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July 13, 2018
State and Local Tax this week
Illinois General Assembly
The General Assembly returns to Springfield for the fall veto session on November 13. The House and Senate are scheduled to be in session November 13 through 15 and November 27 through 29.
HB 4415 - which extended the sunset date of the sales tax exemption for coal and aggregate equipment until June 30, 2023 was signed into law by the Governor as P.A. 100-0594.
Rulemaking
The July 6 edition of the
Illinois Register did not contain any rulemakings by the Illinois Department of Revenue or the Department of Commerce and Economic Opportunity. This edition of the Illinois Register contained the regulatory agenda of the Illinois Treasurer. The Treasurer advised that he plans to propose rulemaking implementing the Revised Uniform Unclaimed Property Act during July 2018.
The July 13 edition of the
Illinois Register did not contain any rulemakings by the Illinois Department of Revenue or the Department of Commerce and Economic Opportunity.
The most recent edition of the Illinois Register contains the regulatory agenda for the Illinois Department of Revenue. The regulatory agenda of state agencies is required to be published twice each year in the Illinois Register. Regulatory agendas are aspirational. Agencies are not limited to engaging only in rulemaking that is listed in the semi-annual regulatory agenda. However, reviewing regulatory agendas can provide some insight into issues that agency staff have concluded are required subjects of rulemaking.
The IDOR regulatory agenda for Part 100, the income tax rules, notably indicates that the Department is considering the promulgation of rules governing the reallocation of items under Section 404 of the Illinois Income Tax Act. This has been a contentious subject in the past and will likely remain contentious if the Department follows through with a rulemaking on this subject. As I recall, the Department floated draft regulations on this subject a number of years ago that were subject to widespread criticism.
The remainder of the Department's regulatory agenda appears to be directed to efforts to continue to update the regulations to reflect enacted legislation.
Court cases
In each case, a bankruptcy court authorized the sale of the firms' principal assets (the businesses had debts that far exceeded the value of their assets). The bankruptcy courts, pursuant to section 363(f) of the Bankruptcy Code allowed the sales to proceed free and clear of the interests of the properties held by any entity other than the bankruptcy estates, including the interest of the Illinois Department of Revenue under the Bulk Sales Provisions of Illinois law.
IDOR appealed. The appeals court upheld the determinations of the bankruptcy courts. The court ruled that assuming IDOR's interest is cognizable under Section 353 of the Bankruptcy Code, it did not give the court a realistic assessment of the value of its interest.
Tax Tribunal
No new decisions were issued by the Tribunal this week. One new cases recently filed with the Tax Tribunal is of interest.
The Department denied a claim for refund for the tax period ending December 31, 2010. At issue is whether the Illinois claim for refund, which was triggered by a federal refund claim was out-of-statute. The Department contends the claim was filed after the expiration of the statute of limitations. Country Financial contends that it was not.
The petition outlines the history of the various amended returns that were filed both at the federal and state level and the active interaction between representatives of the Department and Country Financial throughout this chronology.
The facts and chronology are somewhat complex. I would direct your attention to the petition to obtain an understanding of the facts. I highlight some of the salient portions of the chronology below.
Country Financial disputes the Department's assertion that the statute for reporting the federal change at issue began on April 21, 2015. It explains that there was no 2010 Federal change to report to Illinois pursuant to the original federal RAR accepted on April 21, 2015.(The Department alleges this date "started the clock" for purposes of the statute of limitations.)
In contrast, Country Financial contends that the its 2010 amended IL-1120-X reflecting a net loss deduction filed on January 4, 2018 was timely filed based on a March 31, 2016 federal amended return and its March 17, 2017 Illinois amended return.
Country Financial advises that it filed two separate 2010 IL-1120-X returns based on written guidance it received from the Department in a notice of claim denial it received for the 2008 tax year.
In summary, this case highlights the complexity that results when there are amendments to returns for multiple years, some of those years have multiple amendments, and you throw in amendments that generate Illinois net losses to be carried forward to subsequent years as well.
In this instance, Country Financial is, in my estimation, a victim of a "gotcha" situation by the Department and should not be denied the refund claim.
Publications
The Illinois General Assembly Commission on Government Forecasting and Accountability has issued its Monthly Briefing for the Month Ended: June 2018.
Illinois Chamber Cyber Security Conference - July 24 - Chicago
Cybersecurity is an issue that affects everyone. The Illinois Chamber of Commerce, in collaboration with the U.S. Chamber of Commerce, is hosting its third annual Cyber Security Conference to bring together public and private entities to discuss policy and best practice in cybersecurity to help businesses be prepared for the future.
Collaboration and communication between government entities and the private sector is essential to success combating cyber threats. Featured speakers include NIST, Merit Labs, Baker McKenzie, the U.S. Security Service and more. For more information, visit the conference website.
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