Ill. Admin. Code tit. 86, § 100.7390 - Minimum Wage Tax Credit (IITA Section 704A(i))
"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.
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
EXAMPLE: In the fourth reporting period of 2019, the taxpayer employed 10 salaried employees who worked a total of 100 weeks and 30 hourly employees who worked a total of 15,000 hours during the reporting period. All employees earned less than $55,000 during the reporting period. The taxpayer paid a total of $183,000 in wages to all 40 employees during the reporting period. The average wage paid in Illinois to all employees earning less than $55,000 during the reporting period was $9.63 per hour. $183,000/((100 weeks x 40 hours) + 15,000 hours) = $9.63/hour. During the fourth reporting period of 2020, the taxpayer employed 8 salaried employees who worked a total of 100 weeks and 32 hourly employees who worked a total of 16,000 hours during the reporting period. All employees earned less than $55,000 during the reporting period. The taxpayer paid a total of $224,000 in wages to all 40 employees during the reporting period. The average wage paid in Illinois to all employees earning less than $55,000 during the reporting period was $11.20 per hour. $224,000/((100 weeks x 40 hours) + 16,000 hours) = $11.20 per hour. $11.20 is greater than $9.63, therefore the taxpayer is eligible for the credit for the fourth reporting period of 2020.
EXAMPLE: Employee is hired by the taxpayer on January 6, 2020 and continues to be employed through December 31, 2020. During that time, the employee earns the minimum wage required for each reporting period in 2020. The employee's 90th day of consecutive employment is April 5, 2020, which occurs during the second reporting period of 2020. Because the employee's 90th consecutive day of employment did not occur prior to the start of the second reporting period of 2020, the taxpayer must use the wages earned by the employee during his or her first 90 consecutive days of employment to calculate the credit for the third reporting period in 2020.
EXAMPLE: In the fourth reporting period of 2019, taxpayer employed 10 tipped employees who earned the reduced wage of $4.95 authorized by Section 4(c) of the Minimum Wage Law. All employees were hired more than 90 days prior to the beginning of the reporting period. The employees worked a total of 5,200 hours during that reporting period. In the first reporting period of 2020, the taxpayer employed the same 10 employees who earned the applicable subminimum wage of $5.55 authorized by Section 4(c) of the Minimum Wage Law and worked 5,200 hours. Taxpayer is entitled to a credit of $780. ((5,200 hours x $5.55) - (5,200 hours x $4.95)) x .25 = $780
EXAMPLE: In the fourth reporting period of 2019, taxpayer employed 10 tipped employees who earned the reduced wage of $4.95 authorized by Section 4(c) of the Minimum Wage Law. All employees were hired more than 90 days prior to the beginning of the reporting period. The employees worked a total of 5,200 hours during that reporting period. 1 of the 10 employees resigned effective December 31, 2019. In the first reporting period of 2020, the taxpayer employed the remaining 9 employees. Taxpayer hired 1 additional employee on January 6, 2020 who continued to work for the employer through December 31, 2020. For the first 2 reporting periods of 2020, all 10 employees earned the applicable subminimum wage of $5.55 authorized by Section 4(c) of the Minimum Wage Law. During the 3rd reporting period of 2020, all 10 employees earned the applicable subminimum wage of $6.00 authorized by Section 4(c) of the Minimum Wage Law. During the first 3 reporting periods of 2020, the original 9 employees worked 4,680 hours and the 1 recently hired employee worked 520 hours during each reporting period. The 1 recently hired employee reached the 90th day of employment on April 5, 2010, during the 2nd reporting period of 2020. For the first reporting period of 2020, the taxpayer is entitled to a credit of $58.50. ((4,680 hours x $5.55) - (5,200 hours x $4.95)) x .25 = $58.50. The $2,886 in wages paid to the recently hired employee during the 1st reporting period does not count toward the 1st reporting period credit. 520 hours x $5.55 = $2,866. During the 2nd reporting period of 2020, the recently hired employee worked 30 hours between April 1, 2020 and April 5, 2020. Between April 6, 2020 and April 30, 2020, the recently hired employee worked 490 hours. The $166.50 in wages paid to the recently hired employee between April 1, 2020 and April 5, 2020, does not count towards the 2nd reporting period credit. 30 hours x $5.55 = $166.50. The remaining $2,719.50 in wages paid to the recently hired employee does count toward the 2nd reporting period credit. 490 hours x $5.55 = $2,719.50. Therefore, for the 2nd reporting period of 2020, the taxpayer is entitled to a credit of $738.36. ((5,170 hours x $5.55) - (5,200 hours x $4.95)) x .25 = $738.36 The $3,032.50 in wages paid to the recently hired employee during the first 90 days may be applied to the 3rd reporting period credit calculation. 550 hours x $5.55 = $3,032.50. Therefore, for the 3rd reporting period of 2020, the taxpayer is entitled to a credit of $2,123.13. (((5,200 hours x $6.00) + (550 hours x $5.55)) - (5,200 hours x $4.95)) x .25 = $2,123.13.
Notes
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