The Taxpayer Accountability and Budget Stabilization Act (the Act) has passed both chambers of the Illinois legislature and gas gone to Governor Quinn, who is expected to sign it.  The Act raise personal and corporate income tax rates and imposes budget limits on the State to try to combat Illinois’s financial shortfalls.

The corporate income tax rate will increase from 4.8% to 7%.  In 2015 the rate will fall to 5.25%.  The Act provides for the rate to fall again in 2025 back to 4.8%.  These rates are not the whole story when it comes to corporations in Illinois however.  The State also charges the personal property replacement tax.  This tax is assessed on all corporations, partnerships, trusts, S corporations and public utilities.  Corporations pay a replacement tax rate of 2.5% on income.  Trusts, S corps, and partnerships pay 1.5%.  Utilities pay 0.8% on invested capital.

The personal property replacement tax  effectively means that a corporation in Illinois, with the passing of the new tax act, will pay 9.5% income tax.  9.5% is the third highest corporate income tax rate in the country.

For more information on the new tax act, or for other corporate law concerns, contact the Chicago corporate attorneys at Horowitz & Weinstein.

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