In 2017, the federal government capped state and local tax deductions for small businesses at $10,000, thereby significantly increasing federal taxes for small businesses in Illinois. Not so for large corporations. After taking office in the Illinois Senate in January of this year, one of my priorities was to pass legislation to help these struggling
In 2017, the federal government capped state and local tax deductions for small businesses at $10,000, thereby significantly increasing federal taxes for small businesses in Illinois. Not so for large corporations.
After taking office in the Illinois Senate in January of this year, one of my priorities was to pass legislation to help these struggling businesses in Illinois. That’s why I sponsored Senate Bill 2531, which I worked to successfully get passed through both Houses of the General Assembly.
The Governor told me he has never seen such consequential legislation from a freshman legislator and that he intends to sign the bill.
SB 2531 was one of four pieces of legislation I sponsored and succeeded in getting passed through both the House and Senate in my first five months in office.
The result of this legislation will help up to 400,000 Illinois small business owners save thousands of dollars annually in federal taxes. Through an IRS-approved method, pass-through entities, such as S-corporations and partnerships, would be allowed to bypass the $10,000 cap on the State and Local Tax (SALT) deduction that was created by the federal Tax Cuts and Jobs Act in 2017.
Currently, owners of pass-through entities report their share of business income on their individual income tax return. This means that they are subject to the $10,000 deduction cap on state and local taxes.
Because of this simple change to our state’s own tax code in my bill, around 400,000 small business owners could soon be given the option to elect to file their taxes through their pass-through entity instead of through their own individual income tax return.
This would allow them to bypass the $10,000 SALT cap because that cap does not apply to business-related tax filings. That would mean that small business owners of pass-through entities could potentially save thousands of dollars on their federal taxes.
The best part? It would cost the state of Illinois absolutely nothing. All of the tax savings involve federal, not state tax dollars. Illinois will receive the same amount of income tax receipts from partnerships and subchapter S-corporations who make the decision to file under the new changes.
Additionally, Senate Bill 2531 shouldn’t make filing Illinois tax returns any more complicated than it already is. The legislation was drafted so that the Illinois Department of Revenue does not have to change existing forms. An electing partnership or S-corporation can use existing forms currently used for reporting and remitting taxes for nonresident partners and shareholders to report and remit taxes.
More than fifty percent of our nation’s workforce is employed by small businesses. That’s an incredible number, and one that shouldn’t go ignored, especially when considering the hardships these businesses have faced over the last year and the numerous additional high tax and regulatory burdens they face in Illinois.
The money saved by small business job creators as a result of my bill will enable them to reinvest in their businesses, be more competitive with large corporations by increasing pay for employees, and offset new inflationary pressures in our economy.
During a time when small businesses have been struggling to survive, we should be actively seeking out ways to help our local business community. This legislation is just one way that we can help.
As your State Senator, I will continue to draw upon my MBA and accounting degrees from the University of Illinois, my previous experience as a CPA and auditor for Price Waterhouse, and my ownership of a small business with 40 employees.
I will continue to be an unwavering advocate for employers so we can increase the number of employees in Illinois. I will also continue to be an advocate for hard working taxpayers in Illinois to stop chronic overspending and repeated tax hikes, get our finances in order and start growing again.
Passage of my bill, SB 2531 giving federal income tax cuts to 400,000 small businesses, is a great first step.
Senator Win Stoller