This Week in Springfield – 101-08

March 15, 2019

IN THIS ISSUE:

CONSUMER LIQUOR HOME DELIVERY PASSES COMMITTEE
TOBACCO 21 TO GOVERNOR
PERSONAL BULK FOOD CONTAINERS AT RETAIL
PAY HISTORY PASSES THE HOUSE, AGAIN
SNAP BENEFITS AT RESTAURANTS PASSES COMMITTEE
REBATE CARDS DORMANCY CHARGES PROHIBITION PASSES COMMITTEE
EMPLOYEE HUMAN RIGHTS “EXPANSION” ADVANCES

This Week in Springfield both Chambers were in session, Tobacco 21 was sent to the Governor, salary history made its way to the Senate for a third year in a row, and committee action started to heat up before the impending deadlines.

CONSUMER LIQUOR HOME DELIVERY PASSES COMMITTEE

SB 54 (Sen. Don Harmon, D-Chicago) expressly allows retailers to deliver liquor to consumers. The retail industry is ever evolving and growing as technology offers more conveniences for consumers.  One innovative step has included the use of mobile phone apps, telephone and internet orders, and curbside pickup to facilitate the purchase of groceries and alcohol.  Illinois currently allows this innovation to thrive and retailers have used various procedures to facilitate liquor delivery either through an independent contractor, employee, third party contractor delivery, or curbside pickup. Safeguards to verify the age and identity of the consumer are required at the point of sale and at the point of delivery.

Inconsistency has arisen as some local municipalities have been prohibiting it while others have been expressly allowing it through ordinance. In order to encourage continued innovation and establish a consistent policy, Sen. Don Harmon brought stakeholders together that include the IRMA, Associated Beer Distributors of Illinois (ABDI), Wine and Spirits Delivery Distributors of Illinois (WSDI) and the Illinois Beverage Association (ILBA) to work on an industry compromise. The legislation allows retailers to continue using the aforementioned delivery methods and ordering platforms while also inserting consumer safeguards.  The legislation also requires the liquor to be delivered during applicable hours of sales from an Illinois retailer to an Illinois consumer within a 30 mile radius.

The legislation passed the Senate Executive Committee by a unanimous vote with the agreement that Sen. Harmon will bring an amendment back to the Committee for consideration.

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TOBACCO 21 TO GOVERNOR

Tobacco 21, HB 345 (Rep. Camille Lilly, D-Chicago/ Sen. Julie Morrison, D-Deerfield), passed the House with a vote of 82-31 and the Senate by a vote 39-16. Tobacco 21 passed the Senate and narrowly passed the House last spring with 61 votes before being vetoed by Governor Bruce Rauner. In the meantime more than 34 Illinois municipalities passed a Tobacco 21 measure.

HB 345 prohibits a licensed Illinois retailer from selling tobacco products to anyone below the age of 21, but removes the penalties for the purchase, possession, selling, or consumption of tobacco for the same individuals. It completely removes the specific prohibition of the possession of tobacco products by a minor.  And it only prohibits a minor from selling tobacco products, as an employee, at a licensed retailer. In fact, the only thing SB 21 penalizes a minor for is using a fraudulent identification.

As a result, since the Illinois statutes would no longer penalize a minor for any of the aforementioned, SB 21 makes it “legal” for a person under the age of 21 to: (1) possess tobacco, (2) consume tobacco, (3) sell tobacco, (4) buy tobacco from an unlicensed Illinois retailer or individual, or (5) buy tobacco from a licensed out-of-state retailer or online.  As such, the bill protects unlicensed, unregulated, and, untaxed individuals selling tobacco to minors while prohibiting licensed Illinois retailers from selling tobacco products to anyone below the age of 21.

The legislation has been sent to Governor Pritzker for his signature.  Part of the Governor’s budget relied on vaping and tobacco taxes. As of this writing, there has been no word on how this will impact those revenue estimates. If signed the changes will go into effect July 1, 2019.

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PERSONAL BULK FOOD CONTAINERS AT RETAIL

HB 3440 (Rep. Will Guzzardi, D-Chicago) permits retailers to allow consumers to fill personal containers with dry bulk foods and prohibits counties and municipalities from disallowing the practice.  This practice is already allowed in Illinois but is currently prohibited in Chicago.   IRMA is neutral on the legislation because it is permissive and maintains the current status quo of allowing retailers either to implement or prohibit the practice on their premise.

Most retailers do not currently allow the practice for many different reasons. Currently, Illinois law does not define what may be used for a personal container or who is liable if the consumer gets sick from an unsanitary personal container brought from home. Additionally, most retailers provide a uniform variety of single use containers in the store and the tare weights are pre-programmed into the point of sale and scale system. It would be impractical to allow a consumer to bring a random personal container for which the retailer does not have the weight pre-programmed into the point of sale.  Moreover, if the retailer cannot accurately ascertain the weight of the personal container prior to the consumer adding bulk food, then the retailer cannot accurately charge the correct price or proper tax for the item. This opens retailers up to frivolous lawsuits for imposing an improper tax.  Similar to the plethora of the lawsuits filed during the short run of the ill-fated sugar sweetened beverage tax in Cook County. Hence, the importance of allowing retailers to decide whether or not to allow the practice.

HB 3440 passed the House Energy & Environment Committee by a vote of 25-0-0. IRMA will remain neutral because HB 3440 is permissive and does not change the status quo. That being said, most retailers will continue to avoid the practice due to the aforementioned issues.

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PAY HISTORY PASSES THE HOUSE, AGAIN

HB 834 (Rep. Anna Moeller, D-Elgin) or the “Pay History” legislation passed the House by a vote of 86-28 and now moves to the Senate for consideration.

Two years ago, IRMA stated it would support a proposal prohibiting an employer from asking an employee about previous wage, salary, and other compensation. We proposed the model that was adopted in Massachusetts and supported by the advocates in partnership with the Massachusetts business community. Last year, IRMA stated it would support the legislation if it would just prohibit the question. The offer for compromise is once again before the General Assembly. Unfortunately, HB 834 does not contain either avenue for compromise.

