit has done an excellent job of summarizing most of the bills that have been sent to the Governor. It may be found at LRU's website at this link. Click on "First Reading," and then click on the August 2009 issue, vol. 23, No.1. You may have to go to the General Assembly webpage to see if the bill has been signed into law, by clicking here.

Immediate effective dates

Posted on August 26, 2009 by James R. Covington
Generally, immediate effective dates are a nightmare for those who must enforce, administer, or implement a new law. Three recent public acts with immediate effective dates amend the Residential Real Property Disclosure Act, the Health Care Surrogate Act, and the Voluntary Acknowledgment of Paternity Form. This is a short summary of all three. Residential Real Property Disclosure Act. Public Act 96-232 (Smith, D-Canton; Sullivan, D-Rushville) requires the seller to disclose whether the property has been used for the manufacture of methamphetamine. Effective Aug. 11, 2009. Health Care Surrogate Act. Public Act 96-492 (Wilhelmi, D-Joliet; Ryg, D-Vernon Hills) does two things. (1) Requires that a health-care facility permanently maintain any advance directive of a patient or authorized person. (2) Authorizes a surrogate to make decisions for the patient until removed by the patient who regains decisional capacity, a guardian of the person is appointed, or the patient dies. Effective Aug. 14, 2009. Voluntary Acknowledgment of Paternity Form. Public Act 96-333 (Martinez, D-Chicago; Mell, D-Chicago) does three things. (1) The voluntary acknowledgment of paternity form prepared by Health and Family Services must be the same form in child-support collection or under the Vital Records Act. This form must inform the mother and putative father that they have the right to request DNA tests for paternity, and if they sign this form that they waive this right. This part of the form must be in boldface capitals and letters not less than 0.25 inches tall.

Loan-forgiveness program for public lawyers

Posted on August 25, 2009 by James R. Covington
Public Act 96-615 (Schoenberg, D-Evanston; Hoffman, D-Collinsville) creates the Public Interest Assistance Act to reimburse public-interest attorneys for debt incurred for attending undergraduate and law school. “Public-assistance attorneys” includes assistant state's attorneys, assistant public defenders, assistant attorney generals, assistant public guardians, and legal-aid providers. Loan repayment may be up to $6,000 per year to a maximum of $30,000 for the attorney's career. These bills simply create the program, and the General Assembly must appropriate funds to implement later. Effective January 1, 2010. Click here to read the full legislation.

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