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June 29, 2018
No newsletter next week. I'm taking next week off.
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.
On June 27, Republican House Minority Leader Durkin announced his legislation to "sunset" the Property Tax Code, effective July 1, 2019. Representative Durkin filed HB 5924. The bill simply repeals the Property Tax Code. There is no language proposed to replace the Property Tax Code. In my estimation, this legislation is unlikely to be considered during the fall veto session.
For those of you who ride motorcycles, Representative Skillicorn filed
HB 5925 which establishes the Toll Exemption for Motorcycles Act. This legislation would exempt motorcycles from all tolls.
Rulemaking
The June 29 edition of the
Illinois Register did not contain any rulemakings by the Illinois Department of Revenue or the Department of Commerce and Economic Opportunity.
Court cases
At issue in
City of Chicago v. Wendella Sightseeing, Inc. is the scope of the City of Chicago Amusement Tax. This case was before the Circuit Court of Cook County on a Complaint for Administrative Review filed by the City of Chicago. The City sought review of a decision of an Administrative Law Judge of the City of Chicago Department of Administrative Hearings.
The Chicago Department of Revenue assessed Wendella for amusement taxes penalties and interest in the amount of $3,288,937.65. The case was before the ALJ on motions for summary judgment. The circuit court judge determined that because the parties were in front of the court on cross-motions for summary judgment the court was entitled to decide the questions presented as a matter of law. The court determined that it would review the case de novo, because a decision by an administrative agency on a question of law is not binding on the court.
While the discussion in the previous paragraph may seem a bit arcane, it is of importance. Under applicable case law, an administrative agency's findings on questions of fact will be reversed only if it is against the manifest weight of the evidence. An agency's determination on a mixed question of fact and law will be overturned only if it is deemed "clearly erroneous." The "clearly erroneous" standard in mixed questions of fact and law is, as a practical matter, a difficult burden for a taxpayer to overcome when challenging an administrative decision of a taxing agency.
Wendella contended that the amusement tax was preempted by Section 5a of the federal Maritime Transportation and Security Act, and contended that it was entitled to take a credit against the Amusement Tax for fees it paid under its license agreement with the City pursuant to a 1997 written agreement with the City, Wendella asserted that its tours are exempt from Amusement Tax because they are primarily educational and the Department improperly extended the audit period beyond the statute of limitations.
The City's ALJ ruled that the amusement tax was preempted by federal law, and Wendella was entitled to take a credit against the amusement tax for fees it paid under its license agreement with the City. The ALJ found that Wendella was liable for amusement taxes collected, but not remitted, minus the credit for payments made pursuant to the license agreement. The ALJ found that Wendella didn't prove its tours are primarily educational and therefore exempt from the tax, and the Department correctly applied the statute of limitations.
The issue of whether Wendella is entitled to take the credit, is of interest. The City issued a letter to Wendella in 1997 authorizing the credit. The City contended that there was a change in the ordinance in 2008 that meant that Wendellat could no longer rely on letter. The City also contended that reliance on the letter was inappropriate in light of Uniform Revenue Procedures Ruling #3 that places a 10 year limit on the reliance on any written information or written advice. The judge found that the City lacked the authority to impose a ten-year time restriction on reliance on a corporation counsel letter from the City.
The judge's ruling that the City's 10-year limitation on written advice is improper is interesting. I would note that the Illinois Department of Revenue has a similar limitation on private letter rulings at
2 Ill. Adm. Code 1200.110(e). However, I would be surprised if this part of the decision is upheld if the case is appealed although I may be a bit biased because I was the author of the 10 year limitation on private letter rulings by the Department of Revenue when I was General Counsel of the Department.
Tax Tribunal
No new decisions were issued by the Tribunal this week. None of the new cases filed with the Tax Tribunal this week raise any unique issues. The number of cases filed with the Tribunal through the first 6 months of this year is down from previous years. As of today, only 76 cases have been filed with the Tribunal this year. Of that number, approximately 1/3 of the cases have been filed by one attorney who represents small businesses before the Department.
Nominations are being accepted now until 5 p.m. June 29, 2018. For additional questions, please contact Katie Stonewater at [email protected].
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