While HB 834 prohibits an employer from asking an employee about previous wage, salary and other compensation, it also unjustifiably erodes the current statutory defenses for Illinois employers while expanding the statutory penalties.  The facts do not justify this approach.

According to Illinois Department of Labor statistics (“DOL”), in the past 13 years (excluding 2010 and 2011 where there are no available data), under the current limited defenses and exorbitant penalties, there have been only 51 recorded violations of the Equal Pay Act. In that same time period, approximately 707 investigations were conducted by DOL. Less than 7.5% of all claims in the last 13 years have resulted in a violation.  Moreover, according to the U.S. Small Business Administration there are over 1.2 million businesses in Illinois. Assuming that a different company was responsible for each violation only .0000425% of Illinois businesses have been responsible for an Equal Pay Act violation in 13 years.  This is a 99.9999575% compliance rate.

The reason is found in the fact that unlike other states, Illinois employers only have four defenses to an unequal wage claim. Those four defenses are: (1) seniority system; (2) merit system; (3) a system that measures earnings by quantity or quality of production; and (4) a differential based on a business necessity that does not include sex or race.  If an Illinois employer is found in violation of an equal pay claim, the employer is liable for damages under no less than seven state and federal statutes. Unlike most states, Illinois does not prohibit a claimant from ‘double-dipping’ in state and federal court.  These statutes include the: (1) Illinois Equal Pay Act of 2003, (2) Illinois Humans Rights Act, (3) Illinois Wages of Women and Minors Act, (4) Illinois Equal Wage Act, (5) U.S. Equal Pay Act of 1963, (6) Title VII of the U.S. Civil Rights Act of 1964, and most recently (7) the Lily Ledbetter Fair Pay Act of 2009.

Given the facts noted above, it is safe to conclude that the current state and federal statutory penalty scheme has served as a more than sufficient deterrent to pay discrimination – at least in Illinois. Hence the need to simply eliminate the question.

Since the facts do not support the need for the extreme measures proposed in HB 834, IRMA remains opposed to arbitrarily restricting Illinois’ employer’s current limited defenses and increasing current statutory penalties.  IRMA does, however, continue to stand behind its pledge to support legislation to prohibit an employer from asking about previous wage, salary, or other compensation.

For these reasons, IRMA stands opposed to HB 834 but stands ready to support HB 834 if genuine, fact-driven compromise is desired.

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SNAP BENEFITS AT RESTAURANTS PASSES COMMITTEE

HB 3343 (Rep. Sonya Harper, D-Chicago) requires the Department of Human Services to establish a Restaurant Meals Program to permit individuals who are elderly, persons with a disability, and homeless individuals to redeem their Supplemental Nutrition Assistance Program benefits at private establishments that contract with the Department to offer meals for eligible SNAP recipients at concessional prices.  HB 3343 passed the House Human Services Committee by a vote of 18-0-0.

IRMA supports the intent of the legislation but was awaiting a conversation with the advocates as to some common-sense changes that would reduce the bureaucratic impact on businesses. IRMA will continue to keep members posted.

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REBATE CARDS DORMANCY CHARGES PROHIBITION PASSES COMMITTEE

HB 2156 (Rep. Theresa Mah, D-Chicago) passed the House Economic Opportunity Committee by a 9-4 vote and SB 222 (Sen. Cristina Castro, D-Elgin) passed the Senate Commerce and Economic Committee by an 8-2 vote. Both bills are intended to prohibit the issuance of product rebate cards that charge dormancy or other post-issuance fees. The language only applies to multi-store cards utilized for rebates after the consumer completes the rebate submission process. It exempts closed-looped merchant cards that are distributed and used at one retailer—also known as “store cards”.

An identical bill (HB 4922) passed the House with a 67-44 vote and the Senate by a 35-17 vote last year. It was subsequently vetoed by Governor Bruce Rauner.  Due to the aforementioned focus of the legislation IRMA is neutral as currently drafted.

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EMPLOYEE HUMAN RIGHTS “EXPANSION” ADVANCES

Currently, the Illinois Human Rights Act only applies to businesses with 15 or more employees. HB 252 (Rep. Will Guzzardi, D-Chicago) expands the coverage of the Act to apply to any business with one or more employees.  HB 252 passed the house by a 74-40 vote. Last year, an identical bill (HB 4572) passed the House by a 64-37 and the Senate by a 33-13 vote before being vetoed by Governor Bruce Rauner.

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This Week in Springfield – 101-07

IN THIS ISSUE:

GRADUATED INCOME TAX
PROPERTY TAX
PLASTIC BAG TAX ADVANCES
E-CIGARETTES INCLUDED IN ILLINOIS SMOKE FREE ACT

This Week in Springfield both the House and Senate were in session and focused on committee work.  A plastic bag tax passed committee, Cook County Assessor Fritz Kaegi’s bill to assess value of a property based on its income passed the committee stage, and Governor Pritzker outlined the structure of the Progressive Income Tax for the Caucus leaders.

GRADUATED INCOME TAX

Throughout the general election campaign last year, then-candidate JB Pritzker advocated for the need for Illinois to amend its constitution to scrap the current flat-tax and, instead, allow the state to create and impose a graduated income tax. Throughout the campaign, he avoided questions as to what rates he would suggest repeatedly stating that such rates had to be negotiated with the Assembly. Today, the Governor’s Office released their suggested plan although the plan was not negotiated with the leaders – at least to this point.

