Illinois Senate Bill 687 Signed into Law

Governor Pritzker signed into law Senate Bill 687 in June 2019. The Illinois November, 2020, ballot will be asking voters to approve an amendment to the Illinois state constitution to switch from a flat income tax rate to graduated rates for individuals. The Bill will come into effect if the amendment passes.

Highlights of this bill are as follows:

• Individual income taxes will change from a flat tax rate (currently 4.95%) to a graduated tax rate, with a top individual rate of 7.99%.
• Corporate income tax rates will increase from 7% to 7.99%, with a provision that corporate income taxes cannot exceed the tax rates on individuals by more than a ratio of 8 to 5 (the max would be 12.78% based on the proposed 7.99% top individual tax rate).
• Net income on pass through entities (S corporations, some LLC’s, partnerships, sole proprietorships) will continue to be treated as income for individuals and subject to the graduated individual income tax rates.
• Personal property tax replacement income tax will stay the same at 2.5% for corporations and 1.5% for pass through entities.

The Illinois Chamber of Commerce has expressed concern that the state legislature could change the various income brackets and the various tax rates in the future if the proposed constitutional amendment is approved by Illinois voters.

You may want to consult with your tax advisor about the impact of the proposed amendment and Senate Bill 687, which would go into effect January 1, 2021, if the proposed constitutional amendment passes in November.

Originally printed in the Roselle Chamber of Commerce's newsletter.