In the final hours of the 96th Illinois General Assembly, the Illinois state legislature passed a tax increase package intended help rescue the state from its financial shortfalls. The Taxpayer Accountability and Budget Stabilization Act (the Act) has since gone to the Governor who is expected to sign it.
The central focus of the Act is an increase to personal and corporate income tax rates. The personal rate will rise from 3% to 5% and remain at those levels until 2015 when they will fall to 3.75%. The corporate rate will rise from 4.8% to 7%, also until 2015 when it will fall to 5.25%. The Act provides that in 2025 the personal and corporate income tax rates will fall to 3.25% and 4.8% respectively.
The provisions in the Act are effective retroactively to January 1st. For taxable periods beginning before January 1st, 2011 and ending after December 31st, 2010, taxes are determined at a rate of 3% prior to January 1st and 5% after. The same manner of rate split applies to tax years straddling January 1, 2015 and January 1, 2025.
The Act does not include an increased tax on cigarettes, a piece of the original bill, and a property tax relief component has also been removed. The Act places spending limits on the state budget through 2015. The act passed by a 3 vote margin in the House and it passed by only a single vote in the Senate. This is the first time Illinois income tax rates have increased since 1989.
For more information on this or other tax issues, contact the Chicago tax lawyers at Horowitz & Weinstein.