According to the Governor’s Office, 97.2% of state income tax payers would not experience an income tax increase. Here is an overview of the proposal as it relates to income tax rates:

Adjusted Gross Income Marginal Rates %  of impacted taxpayers
$0 – $10,000 4.75% 27.20%
$10,001 – $100,000 4.90% 58.90%
$100,001 – $250,000 4.95% 11.10%
Total % of Taxpayers 97.20%

 

Here are the details on the 2.8% of state income tax payers who would experience an increase:

Adjusted Gross Income Marginal Rates %  of impacted taxpayers
$250,001 – $500,000 7.75% 1.90%
$500,001 – $1,000,000 7.85% 0.60%
over $1,000,000 7.95% 0.30%
Total % of Taxpayers 2.80%

 

Additionally, the Corporate Income Tax (CIT) rate would be set at 7.95%. Today, the CIT rate is currently 7.00%.

None of these rates include the Personal Property Replacement Tax (PPRT). Corporations pay an additional 2.5% on income meaning the effective CIT would be 10.45%. For pass-through entities (partnerships, trust, and S-Corps), the PPRT is 1.5%. That 1.5% is paid off the top from the federal Form 1065 Schedule K. Remaining monies are then distributed to partners who pay at the individual rate. Nevertheless, this plan will hit pass-through entities harder.

Let’s consider a few examples. First, let’s assume a single or joint filer with an adjusted gross income of $600,000.

Adjusted Gross Income $600,000
Tax on $500,000 @ 7.75% $38,750
Tax on $100,000 @ 7.85% $7,850
Total Income Tax Paid $46,600
Effective Rate 7.77%

Second, let’s assume a single or joint filer with an adjusted gross income of $1,000,000. This filer pays 7.95% (the top individual rate) on the entire amount for a total of $79, 500. That would be $30,000 more than they would pay today or 60.6%.

Finally, here is an example of how a corporation would be taxed under this plan:

Adjusted Gross Income $2,000,000
7.95% tax $159,000
2.5% PPRT $50,000
Total Income Tax Paid $209,000
Effective Rate 10.45%

These proposed rates would give Illinois the second highest income taxes on corporations in the nation behind only Iowa. In terms of personal income taxes, Illinois would be 7th highest in the nation for both the highest lowest rate (4.75%) and for the highest rate (7.95%). Again, it is not possible at this writing to calculate the impact on pass-through entities but they will certainly pay more.

There are a few proposed changes to credits as well. First, the Governor is proposing a 20% increase in the current property tax credit from $500 million to $600 million. Second, he is including a proposed $100 per child tax credit. For single filers the child credit is for those under $80,000 per year, but it phases out starting at $40,000. For joint-files, the child credit is for those under $100,000 per year but it starts phasing-out at $60,000.

The Governor’s Office estimates the net revenue from this proposal to be $3.4 billion annually.

It is vital to remember that this plan is a LONG way from becoming reality and there is nothing to say it can’t be changed. First, both chambers have to approve putting a constitutional amendment on the ballot. That requires a 3/5ths vote in both chambers. Second, if that happens, the question will then appear on the ballot in November 2020. Third, the question will then have to receive 50% support of ALL the people casting ballots in the election (will never happen because not everyone votes the entire ballot) or 60% of those voting on the question. Fourth, if they meet that threshold, the Assembly will have to approve the rates. Now, the Assembly could put into law these rates with a provision that states ‘if and only if the constitutional amendment is approved’ but that still would not preclude them from coming back and changing the rates. Bottom line: there is at least 19 more months before anything can happen.

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PROPERTY TAX

Newly-elected Cook County Assessor Fritz Kaegi is advocating for a significant change in the property tax assessment process. SB 1379 (Sen. Toi Hutchinson, D-Chicago Heights)/HB 2217 (Rep. Will Davis, D-East Hazel Crest) passed out of the Senate Revenue Committee but only upon the promise that the proponents would be back with a substantive amendment addressing the concerns raised.

As proposed, the legislation would require non-owner occupied income producing properties to disclose their income and expenses annually to the Assessor’s office. In its current form, the proposal does not apply to residential properties with 6 or fewer units or with a market value under $1 million. It also does not apply to commercial properties with a market value under $400,000. The argument of the Assessor is this information would lead to a more accurate assessment process. A coalition of interested groups including IRMA, have and continue to meet with the Assessor’s Office. We share the goal of a more accurate and transparent assessment process but believe the proposal in its current form is highly flawed.  Just to name a few, examples of issues that must be hammered out in detail include definitions, privacy, scope of data, program evaluation, etc. This is a highly technical area where the smallest omission or error can have grave consequences. These difficult questions must be addressed in the legislation and not left to arbitrary ‘rules’. Keep in mind, Cook County does not have an administrative rules process like JCAR.

It is likely the House Revenue & Finance Committee will have a subject-matter hearing next week and discussions will continue behind the scenes.

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PLASTIC BAG TAX ADVANCES

SB 1240 (Sen. Terry Link, D-Gurnee) creates the Checkout Bag Tax Act and imposes a tax of $0.07 on paper and plastic bags used by a customer at a retail establishment in Illinois.  As currently drafted the proceeds of the tax are distributed in the following manner: (1) the retailer retains $0.02 per bag to cover their costs; (2) $0.02 per bag is distributed to the General Revenue Fund; and (3) $0.03 per bag is deposited into the Checkout Bag Tax Fund. The $.03 from in the Checkout Bag Tax Fund is then distributed to local governments to use for funding the collection of household hazardous waste such as needles, paint, batteries and other common items such as mattresses, plastic bags, auxiliary containers, etc. It also provides funds to local governments for education and grant programs to increase the recycling and composting in the Illinois.

Municipalities that do not already have a plastic bag ban or tax would be prohibited from banning, regulating or taxing plastic or paper bags or auxiliary containers.  Chicago, Oak Park, and Evanston would be able to keep their current ordinances but could not change them unless to make them consistent with the proposed state law. This is to avoid both a municipal tax and a state tax.

IRMA and coalition of stakeholder including the Illinois Manufacturers Association (IMA), Solid Waste Agency of Lake County (SWALCO) and Solid Waste Agency of Northern Cook County (SWANCC) worked together to support this initiative because it: (1) provides consistency for retailers, manufacturers, municipalities, and counties throughout the state in regards to plastic bags and auxiliary containers; (2) addresses environmental concerns of plastic and paper bag usage; (3) provides additional funding for a significant expansion of recycling and composting infrastructure; (4) provides a non-discriminatory tax on bags regardless of material or industry, and (5) provides a consistent revenue stream for the state.

