Illinois ~ Corporate, Personal Income Taxes: Guidance on Tax Rate Increases Issued

The Illinois Department of Revenue has issued an informational bulletin on Illinois corporate and personal income tax rate increases enacted as part of the 2017 budget package (TAXDAY, 2017/07/10, S.9). For individuals, trusts, and estates, the Illinois income tax rate has increased from 3.75% to 4.95% and for corporations (excluding S corporations), the Illinois income tax rate has increased from 5.25% to 7%, effective July 1, 2017. The bulletin contains detailed instructions on how the income tax rate change affects: 2016 and 2017 tax returns; the calculation of income tax for fiscal-year, short-year, and 52/53 week filers; estimated tax payments and underpayment penalties; and exempt organizations. Taxpayers filing a 2016 return as fiscal-year, short-year, or 52/53 week filer must divide total net income between the periods before and after July 1, using the apportionment or blended rate method, which taxes net income as though it was received evenly throughout the taxable year based on the total number of days in one accounting period and the total number of days in the second accounting period. These taxpayers may make an irrevocable election to use the specific accounting method to treat net income or loss and modifications as though those items were earned in two different taxable years and calculate tax liability at the appropriate rate for each period. The budget legislation did not change the Illinois replacement tax rate for S corporations, partnerships, and trusts. However, the income tax rate changes will affect how S corporations, partnerships, and fiduciaries calculate pass-through withholding payments for their nonresident shareholders, partners, and members.

Informational Bulletin FY 2018-02, Illinois Department of Revenue, July 2017, ¶403-246

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