May 3, 2019
IN THIS ISSUE:
This Week in Springfield, IRMA held its annual Business Day. The Senate passed a resolution to change the constitution to implement a Graduated Income Tax and followed that up with proposed rates that were more expansive than the Governor’s proposal. After burdening employers with a $15 minimum wage earlier in session, the Senate has doubled down on employer mandates and passed a paid sick leave mandate that includes a requirement that businesses pay an employee to attend a court date for any illegal act of the employee.
BUSINESS DAY 2019
On Wednesday, May 1st, approximately 400 employers met in Springfield for IRMA’s annual Business Day. This gathering represents the largest annual gathering of employers and is held in conjunction with the Illinois Manufacturers’ Association. We appreciate the support of our sponsors and partners who make this day an annual success.
Governor JB Pritzker addressed the opening luncheon laying out his vision for moving Illinois forward. This included returning fiscal stability, repairing and improving infrastructure, and investing in education. Key to these plans is his goal of amending the state’s constitution to allow for a graduated income tax. IRMA appreciated the Governor’s willingness to share his thoughts with attendees who may not agree on every proposal but agree on the need to move Illinois forward.
Adding a refreshing twist to the event, attendees experienced three subject-specific panels. These panels focused on data privacy, recreational cannabis, and the proposed graduated income tax, respectively.
Data privacy panel: The data privacy panel featured Aaron Tantliff, a Partner at the law firm of Foley & Lardner, who has a substantial practice advising employers on how to comply with current privacy laws and how to stay ahead of changes in legislation through adopting best practices. Aaron provided attendees an understanding of how data privacy has been approached at the macro level by detailing the most relevant portions of the European Union’s General Data Privacy Regulations (GDPR) and describing the significant difference between how the EU and the United States have addressed regulation. Mr. Tantliff agreed that legislation could be a powerful tool in privacy protection if truly balances the desire to protect consumers from harm and the desire to allow for the continued expansion of innovation. Case in point, he cautioned legislators to examine what we have learned from the passage of Illinois’ Biometric Information Privacy Act (BIPA). The Act was put in place years ago to help ensure that appropriate notification and permission was given before a person’s biometric identifiers were collected and used for business purposes. Unfortunately, the effect of the law has been a boon to the plaintiff’s bar which has used the law to ensnare businesses who were, by all accounts, substantively in compliance, and bring class action lawsuits against them based on technicalities. These filings have cost the employer community in Illinois plenty in settlements, but hasn’t significantly increased protections by the same factor. Mr. Tantliff strongly encouraged the General Assembly to fix what is broken with BIPA and to not make the same mistake if it chooses to move forward with other laws in this area. Attendees received very critical information on best practices and helpful information on how to communicate with lawmakers on preserving the ability to use data to promote the growth, expansion and competitiveness of Illinois’ employer community.
Recreational cannabis panel: The recreational cannabis panel included Representative Kelly Cassidy, D-Chicago, a primary mover behind the proposal along with Senator Heather Steans, and Scott Cruz from the law firm of ClarkHill. Mr. Cruz specializes in employment and labor law.
While many residents focus on the legalization aspect and policymakers primarily focus on the legalization and revenue aspects of cannabis, employers are focusing on the use or possession of cannabis in the workplace. Under the current Illinois Compassionate Use of Medical Cannabis Pilot Program Act an employer may adopt a drug free or zero tolerance drug policy. Mr. Cruz explained that while cannabis may become illegal on the state level, currently it remains illegal on the federal level. As such, employers should be cognizant of federal employment and safety standards. Rep. Cassidy explained that the intent is to maintain the employer’s complete control of the workplace and complete discretion in regards to the drug possession or use policy. In some states, exception to employment policies are made for those individuals that have received a medical cannabis card as a result of a debilitating disease of malady. Currently, the intent is to provide no exceptions to the employer’s ability to maintain a drug free workplace regardless of the situation of the employee.
Graduated income tax panel: The final panel of the day focused on the proposed graduated income tax. Coincidentally, as the panel was meeting, the Senate passed a graduated income tax package. This panel featured Ralph Martire, Executive Director of the Center for Tax and Budget Accountability and Jared Walczak, Senior Policy Analyst with the Tax Foundation. Mr. Martire made the case that a graduatd income tax is fairer in that those who earn more, pay more. However, he noted that without enacting other changes, such as sales tax on services, Illinois would continue to struggle with instability.