The legislation passed out of the Senate Revenue Committee unanimously by a vote of 7-0. The Sponsor agreed to hold it on Second Reading to continue the dialog with the Governor’s office who has proposed a 5-cent tax on just plastic bags. An approach IRMA opposes.  IRMA would like to thank Senator Link for his continued leadership on this issue and for bringing a diverse coalition together to collaborate.

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E-CIGARETTES INCLUDED IN ILLINOIS SMOKE FREE ACT

SB 1864 (Sen. Terry Link, D-Gurnee) include e-cigarettes in the Smoke Free Illinois Act (Public Act 95-0017). The Smoke Free Illinois Act prohibits smoking in public places and places of employment and within 15 feet of any entrance, exit, windows that open, or ventilation intake of a public place or place of employment. Places of employment are defined any area under the control of a public or private employer that employees are required to enter, leave or pass through during the course of employment. These areas include, but are not limited to, offices and work areas, restrooms, conference rooms and classrooms, break rooms and cafeterias and other common areas. Smoking also is prohibited in public conveyances, like taxis, buses, shuttles and any vehicle owned, leased or operated by the state or a political subdivision of the state.

The legislation passed out of the Senate Public Health Committee unanimously by a vote of 12-0.
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This Week in Springfield – 101-05

IN THIS ISSUE:

GOVERNOR PRITZKER DELIVERS BUDGET ADDRESS
GOVERNOR SIGNS $15
PAY HISTORY COMPROMISE IGNORED

GOVERNOR PRITZKER DELIVERS BUDGET ADDRESS

On Wednesday at Noon, Governor JB Pritzker delivered his first Budget Address in which he laid out his priorities for the Illinois Fiscal Year 2020 budget. While claiming ‘austerity’, there was nothing austere about it as there is plenty of new spending was proposed.

The Administration is assuming a General Revenue Funds (GRF) budget of $38.75 billion on GRF revenues of $38.9 billion. If all sources are included (e.g. Federal funds) the size of the proposed budget is $77 billion. The GRF proposal is a 4% increase over the current fiscal year budget.

New spending totaling at least $4.6 billion is proposed for early childhood programs ($140.8 million), K-12 education ($382.25 million), higher education ($161.4 million), health and human service programs ($437.85 million), criminal justice reforms ($10 million), public safety ($108.8) and infrastructure ($3.37 billion).

Governor Pritzker proposed over $1.1 billion in new revenues and claimed that if these revenues were not approved GRF spending would have to be cut 4% excluding employee healthcare, pensions, and debt service costs. The proposed revenue increases include:

  • Capping the Retail Discount/Vendor Collection Allowance at $1,000. This is a significant hit to retailers and shifts even more of the cost of administering the sales tax on behalf of state and local government onto the backs of retailers. ($70 million estimated)
  • Taxing e-cigarettes at 36% ($10 million estimated)
  • Increasing the cigarette tax by $0.32 per pack/$3.20 per carton ($55 million estimated). This would push Illinois’s cigarette tax to $2.30 per pack/$23.00 per carton, the City of Chicago’s to $3.48/$34.80 per carton, and Cook County’s to $5.30 per pack/$53.00 per carton. The chart below highlights how Illinois, Cook County, and the city of Chicago would compare on a per pack basis. To calculate the per carton cost, simply multiply by ten.

Imposing a plastic bag tax. At this writing, it is unclear if this would add to Chicago’s plastic bag tax of $0.07 or Chicago would be exempt. If it does not contain an allowance for retailers, it would be the first bag tax of its kind to ignore the extra costs imposed on retailers. ($20 million estimated)

  • Placing an assessment on Managed Care Organizations ($390 million estimated).
  • Creating a progressive tax structure for video gaming ($89 million estimated).
  • Decouple from the Federal Tax Credit for Repatriated Corporate Income ($94 million estimated).
  • Enacting sports wagering ($212 million estimated).
  • Enacting recreational cannabis ($170 million estimated).
  • Tax amnesty ($175 million estimated)

On the pension front, the most serious financial crisis confronting Illinois, the Governor proposed extending the current ramp by an additional seven year, to 2052, thereby avoiding an $878 billion pension payment. Additionally, the proposal includes an additional $2 billion in new pension bonds as well as extending the current buyout program.

In terms of infrastructure, the Governor is proposing over $2 billion including a pay-as-you-go program for roads.

This begins the budget discussions in earnest expected to result in a budget on or before May 31st. At this writing, the budget may be balanced but does not address the bill backlog.

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GOVERNOR SIGNS $15

Tuesday, Governor Pritzker signed SB 1 (Sen. Kimberly Lightford, D- Westchester/Rep. Will Guzzardi, D- Chicago) into law as Public Act 101-001 setting Illinois on a rapid rise to a $15 starting wage. Here are the details:

18 years and older Under 18 years of age*
YEAR WAGE YEAR WAGE
1/1/2020 $9.25 1/1/2020 $8.00
7/1/2020 $10.00 7/1/2020
1/1/2021 $11.00 $8.50
1/1/2022 $12.00 $9.25
1/1/2023 $13.00 $10.50
1/1/2024 $14.00 $12.00
1/1/2025 $15.00 $13.00

 

Tax credit: First, it is important to note that unless the language of the new law is changes, NO ONE qualifies for the tax credit. That is because as it was enacted, an employee has to work 90-consecutive days. Even if that is repaired before January 1, 2020, the following employer are NOT considered eligible for the tax credit:

