Illinois Administrative Code › Title 86 - REVENUE › Part 100 - INCOME TAX › Subpart V - EMPLOYER'S RETURN AND PAYMENT OF TAX WITHHELD › Section 100.7390 - Minimum Wage Tax Credit (IITA Section 704A(i))

Current through Register Vol. 48, No. 28, July 12, 2024
a) Minimum Wage Credit.
Each employer
				with 50 or fewer full-time equivalent employees during the current reporting
				period may claim a credit against the payments due under
IITA Section
				704A
in an amount equal to the maximum credit allowable. The credit may
				be taken against payments due for reporting periods that begin on or after
				January 1, 2020 and end on or before December 31, 2027. In no event may the
				credit exceed the employer's liability for the reporting period.
(IITA
				Section 704A(i)) No carryover of excess credit is allowed.
b) Definitions Applicable to this Section
"Applicable Percentage" means:
25% for reporting periods beginning on or after
				  January 1, 2020 and ending on or before December 31, 2020;
21% for reporting periods beginning on or after
				  January 1, 2021 and ending on or before December 31, 2021;
17% for reporting periods beginning on or after
				  January 1, 2022 and ending on or before December 31, 2022;
13% for reporting periods beginning on or after
				  January 1, 2023 and ending on or before December 31, 2023;
9% for reporting periods beginning on or after
				  January 1, 2024 and ending on or before December 31, 2024;
5% for reporting periods beginning on or after
				  January 1, 2025 and ending on or before:
December 31, 2026, for employers with more than 5
				  employees; and
December 31, 2027, for employers with no more than 5
				  employees.
(IITA Section 704A(i))
"Base Compensation" for a reporting period means the total
				  compensation paid in Illinois, during the fourth quarter of the calendar year
				  prior to the reporting period, to employees who earned less than the current
				  minimum wage during that fourth quarter. Compensation or wages "Paid in
				  Illinois" has the meaning ascribed to that term under IITA Section
				  304(a)(2)(B). If an employee's compensation is not subject to tax in another
				  state, the compensation is presumed, subject to rebuttal, to be paid in
				  Illinois.
"Current Compensation" for a reporting period means the sum
				  of:
the total compensation paid in Illinois to eligible employees
				  who earned no more than the current minimum wage during the reporting period,
				  plus
for eligible employees who earned more than the current
				  minimum wage at any time during the reporting period, the total hours worked in
				  Illinois times the current minimum wage.
"Current Employee" means an employee who was employed by the
				  taxpayer during the current reporting period.
"Current Minimum Wage" means the minimum or reduced wage
				  applicable to an employee under the Minimum Wage Law [820 ILCS 105] for the
				  current reporting period.
"Current Reporting Period" means the reporting period for
				  which the taxpayer is calculating the minimum wage credit under this
				  Section.
"Eligible Employee" means any employee who earned no more
				  than the current minimum wage for hours worked in Illinois for the employer
				  during the reporting period and any employee who earned more than the current
				  minimum wage for hours worked in Illinois for the employer at any time during
				  the reporting period, but who earned less than the current minimum wage for
				  hours worked in Illinois for the employer during the calendar year prior to the
				  effective date of the current minimum wage. A recently hired employee is not an
				  eligible employee. The total number of eligible employees for a current
				  reporting period may not exceed the total number of employees who earned less
				  than the current minimum wage for hours worked in Illinois for the employer at
				  any time during the fourth quarter of the preceding calendar year.
"Employer" and "Employee"
have the meaning ascribed
				  to those terms in the Minimum Wage Law except that "employee" also includes
				  employees who work for an employer with fewer than 4 employees.
(IITA
				  Section 704A(i)) Members of a limited liability company who are treated as
				  partners for federal and Illinois income tax purposes, but are employees within
				  the meaning of the Minimum Wage Law, are employees for purposes of this
				  credit.
"Full-time Equivalent Employees"
means the ratio of
				  the number of paid hours during the reporting period and the number of working
				  hours in that period.
