Personal Property Replacement Tax
What are personal property replacement taxes?
Personal property replacement taxes (PPRT) are revenues collected by the state of Illinois and paid to local governments to replace money that was lost by local governments when their powers to impose personal property taxes on corporations, partnerships, and other business entities were taken away.
These taxes resulted when the new Illinois Constitution directed the legislature to abolish business personal property taxes and replace the revenue lost by local government units and school districts. In 1979, a law was enacted to provide for statewide taxes to replace the monies lost to local governments.
Who pays these taxes?
Corporations, partnerships, trusts, S corporations and public utilities pay these taxes.
What are the rates?
- Corporations pay a 2.5 percent replacement tax on their net Illinois income.
- Partnerships, trusts, and S corporations pay a 1.5 percent replacement tax on their net Illinois income.
- Public utilities pay a 0.8 percent tax on invested capital.
How and when are these taxes paid?
Corporate income tax due dates are generally the 15th day of the 3rd or 4th month depending on the tax year end date of the corporation filing the return.
Tax returns for partnerships and trusts generally have a due date of the 15th day of the 4th month following the end of their tax year.
Tax returns for S-corporations generally have a due date of the 15th day of the 3rd month following the end of their tax year.
While extensions are automatically granted, any anticipated tax due must be paid by the original due date of the return.
Utilities pay the invested capital tax by the fifteenth day of March, June, September, and December. A final return is due by the fifteenth day of March after the close of their taxable year.
How is the money distributed?
The proceeds from these taxes are placed into the Personal Property Tax Replacement Fund to be distributed to local taxing districts.
The total collections are divided into two portions. One portion (51.65 percent) goes to taxing districts in Cook County. The other portion (48.35 percent) goes to taxing districts in the remaining 101 counties, commonly referred to as downstate counties.
The Cook County portion is then distributed to the taxing districts in Cook County on the basis of each district's share of personal property tax collections for the 1976 tax year. (For example, if total taxes collected by all districts in Cook County for the 1976 tax year were $1 million and Taxing District A collected $35,000 of that total, Taxing District A's share of any future distributions from the Cook County portion would be 3.5 percent.)
The downstate portion is distributed similarly, except that the collections from the 1977 tax year are used to calculate each taxing district's share of the distribution.
This percentage is called the taxing district's "allocation factor."
Can a taxing district's allocation factor change?
Yes. The allocation factor can change when taxing districts that are currently receiving PPRT distributions merge into another taxing district, when two or more existing taxing districts consolidate to create a new taxing district, or when a portion of the territory of a taxing district is disconnected and annexed to another taxing district. The base year collections from the 1976 (for Cook County) or 1977 (for downstate counties) tax year are transferred from the original taxing district(s) to the receiving taxing district.
How often is the money distributed to you?
The legislature amended the original schedule of quarterly payments effective with the 1981 payments to provide for separate payments to be made in January, March, April, May, July, August, October, and December.
PPRT distributions are made in January, March, April, May, July, August, October, and December.
Does this mean you receive eight equal distributions?
No. The total to be distributed will vary from payment to payment depending upon the amount of tax that the Illinois Department of Revenue (IDOR) has collected since the last payment was made to the districts.
Can a taxing district receive an estimate of the amount of PPRT distributions they might expect to receive?
Yes. Between the end of July and the middle of August each year, IDOR posts a list of estimates for each taxing district for the current state fiscal year at Fiscal Year Estimate for Replacement Tax. Please note that an estimate cannot be provided unless a state budget has been passed for that fiscal year.
Who qualifies to receive these payments?
Only taxing districts that collected and received personal property taxes for the 1976 tax year for Cook County or 1977 tax year for the remainder of the state are eligible to receive PPRT payments. Taxing districts, except community colleges, that were created after 1977 are not eligible to receive PPRT money since they did not experience a loss in revenue.
Are payments made directly to the unit of government?
Yes. State warrants are made payable to the treasurer or fiscal officer of each local taxing district. Under the former personal property tax, the county treasurer distributed the money to local units taxing districts.
Are there restrictions on how PPRT money can be used?
If part of the former personal property tax money was used to pay off "debt service," a comparable proportion of the current PPRT money received must go toward this purpose. The same holds true for pension or retirement obligations previously supported by personal property taxes.
Also, any taxing district that levied personal property taxes for another governmental body or school district for tax year 1976 in Cook County or for tax year 1977 in the remainder of the State is required to allocate a proportionate share of their PPRT payment to that governmental body or school district. This also includes proportionate shares paid to library districts and cemetery districts.
After these obligations have been satisfied, the remaining money can be used for the same purposes as the money the district raised through real estate taxes.
Who can we contact with questions regarding PPRT distributions?
LOCAL TAX ALLOCATION DIVISION (3-500)
ILLINOIS DEPARTMENT OF REVENUE
101 W JEFFERSON
SPRINGFIELD IL 62702
217 785-6527 FAX