  1. Any employer with more than 50 full-time equivalent employees in their entire operation is not eligible. Many employers including call and IT centers, a restaurant, grocery store, movie theater or other entertainment option, dry cleaner, etc. can easily have more than 50 at a single location. They would not be eligible for the tax credit.
  2. Any employer who has more than one franchised store or files taxes as part of a unitary group is not eligible. This demonstrates a fundamental lack of understanding between a franchisee and a franchisor.
  3. Any employer who pays more than the minimum wage at the time is not eligible. For example, if an employee is currently paid $9.50 per hour, and the wage increases January 1, 2020 from $8.25 to $9.25, that employer is not eligible.
  4. Any employer whose average wage is less in the current quarter vs the quarter the year before is not eligible. If an employer has to lay people off, close a store, or reduce hours, he/she would not be eligible for the credit.
  5. An employer cannot claim credit for more employees than the number of employees making less than the minimum or reduced wage for the current calendar year during the last reporting period of the preceding year. If an employer employees 100 people and 10 were making less than the minimum or reduced wage (i.e. teens) during the last reporting period of the preceding year (October – December), then the employer can only claim the credit for 10 employees.
  6. The effort to really help small employers by extending the credit an extra two years helps almost no one. IDOR is claiming 48% of all employers have fewer than 5 employees. In fact, that includes employers who work for themselves and are the only employee. They account for nearly 80% of all employers with fewer than 5 employees. IDES reports that in the City of Chicago 6.6% of all employers fit this category. When reduced by 80%, only 1.4% of all small employers would be eligible for the credit.

If an employer somehow manages to escape all of those disqualifications, then the following credit applies to employers with 50 or fewer employees:

  • Credit against withholding payments beginning on or after January 1, 2020 and ending on or before December 31, 2027.
  • The credit cannot exceed employer’s payroll withholding for that period.
  • Maximum credit allowed for reporting periods beginning on or after and ending on or before the following dates:
    • January 1, 2020 – December 31, 2020 = 25%
    • January 1, 2021 – December 31, 2021 = 21%
    • January 1, 2022 – December 31, 2022 = 17%
    • January 1, 2023 – December 31, 2023 = 13%
    • January 1, 2024 – December 31, 2024 = 9%
    • January 1, 2025 – December 31, 2025 = 5%

For employers with more 5 employees, these credits can continue to be claimed for reporting periods beginning on or after January 1, 2026 and ending on or before December 31, 2026.

For employers with fewer than 5 employees, these credits can continue to be claimed for reporting periods beginning or after January 1, 2026 and ending on or before December 31, 2027.

Tip credit remains at 60%/40%; training wage remains at $0.50 per hour lower than starting wage for first 90-days of employment; and penalties are increased substantially for wage-theft.

 

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PAY HISTORY COMPROMISE IGNORED

For a third straight year compromise has been ignored and HB 834 (Rep. Anna Moeller, D-Elgin) or the “Pay History” legislation passed the committee stage on a partisan roll call.

Two years ago, IRMA stated it would support a proposal prohibiting an employer from asking an employee about previous wage, salary, and other compensation. We proposed the model that was adopted in Massachusetts and supported by the advocates in partnership with the Massachusetts business community. Since that time, Delaware, Oregon, and Puerto Rico have also adopted the Massachusetts model.  Last year, IRMA stated it would support the legislation if it would just prohibit the question. Unfortunately, political considerations governed last year and a different proposal was passed which then-Governor Rauner vetoed. With those considerations behind us, and the stated desire of everyone to seek compromise this year, the opportunity for compromise is once again before the General Assembly. Unfortunately, as it sits before you, HB 834 does not contain either avenue for compromise.

While HB 834 prohibits an employer from asking an employee about previous wage, salary and other compensation, it also unjustifiably erodes the current statutory defenses for Illinois employers while expanding the statutory penalties.  The facts do not justify this approach.

According to Illinois Department of Labor statistics (“DOL”), in the past 13 years (excluding 2010 and 2011 where there is no available data), under the current limited defenses and exorbitant penalties, there have been only 51 recorded violations of the Equal Pay Act. In that same time period, approximately 707 investigations were conducted by DOL. Less than 7.5% of all claims in the last 13 years have resulted in a violation.  Moreover, according to the U.S. Small Business Administration there are over 1.2 million businesses in Illinois. Assuming that a different company was responsible for each violation only .0000425% of Illinois businesses have been responsible for an Equal Pay Act violation in 13 years.  This is a 99.9999575% compliance rate.

The reason is found in the fact that unlike other states, Illinois employers only have four defenses to an unequal wage claim. Those four defenses are: (1) seniority system; (2) merit system; (3) a system that measures earnings by quantity or quality of production; and (4) a differential based on a business necessity that does not include sex or race.  If an Illinois employer is found in violation of an equal pay claim, the employer is liable for damages under no less than seven state and federal statutes. Unlike most states, Illinois does not prohibit a claimant from ‘double-dipping’ in state and federal court.  These statutes include the: (1) Illinois Equal Pay Act of 2003, (2) Illinois Humans Rights Act, (3) Illinois Wages of Women and Minors Act, (4) Illinois Equal Wage Act, (5) U.S. Equal Pay Act of 1963, (6) Title VII of the U.S. Civil Rights Act of 1964, and most recently (7) the Lily Ledbetter Fair Pay Act of 2009.

Given the facts noted above, it is safe to conclude that the current state and federal statutory penalty scheme has served as a more than sufficient deterrent to pay discrimination.

Since the facts do not support the need for the extreme measures proposed in HB 834, IRMA remains opposed to arbitrarily restricting Illinois’ employer’s current limited defenses and increasing current statutory penalties.  IRMA does, however, stand behind its pledge to support legislation to prohibit an employer from asking about previous wage, salary, or other compensation.

For these reasons, IRMA stands opposed to HB 834 but stands ready to support HB 834 if genuine, fact-driven compromise is desired.

