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Local Tax

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The Illinois legislature recently passed several tax related bills along with a budget. The tax changes are primarily reflected in Senate Bills 689 and 690. Governor Pritzker signed S.B. 689 on June 5, 2019 and is expected to sign S.B. 690 shortly. The following is a summary of some of the more significant tax changes applicable to businesses.

With the 2017 Tax Cuts and Jobs Act (“Tax Reform”) fully enacted, taxpayers and practitioners are racing to find last-minute planning opportunities prior to the new year, and states are looking for ways to assist their residents prospectively.  The most talked about planning opportunity, currently, is prepaying property taxes for 2018 to create a 2017 tax benefit around Section 11042(a)(6), which limits the state and local tax deduction to $10,000 beginning in 2018.  However, imprecise wording contained within Section 11042(a)(6) could feasibly be interpreted to permit a deduction for state and local income taxes as well – depending on how you read the provision.

Cook County, Illinois lawmakers recently voted to repeal the nation’s largest soda tax only two months after it went live (the repeal scheduled to be effective at the end of Cook County’s fiscal year – November 30, 2017). And this is on the heels of a soda tax defeat in May of this year in Santa Fe, New Mexico, where voters rejected a local soda tax measure by a significant margin.  All of this hostility to the soda tax reached a crescendo in Michigan, where the legislature approved a bill to preemptively ban local governments from levying excise taxes on food, in response to the national trend of taxing sweetened beverages.  Michigan bill H.B. 4999 cleared the Senate on October 12, 2017 with a 30-5 vote, after passing the House on October 5, 2017. Specifically, the bill prevents localities from imposing taxes or fees on the sale, manufacture, or distribution of food, including beverages and chewing gum.

The California real estate transfer tax landscape experienced a seismic shift when the Supreme Court of California upheld the imposition of Los Angeles County’s Documentary Transfer Tax (“L.A. Transfer Tax”) on the transfer of a controlling interest in a partnership that indirectly owned Los Angeles real estate through an LLC.  926 North Ardmore Avenue, LLC v. County of Los Angeles, 219 Cal. Rptr. 3d 695 (Cal. June 29, 2017).  Specifically, the Court held “that the tax may be imposed if the document reflects a sale: that is, an actual transfer of legal beneficial ownership made for consideration.”