After the panels, attendees then spent time at the Capitol meeting with legislators. IRMA’s Board of Directors and some invited guests met with Senate President John Cullerton, Senate Republican Leader Bill Brady, and House Republican Leader Jim Durkin. Those meetings focused on a number of issues including expressing frustration that elected officials continue to consider engaging in theft of services by reducing or eliminating the Retail Discount. Such a move, if enacted, would have retailers paying for the tax credits and dedicated spending benefiting other business sectors. Retailers should not have to pay for even more costs imposed on them by the state so that other business sectors can pay less.
The day concluded with a revised and expanded Party Under the Tent which has become a ‘not-to-be-missed’ event.
IRMA would like to thank all those who made this day possible.
GRADUATED INCOME TAX
While employers attended Business Day, the legislative process ground on and the focus was on the Senate as they passed a package focused on the graduated income tax.
First up was Senate Joint Resolution Constitutional Amendment 1 (Sen. Don Harmon, D- Oak Park/Rep. Rob Martwick, D- Chicago). This would put a question on the November 2020 ballot asking voters whether they want to amend the Illinois Constitution to allow for a graduated income tax. SJRCA 1 was approved by the Senate on a party-line vote with all 40 Democrat members supporting and all 19 Republican’s opposing. As the Chicago Sun-Times headline noted, the Senate took less time to pass this proposal than it takes to play the Led Zepplin song “Stairway to Heaven”.
Then came Senate Amendment #1 to SB 687 (Sen. Toi Hutchinson, D- Chicago Heights/Rep. Michael Zalewski, D- Riverside) proposes income tax rates should voters approve the constitutional amendment in November 2020 allowing Illinois to impose a graduated income tax. The new proposed tax rates on personal income, which includes pass-through entities such as trusts and partnerships. In Illinois, pass-through entities also must apply a 1.5% tax on all income known as the Personal Property Replacement Tax. Therefore, the proposed effective rates are as follows:
|INCOME||TAX RATE||EFFECTIVE TAX RATE WITH PPRT (1.5%)|
|$10,000 or less||4.75%||6.25%|
|$10,000.01 – $100,000||4.90%||6.40%|
|$100,000.01 – $250,000||4.95%||6.45%|
|$350,000.01 – $750,000||7.85%||9.35%|
For individuals with incomes over $750,000, the 7.99% rate applies to the entire income – not just the income over $750,000.
What follows are the new proposed rates on corporate income. In Illinois, corporations must also apply a 2.5% tax on all income known as the Corporate Personal Property Replacement Tax. Therefore, the proposed and effective rates are as follows:
|INCOME||TAX RATE||EFFECTIVE TAX RATE WITH CPPRT (2.5%)|
|$10,000 or less||4.75%||7.25%|
|$10,000.01 – $100,000||4.90%||7.40%|
|$100,000.01 – $250,000||4.95%||7.45%|
|$250,000.01 – $500,000||7.75%||10.25%|
|$500,000.01 – $1,000,000||7.85%||10.35%|
For corporations with incomes over $1,000,000 the 7.99% rate applies to the entire income – not just the income over $1,000,000.
This proposal represents an expansion of the rates as originally discussed. Initially, the discussion was to make the highest rate for individuals top out at 7.95% and $1 million. The top rate is higher and now applies to those making less than $1 million. This appears to be an effort to blunt criticism that the initially discussed rates did not solve the current budget problems. Even if these proposed rates do that, they still do not generate the revenue necessary to return Illinois to fiscal stability by addressing out-year commitments to schools and pensions as well as the proposed new spending.
There is also a $100 per child tax credit for those with children under 17 years of age. For those filing jointly making $100,000 or less. This credit phases out incrementally by $5 for every $2,000 in income beginning at $60,000 for those filing jointly. Those filing as individuals are eligible if they make $80,000 or less. The child credit begins reducing by $5 for every $2000 as income increases over $40,000.
Next came Senate Amendment #1 to 689 (Sen. John Cullerton, D-Chicago/Michael Zalewski) proposing to repeal the Illinois estate tax. The state would lose $300 million a year. This was an attempt to incentive Republican support and be more attractive, particularly to agricultural interests. The legislation passed the Senate by a 33-24 vote. The House Progressive Caucus immediately released a statement that panned the repeal of the estate tax.
Finally, came Senate Amendment #1 to SB 690 (Sen. Andy Manar, D-Bunker Hill/Michael Zalewski) proposing property tax freezes in years in which the state fully funds the education funding formula and categoricals. It is rare the state has ever fully funded these items so how effective this will be remains to be seen. If the state were to fully fund, this would further highlight that the proposed graduated income tax rates in SB 687 are inadequate to meet known fiscal needs.
SJRCA 1, and Senate Bills 687, 689, and 690 now proceed to the House for further consideration.