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This Week in Springfield – 101-04

February 15, 2019

Despite bi-partisan opposition, Thursday afternoon the Illinois House passed Senate Bill 1 (Sen. Kimberly Lightford, D- Westchester/Rep. Will Guzzardi, D- Chicago) on a partisan roll-call of 69-47-1. It is important to note five House Democrats joined all the House Republicans in opposition. Nevertheless, SB 1 will now go to Governor JB Pritzker’s desk where a quick signature is expected.

IRMA would like to thank the IRMA members who repeatedly made contact with their State Senators and State Representatives. It did have impact and while history will never record how close we came to achieving genuine compromise, we know.

IRMA approached the issue with two viable compromises  and IRMA was willing to stand in public support of both. One of the compromises got everyone to $15 but gave suburban and downstate employers the same time to ramp up that Chicago employers have been given. Despite the fact the same proponents advocating for SB 1 in Illinois supported both alternatives IRMA put on the table when they were adopted in other states, there was no true effort to compromise. One of IRMA’s alternatives agreed to get everyone to $15 but gave suburban and downstate employers the same time and consideration that Chicago employers have been given. To no avail.

The press coverage was voluminous and very much in favor of the compromises IRMA, and a broad coalition of employer organizations led by IRMA, offered.

Nevertheless, the other side chose differently and had the advantage.

As passed by the Assembly, SB 1 amends the Illinois Minimum Wage Law to phase-in the $15 starting wage over five years:

18 years and older Under 18 years of age*
YEAR WAGE YEAR WAGE
1/1/2020 $9.25 1/1/2020 $8.00
7/1/2020 $10.00 7/1/2020
$11.00 $8.50
1/1/2022 $12.00 $9.25
1/1/2023 $13.00 $10.50
1/1/2024 $14.00 $12.00
1/1/2025 $15.00 $13.00

While it looks like six-years, it is, in fact, five. The first three increases occur within 367 days – one year for the planning purposes of employers.

Additionally, the legislation contains a tax credit, allegedly for small employers. However, it excludes many small employers. For example, the following are not eligible for the credit:

  • Any employer with more than 50 full-time equivalent employees in their entire operation – not by location. NOTE: The legislation does not define how many hours constitute full-time. That will be determined in rules therefore employers have no way of knowing how to calculate the potential credit.
  • Any employer who has more than one franchised store OR files taxes as part of a unitary group.
  • Any employer who pays more than the minimum wage at that time.
  • Any employer whose average wage is less in the current quarter vs. the quarter the year before. Therefore, if an employer is forced to lay-off or cut hours to afford the rapid rise to $15, she/he would not be eligible for the credit.

For Chicago employers, you will follow the city of Chicago’s minimum wage until January 1, 2024 when the state’s starting wage will be higher. Of course, this would change if the city increases their wage again. Proponents are already talking about wanting to increase Chicago’s wage to $17 or $20.

To make matters worse, as currently written, no employer is eligible because the bill contains an error. While the sponsor was informed of the error multiple times, he refused to repair the bill because he was concerned about sending it back to the Senate. It is widely anticipated a trailer bill will occur at a later date to repair.

The tip credit remains the same at 40%.

The training wage remains the same at $0.50 less per hour than the minimum wage in effect at that time through the first 90-days of employment.

Finally, penalties for wage theft are increased substantially. Civil damages are increased from damages to treble damages; damages increase from 2% of underpaid wages to 5%; an additional $1,500 must now be paid to the Department of Labor. These damages are on top of the existing 20% of damages that must be paid to the Department.

IRMA would like to the Senate and House Republicans who did such a great job of noting the way SB 1 discriminates against suburban and downstate employers, the economic advantages Chicago enjoys vis-a-vis those same regions, and the substantial additional impact taxpayers will bear due to the costs on local governments, park districts, K-12 schools, higher education, social services, etc. Specifically, IRMA thanks House Republican Leader Jim Durkin, Representatives Mark Batinick, C.D. Davidsmeyer, Tom Demmer, David McSweeney, former restauranteur Mike Murphy, Steve Reich, Grant Werhli, Keith Wheeler, and many more not only for their floor comments but leadership in committee over multiple hearings.

IRMA would also like to thank the four Democrats who voted “no” and one who voted ‘present’. They are Representatives Monica Bristow (D- Alton), Terra Costa-Howard (D-Lombard), Jerry Costello (D-Red Bud), and Mary Edly-Allen (D-Libertyville). Additionally, Representative Stephanie Kifowit (D-Aurora) voted ‘present’ expressing her support for an increase but opposition to the way it was done in SB 1.

Today is the bill filing deadline for both the House and Senate.  This deadline is arbitrary as the filing deadline for an individual bill may be extended and amendments can be continuously filed during the remainder of Session. As of this writing the following is a sample of the bills filed:

Paid Sick Leave MandateHB 2343 (Rep. Jehan Gordon-Booth, D-Chicago) creates the Healthy Workplace Act and requires employers to provide at least 5 paid sick leave days to all employees in Illinois.

Confidential Sales Tax Information CollectionHB 2947 (Rep. Mike Zalewski, D-Riverside) allows a third-party contingency fee auditor access to the sensitive sales tax information of local businesses. This initiative failed in the Senate two years ago.  It failed in the House last year after it came to light that Azavar, a private auditing firm, was illegally collecting businesses’ private sales tax information from municipalities.

Sharps Take-back MandateHB 3246 (Rep. Greg Harris, D-Chicago) requires retailers to install boxes to allow residents to put their used needle in. It requires an employee to receive training to handle and dispose of the needles. It also allows municipalities to require retailers within their jurisdiction to provide sharps take-back boxes.

Mileage TaxHB 2864 (Rep. Marcus Evans, D-Chicago) creates the per-mile road usage charge pilot program. The pilot programs charges a tax for every mile driven on Illinois roads.

Data Broker Registration ActHB 2872 (Rep. Celina Villanueva-D, Chicago) creates the Data Broker Registration Act. Requires a data broker to annually register with the Secretary of State. Defines data broker as a business or unit of a business, separately or together, that knowingly collects and sells or licenses to third parties the brokered personal information of a consumer with whom the business does not have a direct relationship.