(IITA Section 704A(i)) A full-time equivalent
				  employee shall be assumed to work 40 hours per week for 13 weeks for a total of
				  520 hours during a reporting period. The number of full-time equivalent
				  employees for a reporting period means the number of employees working 40 hours
				  per week that would be required to work the number of paid hours actually
				  worked by all employees of the employer for that reporting period.
EXAMPLE: Taxpayer employs 56 employees who work 25,480 paid
				  hours during a reporting period. 25,480 hours divided by 520 hours equals 49.
				  Although employer employs 56 actual employees, only 49 full-time equivalent
				  employees would be required to work the number of paid hours worked by all of
				  the taxpayer's employees during the reporting period.
"Hour Worked in Illinois" means an hour worked by an employee
				  for which the compensation is paid in Illinois.
"Hourly Employee" means an employee whose working hours are
				  tracked and recorded by the employer during the reporting period, regardless of
				  whether the employee is paid by the hour, salary, commission or any other
				  measure.
"Maximum Credit" for a current reporting period means the
				  excess, if any, of the current compensation for the reporting period over the
				  base compensation, multiplied by the applicable percentage, plus the credit for
				  new eligible employees.
"New Eligible Employee" means an employee whose
				  90th consecutive day of employment for the employer
				  occurred during the reporting period immediately preceding the current
				  reporting period.
"Recently Hired Employee" means an employee who has been
				  employed by the employer for less than 90 consecutive days as of the last day
				  before the current reporting period.
"Reporting Period"
means the quarter for which a
				  return is required to be filed under
IITA Section 704A(b). (IITA
				  Section 704A(i))
"Salaried Employee" means an employee whose hours are not
				  tracked and recorded by the employer during the reporting period. Salaried
				  employees are deemed to have worked 40 hours per week for each week in which
				  they were employed during a reporting period.
"Tipped Employee" has the same meaning as ascribed in 56 Ill.
				  Adm. Code
				  210.110.
"Wages" means compensation, including bonus, overtime, and
				  commission pay, of employees, but does not include fringe benefits.
"Week Worked in Illinois" means a week worked by an employee
				  for which the majority of hours worked by the employee were worked in
				  Illinois.
c) Eligibility for
				the Credit - Maximum Number of Full-Time Equivalent Employees. A credit may be
				claimed under this section only by
an employer with 50 or fewer
				full-time equivalent employees during the current reporting period.
(IITA Section 704A(i)) Eligibility for the credit under this subsection shall
				be determined as follows:
1) Determine the
				number of hours worked by all salaried employees. Total the weeks worked by all
				salaried employees during the reporting period, rounded to the nearest whole
				week. Multiply the resulting number of weeks by 40 hours. Round the result to
				the nearest hour.
2) Total the
				hours worked by all hourly employees during the reporting period.
3) Determine the total hours worked by all
				employees by adding the number of hours worked by salaried employees to the
				number of hours worked by all hourly employees during the reporting
				period.
4) Determine the number of
				full-time equivalent employees by dividing the total hours worked by all
				employees during the reporting period by the 520 hours a full-time employee
				would work during the reporting period. Round up the result to the next higher
				whole number.
EXAMPLE: During a reporting period, the taxpayer employs 10
				  salaried employees who worked a total of 100 weeks during the reporting period
				  and 30 hourly employees who worked a total of 15,000 hours. The salaried
				  employees are deemed to have worked 4,000 hours during the reporting period.
				  All employees worked a total of 19,000 hours during the reporting period.
				  Therefore, during the reporting period, 37 full-time equivalent employees would
				  have been required to work all of the paid hours worked by the taxpayer's
				  employees. ((100 weeks x 40 hours) + 15,000 hours)/520 = 36.54, rounded up to
				  37 full-time equivalent employees
5) If the total number of full-time
				equivalent employees is greater than 50, the taxpayer is not eligible for the
				credit.