Illinois – Composite returns eliminated, non-resident withholding required, alternative apportionment updated

On August 16, 2013, Illinois Governor Pat Quinn signed H.B. 3157, which, effective for tax years ending on or after December 31, 2014, (1) eliminates composite returns and (2) requires partnerships, S-corporations, and trusts to withhold tax on nonbusiness income distributable to their respective non-resident partners, shareholders, and beneficiaries. Additionally, Illinois’ alternative apportionment provision is updated to reflect market-based sourcing language. Illinois pass-through entities should be aware of the significant compliance changes that will be in effect for the 2014 tax year.

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