Hiring MandateHB 3056 (Rep. Sonya Harper, D-Chicago) provides that if two employees are equally qualified for a position and one has an arrest record, the employer shall not take an adverse action against the employee with the arrest record.

App Privacy Protection ActHB 3051 (Rep. Carol Ammons, D-Champaign) creates the App Privacy Protection Act and requires an entity that owns, controls, or operates a web site, online service, or software application to identify in its customer agreements or applicable terms whether third parties collect electronic information directly from the digital devices of individuals in Illinois who use or visit its web site, online service, or software application. Requires the disclosure of the names of those third parties and the categories of information collected.

SNAP Wage MandateHB 3220 (Rep. Mike Halpin, D-Rock Island) requires an employer to pay an employee the difference between their wages and the amount the person receives from the Supplemental Nutrition Assistance Program (SNAP)

Personal Tobacco LicenseHB 3178 (Rep. Deanne Mazzochi, R-Westmont) raises the minimum age for the purchase, possession, and use of tobacco products, electronic cigarettes, and alternative nicotine products from 18 years of age to 21 years of age. It authorizes the Secretary of State to issue a smoking license to a person who: (1) is at least 18 years of age but under 21 years of age; (2) has completed the 8-hour online educational program regarding the dangers and consequences of smoking as verified by the Department of Public Health; and (3) has paid a $50 fee to the Secretary of State.

Restaurant Anti-Harassment Training MandateHB 3351 (Rep. Anne Williams, D-Chicago) creates the Restaurant Anti-Harassment Act and requires restaurants to have a sexual harassment training policy and provide training to all employees.

10 Cent Plastic Bag TaxHB 3335 (Rep. Anne Williams, D-Chicago) places a $.10 fee on all carryout bags–plastic, paper or compostable–used at a retailer by a consumer.

Plastic Straw BanHB 3379 (Rep. Michelle Mussman, D-Schaumburg) creates the Plastic Straw Ban Act and prohibits a bar, restaurant, or any business that sells food to the public from providing a customer a single-use plastic straw unless requested by the customer.

Female and Minority Board Mandates HB 3394 (Rep. Chris Welch, D-Chicago) requires no later than the close of the 2020 calendar year, a publicly held domestic or foreign corporation whose principal executive offices are located in Illinois shall have a minimum of one female director and one African American director on its board of directors.

This Week in Springfield – 101-03

$15 STARTING WAGE
TOBACCO 21
BILL INTRODUCTIONS

101-03
February 8, 2019

This Week in Springfield, the Senate passed a $15 wage and the Senate Public Health Committee passed a Tobacco 21 measure.

$15 STARTING WAGE

Despite concerns by suburban and downstate legislators in particular over the impact on the state budget (over $1 billion) and the impact on suburban and downstate employers, the Senate passed a proposal to increase the Illinois starting wage to $15 over 5 years as contained in Senate Amendment #1 to Senate Bill 1 (Sen Kimberly Lightford, D- Westchester). The 39-18 vote was along strictly partisan lines and came only after Governor JB Pritzker spent 30-minutes in the Senate Democratic caucus imploring a united front for his first major policy initiative. This action comes despite two very reasonable alternatives put forward by IRMA under the belief that an increase is inevitable, everyone was genuine in their desire to turn the page on the last four-years and seek genuine compromise, and the two alternatives IRMA put forward were supported in those respective states by the same proponents who are pushing the $15 wage increase in Illinois.

IRMA first suggested following the Oregon model where a different wage would be paid in different parts of the state. For example, $15 would be paid in Chicago, a lower wage in the collar counties, and a yet lower wage downstate. The Oregon model makes the most sense for a state as economically and geographically diverse as Illinois in that no other location in Illinois enjoys the economic benefits of Chicago. Nowhere else has over 55 million tourists per year, nowhere else has millions commuting into the city center every day spending money, nowhere else has the concentration of business headquarters, and nowhere else has the concentration of wealth. However, several legislators and the Governor’s Office expressed reservations over voting for $15 for some parts of the state but not others.

As an alternative, IRMA put forward the New York model. New York increased the starting wage in New York City over 4 years. The starting wage in the two counties on Long Island and Westchester County were increased to $15 over 6 years, and the starting wage in the rest of New York over 10-12 years (increased by CPI until reaches 15). While less sensitive to the economic diversity of New York and Illinois, it is an apt example for Illinois. The city of Chicago began increasing its minimum wage in 2015. If SB 1 is enacted as is, employers in the city of Chicago will have been given 10 years to get to $15 per hour. Employers in the suburbs and downstate will only be given 5 years. It raises the question as to why suburban and downstate employers are not being given the same consideration as employers in the city of Chicago. For those who say ‘well, the city raised the wage on its own, the answer is proponents don’t get it both ways. They can’t oppose preemption and then not count the actions of the city of Chicago. Employers don’t get that luxury.

Claims that alternatives were never presented are simply false. These alternatives were provided to the Governor directly the evening of Tuesday, January 29th, the primary legislative sponsors and the proponents during a morning meeting on Thursday, January 31st, repeated during another meeting the morning of Tuesday, February 5th and shared with other legislators and legislative staff throughout the week. Clearly, given the facts noted above, there does not appear to be a genuine desire for what would otherwise be considered an easily achievable compromise.

The proponents claim that a tax credit inserted into the bill will help small business. In fact, the tax credit as proposed is inadequate to soften the size and pace of the proposed increase and applies to very few employers. The following would NOT receive the credit:

• Any employer with more than 50 full-time equivalent employees. The legislation does not state what constitutes ‘full-time” so it is impossible to accurately calculate. However, given the fact the proposal started with a firm cap at 50, we can expect a definition that keeps close to that number.

• If you are a franchisee and have more than one store OR file as part of a unitary group (e.g. you are a franchisee, run some other type of business and they file taxes together) you would not be eligible for the tax credit.

