The bill, sponsored by Senator Win Stoller, R-Peoria, specifically targets the $ 10,000 annual cap on state and local tax deductions, commonly known as SALT, as part of President Donald Trump’s enforcement by Congress Tax law changes were imposed.
The SALT cap has been extremely unpopular in relatively high-income states like California, New York, and Illinois, where combined state income and local property taxes alone can easily exceed $ 10,000 a year for a middle-class family.
The Washington Democrats have so far unsuccessfully talked about the abolition or lifting of the cap. But, according to Stoller and the Illinois Chamber of Commerce, who worked with him on the bill, the U.S. Internal Revenue Service offered a partial workaround last fall.
With the workaround that is now Illinois law, S-Corps shareholders – usually small, often family-owned companies – and partnerships in partnerships can have their companies pay their taxes directly, presumably through distributions. If the S-Corp or partnership does this for all of its members, the SALT restriction does not apply.
“The IRS issued guidelines last year that basically blessed the concept,” said Stoller. “It’s like the playing field with C-Corps” – or large corporations.
Since the IRS gave the go-ahead, at least 20 other states have adopted or proposed similar moves, including not just New York and Connecticut, but our neighbors Wisconsin and Minnesota, said Keith Staats, executive director of the chamber’s tax institute. He referred to a national group, Main Street Employers, which is actively pursuing the introduction and adoption of such workaround laws
The legislation was passed unanimously by both houses of the Illinois Legislature, paying homage to the fact that shortening Uncle Sam has bipartisan appeal.