November 2, 2018

State and Local Tax this week

The November 2 edition of the Illinois Register  did not contain any new rulemakings by the Illinois Department of Revenue.

The Department of Commerce and Economic Opportunity proposed an amendment to its administrative hearings rules this week.  The Department described the nature of the changes as follows:  

"The Department is amending the rules to increase efficiency of administrative hearings, improve use of scarce resources by expediting the discovery process, clarify provisions relating to recovery of grant funds and suspension and revocation of tax credits, remove unnecessary rules, and make various technical changes. "

The next meeting of the Illinois General Assembly's Joint Committee on Administrative Rules is scheduled for November 13 in Springfield.  At this time, there are 5 rulemakings by the Illinois Department of Revenue scheduled for JCAR consideration. the rulemakings scheduled for review are clean up rulemakings filed over the past few months by the Department. Here is a link to the  JCAR agenda,  

Tax Tribunal 

No new decisions were issued this week by the Tribunal.  

No new case filed with the Tribunal this week raise issues of interest. 

Court Cases

The United States Court of Appeals for the Seventh Circuit recently issued an opinion upholding a decision of the United States District Court for the Central District of Illinois in  Perry et al. v. Coles County, Illinois.  

Perry and another plaintiff, on behalf of themselves and other property owners, sued Coles County in federal district court "for placing a disproportionate tax on commercial and industrial properties in Mattoon Township." The plaintiffs alleged a violation of the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution.

The district court dismissed the claims.  The plaintiffs appealed.  The court of appeals upheld the dismissal.  

The plaintiffs own commercial and industrial parcels in Mattoon Township.  The plaintiffs filed a class-action lawsuit against Coles County.  

According to the complaint, from 2002 to 2016 Coles County did not perform general assessments as required by the Property Tax Code.  Instead, Coles County used a property's assessment from the last year in which the property was assessed.

In 2015 the County ordered a county-wide assessment.  However, the county only reassessed the properties in Mattoon Township for the 2016 tax year. From the 2015 to the 2016 tax years the reassessed values for commercial properties increased 25% and 21% for industrial properties in Mattoon Township.  Assessed values did not change elsewhere in the County.

Plaintiffs alleged an Equal Protection violation by placing an disproportionate tax on them and treating them separately from similarly situated property owners in the county.  The County moved to dismiss the case from federal court for lack of jurisdiction and the court granted the dismissal on the basis of comity. 

In upholding the dismissal, the court of appeals explained that "out of respect for state function, the comity doctrine restrains federal courts from entertaining claims for relief that risk disrupting state tax administration."  The court observed "[s]pecifically as relevant here, the comity doctrine bars taxpayers from asserting Section 1983 claims against 'the validity of state tax systems' via federal lawsuits."  The court noted that taxpayers seeking such relief must seek protection of the federal rights by state tax remedies.

The court noted that it has previously explained that in Illinois "aggrieved taxpayers can file property tax assessment complaints with a county board of review," and then appeals decisions of boards of review by either appealing to the Property Tax Appeal Board ("PTAB") or file a tax objection complaint directly in state circuit court.

The plaintiffs attempted to argue that they fall into an exception to the abstention doctrine outlined by the court because Illinois state courts do not provide them with a "complete" remedy.  The court rejected this argument.

It should be noted that the federal Tax Injunction Act was not at issue in the case because the case was dismissed based on the comity doctrine. 

The Tax Injunction Act provides that "[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." (see 28 U.S.C. 1341)  

Publications

The Illinois Department of Revenue recently issued an Information Bulletin  FY 2019-13 changes to the filing process of the Illinois Voluntary Disclosure Program.  Effective in August 2018 the program was moved from the Department's Board of Appeals in Chicago, to the Department's Problems Resolution Division in Springfield.

The Illinois Department of Revenue established a web page dedicated to information and resources on the Illinois tax treatment of remote sellers post-Wayfair.

Save the Dates

December 13 - BDO and the Illinois Chamber of Commerce will hold a half -day seminar "The Year in Review of State and Local Taxes."  Additional details and registration information will be forthcoming shortly.

The next meeting of the Tax Institute will be on Monday December 17 from 2:00 - 4:00.  For now, it is scheduled to be held at the Illinois Chamber Chicago offices at 300 S. Wacker Drive, 8th Floor conference room.  Please let me know if you would like to host.  We will discuss the impact of the election results on the Illinois tax climate in 2019 and the results of the November veto session.  We will also discuss potential legislation for 2019.