• If your average wages paid are less than the same quarter the year before, you are not eligible for the credit. For example, if you are forced to cut hours worked, lay off workers, or if workers are absent, your average wages could easily drop.

• Employers with 5 or fewer employees are eligible for a credit for a year longer than everyone else. While the proponents claim this applies to 48% of all employers, they don’t tell you that the vast majority of that 48% is comprised of employers where the only employee is the employer. According to the Illinois Department of Employment Security (IDES), in the City of Chicago, such businesses account for 6.6% of employers. According to the US Small Business Administration, 80% of all employers fall into this category. Therefore, 1.4% – 2.0% of employers in Illinois would qualify.

Clearly, the tax credit is nothing more than a talking point.

As passed by the Senate, SB 1 increases the starting wage as follows:

18 years and older                     Under 18 years of age*

YEAR              WAGE                      YEAR            WAGE
1/1/2020       $9.25                    1/1/2020        $8.00
7/1/2020       $10.00                  7/1/2020
1/1/2021       $11.00                                         $8.50
1/1/2022       $12.00                                         $9.25
1/1/2023       $13.00                                        $10.50
1/1/2024       $14.00                                        $12.00
1/1/2025       $15.00                                        $13.00

*If the employee who is under 18 years of age works more than 650 hours for the employer during a calendar year, then the employer must pay the full minimum wage regardless of the employee’s age.

While it looks like a six-year phase-in, it is really a five-year phase in because employers will experience a $2.75 per hour increase (33.3% increase) in the first 366-days. For an employer’s planning purposes, a year-and-one-day, is not two years. This phase-in is an average annual increase to an employer’s largest or second-largest line-item of over 16% per year for a total increase of 81.8% over 5 years.

The House Labor & Commerce Committee is scheduled to consider SB 1 on Wednesday, February 13th at 2:00 p.m. IRMA members should register their opposition by filing a slip at this link. Additionally, IRMA members are encouraged to continue to register their opposition per the action alerts IRMA has distributed.

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TOBACCO 21

SB 21 (Sen. Julie Morrison, D-Deerfield) prohibits an Illinois licensed retailer from selling tobacco products to anyone below the age of 21, but removes the penalties for the purchase, possession, selling, or consumption of tobacco for the same individuals. It completely removes the specific prohibition of the possession of tobacco products by a minor. And it only prohibits a minor from selling tobacco products, as an employee, at a licensed retailer. In fact, the only thing SB 21penalizes a minor for is using a fraudulent identification.

As a result, since the Illinois statutes would no longer penalize a minor for any of the aforementioned, SB 21 makes it “legal” for a person under the age of 21 to: (1) possess tobacco, (2) consume tobacco, (3) sell tobacco, (4) buy tobacco from an unlicensed Illinois retailer or individual, or (5) buy tobacco from a licensed out-of-state retailer or online. As such, the bill protects unlicensed, unregulated, and, untaxed individuals selling tobacco to minors while prohibiting licensed Illinois retailers from selling tobacco products to anyone below the age of 21.

SB 21 passed the Senate Public Health Committee by a partisan vote of 8-4.

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BILL INTRODUCTIONS

The Illinois General Assembly has introduced nearly 4,000 bills to date. With the bill filing deadline of February 15th quickly approach, there will likely be a large number of bills filed next week. Here are a sample of bills that were filed this week:

Check out Bag TaxSB 1240 (Sen. Terry Link, D-Gurnee) creates the Checkout Bag Tax Act and imposes a tax of $0.07 on each checkout bag used by a customer at a retail establishment in the State. The proceeds from the tax shall be distributed as follows: (1) the retailer shall retain $0.02 per bag; (2) $0.02 per bag shall be distributed to the General Revenue Fund; and (3) $0.03 per bag shall be deposited into the Checkout Bag Tax Fund.

The $.03 from in the Checkout Bag Tax Fund is then distributed to municipalities to use for funding the collection of household hazardous waste such as needles, paint, batteries and other common items such as mattresses, plastic bags, auxiliary containers, etc. Municipalities that do not already have a plastic bag ban or tax would be prohibited from instituting a ban or Chicago, Oak Park, and Evanston would be able to keep their current ordinances but could not change them unless to make them consistent with the proposed state law.

Retail DiscountHB 2079 (Rep. Will Guzzardi, D-Chicago) and SB 1132 (Sen. Omar Aquino, D-Chicago) reduces the reimbursement that is provided to retailers for collecting sales taxes on behalf of the state. It caps the amount at $1,000 per retailer per year. Unknown to most people, retailers are responsible for interpreting, administering, collecting, and remitting the occupation and use taxes also known as the sales tax. In return for the expenses that they incur during this process, retailers are allowed to retain 1.75 percent of the sales tax they collect. This is known as the retail discount. This allowance serves as a partial reimbursement. If retailers were to be fully reimbursed for their costs, independent studies conclusively demonstrate the allowance would have to be nearly 4 percent. The Illinois Department of Revenue (IDOR) retains 2 percent of the monies they collect on behalf of local governments. Additionally, while retailers subsidize the state retail sales tax collection, retailers are paying between 1.5% and 3%, plus $.10 of the sales tax directly to the banks in credit card fees. If 50% of their sales are on credit cards, that means an amount equal to between ¾% and 1.32% is paid in credit card fees on the retailer’s entire universe of sales tax collections. Therefore, credit card fees alone erase all or most of any retailer’s partial reimbursement. While IRMA is not asking that this allowance be increased, we adamantly oppose any effort to reduce or eliminate the existing allowance.

Food AllergenHB 2123 (Rep. Jonathan Carroll, D-Northbrook) requires sesame to be labeled in any food product containing sesame. It is unclear whether the bill refers to packaged food or to prepared food. Food allergen labeling is governed by the federal Food Allergen Labeling and Consumer Protection Act (FALCPA). FALCPA keeps food allergen labeling consistent in all 50 states. As drafted, this legislation would require a different Illinois specific label for any food containing sesame sold in Illinois.

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