PAID SICK LEAVE
SB 471 CA#2 (Sen. Toi Hutchinson, D-Chicago Heights) creates the Healthy Workplace Act and would require and employer to provide a minimum of 5 paid sick days a year to each employee. Those members who have locations in Chicago, and/or the various municipalities in Cook County that have not opted out of the Cook County sick leave ordinance, should note that if this bill passes and is signed into law the Chicago and Cook County ordinances would remain in effect. The legislation passed the Senate by a 35-14 vote.
The Specifics of the bill are as follows:
- Employees can accrue up to 5 paid sick days in a 12 month period (1 hour for every 40 hours worked) calculated from the date of hire or the effective date of the bill, and use can begin after 180 days of employment;
- Minimum increments for use of sick leave cannot be more than 4 hours;
- Leave can be used for the employee’s illness, an employee’s family member’s illness, medical care, school closings, to visit family in jail, to attend their own court hearing, or for reasons related to domestic violence;
- Paid sick days must be paid out at an employee’s regular base wage;
- If the employee is a tipped employee, then the wage is at least the full IL minimum wage, not the discounted minimum wage for employees that receive gratuities;
- An employer can only require proof of need for sick days if the employee requests more than 3 consecutive days off;
- Employees cannot be required to find a replacement if taking a sick day and must give the employer notice if the sick day was foreseeable (scheduled doctor’s appointment; scheduled surgery, etc.);
- Unused sick days must carry over, but an employee is limited to the use of no more than 40 hours in one 12-month period unless the employer has a more generous use policy;
- Paid sick days do not have to be paid out upon termination/separation;
- If the employee separates from employment and is re-employed within a 12-month period with the same employer, then the employee will receive any accrued, but unused, sick leave obtained prior to the separation;
- For employees that are currently covered under a collective bargaining agreement (CBA), this bill will not change that agreement; however, at the next negotiation, the CBA can waive paid sick leave as long as it’s in writing;
- Paid sick leave does not apply to anyone working in the construction industry covered by a CBA;
- Employers must keep records for 3 years;
- Employers with paid time off (PTO) policies will not need to change those policies if employees are allowed to take the time in accordance with what is required in this bill;
- Employers must keep the written requirements in this bill on file on the premises for employee review or post the requirement on the premises wherever like postings are located;
- If the employer has employees that are not literate in English, the employer must provide the employee with a written explanation in the language in which the employee is literate;
- Retaliation is prohibited; and
- Employees have a private right of action.
IRMA is opposed.
‘SESAME’ LABELING MANDATE
An initiative to address the growing issue of sesame seed allergens passed the House with an unanimous 114-0-0 vote. Food allergen labeling is governed by the Food Allergen Labeling Consumer Protection Act (FALCPA). FALCPA requires the labels of domestically manufactured or imported pre-packaged goods to include the eight major food allergens: milk, egg, peanut, tree nuts, soy, wheat, fish and crustacean shellfish. Together these foods cause the majority of allergic reactions in the U.S. Due to the rise of sesame seed allergen the United States Food and Drug Administration (FDA) is considering adding sesame seed to the food allergen labeling requirements. The majority of the largest manufactures already include sesame seed labeling on prepackaged food.
HB 2123 (Rep. Jonathan Carroll, D-Northbrook/Sen. Emil Jones, D-Chicago), as introduced, requires a state specific Illinois label to be placed on packaged food as well as ready to consume food. In the modern restaurant, there is no such thing as ‘standardized’ meal. Every offering can be customized to the customer’s desire and 75% of restaurant customers customize their orders. Using a coffee shop as an example, there are over 80,000 different ways to order a cup of coffee.
IRMA worked with Representative Carroll to draft an amendment that reflects the changing federal standards while also protecting those that suffer from food allergies.
HB 2123 passed the Senate Agriculture Committee by a vote of 7-0.
IRMA is neutral as amended and appreciates the consideration of Rep. Carroll.
REBATE CARD DORMANCY FEES
HB 2156 (Rep. Theresa Mah, D-Chicago/Sen. Cristina Castro, D-Elgin) passed the House by a vote of 67-47. The bill is intended to prohibit the issuance of product rebate cards that charge dormancy or other post-issuance fees. The legislation only applies to rebate cards that can be used at multiple merchants. It exempts those closed-looped merchant cards that are distributed and used at one retailer—also known as “store cards”. The language only applies to multi-store cards utilized for rebates after the consumer completes the rebate submission process.
IRMA has worked with the sponsors to address retailers’ concerns. IRMA would like to thank Rep. Mah and Sen. Castro for addressing those concerns.
IRMA is neutral.