The House and Senate returned to Springfield on April 13. The House was in session through Friday. The Senate was in session through Thursday.

The Senate and the House both return to Springfield on Tuesday.

The House Revenue committee met briefly this week. One bill was considered and passed to the floor. HB 1356 - Replaces everything after the enacting clause. Amends the Property Tax Code. Provides that, in addition to any other requirements set forth by law, each member of the board of review in a county with 3,000,000 or more inhabitants must be an attorney licensed to practice law in Illinois. Limits the concurrent exercise of home rule powers.

The Senate Revenue committee met on Wednesday. SB 2531 the Chamber Tax Institute SALT cap work around legislation was passed out of the committee consideration unanimously.

The Senate Revenue committee also passed 32 other bills out of committee to the floor. Here is a link bills considered by committee.

One of the bills passed by the committee was SB 2062 - Castro - an initiative of the Cook County Assessor that would require owners of income producing properties to file physical descriptions of their properties with the Assessor. I testified in opposition to the bill. The bill passed out the committee on a partisan vote.

SB 2279 - Stadelman - an initiative of the Illinois Department of Revenue, was also considered by the committee. I testified in opposition to the provision in SB 2279 that provides the statute of limitations for Department assessments will be extended for 12 months when a taxpayer files a claim for refund. Unfortunately, the committee voted the bill out of committee and to the floor. I will continue in efforts to have this provision removed from the legislation.

The Senate Revenue committee is scheduled to meet again next Thursday.

The House Revenue committee has not yet scheduled a hearing for next week.

SB 1137 - Simmons - Replaces everything after the enacting clause. Amends the Use Tax Act and the Retailers' Occupation Tax Act. Provides that the manufacturing or assembling machinery and equipment exemption will no longer apply to machinery and equipment purchased for use in an environmental justice community as of January 1, 2023. Defines "environmental justice community".

SB 1140 - Gillespie - Replaces everything after the enacting clause. Amends the Property Tax Extension Limitation Law in the Property Tax Code. Provides that, for levy year 2022 and thereafter, the limiting rate shall include 50% of the value of new property (currently, 100% of the value of new property is excluded). Makes changes to the definition of "aggregate extension base". Amends the Tax Increment Allocation Redevelopment Act of the Illinois Municipal Code. Adds two factors to the determination of a "blighted area" for improved, industrial, commercial, and residential buildings or improvements related to poverty and unemployment. Removes or modifies various factors from the definitions of "blighted area" and "conservation area" for improved and vacant areas. Provides that a new redevelopment project shall have a completion date no later than December 31st of the 10th year after the ordinance was adopted (rather than the 23rd year) and may be extended to 15 years (rather than 35 years). Provides that the joint review board and municipality shall approve surplus funds and extensions of redevelopment project area completion dates. Provides that surplus funds shall be distributed annually within 90 days (currently, 180 days) after the close of a municipality's fiscal year. Provides that a new or modified redevelopment project area that overlaps with any existing redevelopment project area shall not be approved. Effective immediately, except that provisions amending the Illinois Municipal Code take effect on January 1, 2022.

SB 2182 - Simms - This bill is an Illinois Chamber initiative. Replaces everything after the enacting clause. Reinserts the provisions of the introduced bill with changes. Provides that a "qualifying Illinois data center" means a new or existing data center that, among other criteria, is located in the State of Illinois, is located within a 5-mile geographic radius, and is connected by common infrastructure. Provides that a data center and an associated tenant may enter into an ancillary memorandum of understanding, as prescribed by the Department of Commerce and Economic Opportunity, for purposes of receipt of an exemption. Provides that the Department is authorized to conform existing memorandums of understanding with the provisions concerning data center investments. Modifies the definition of "tenant". Makes other changes. Effective immediately.

HB 1839 - Croke - Replaces everything after the enacting clause. Reinserts the provisions of the introduced bill with changes. Modifies the terms by which the Department of Commerce and Economic Opportunity may require a business organization to agree to that ensure the business is a good corporate citizen as a condition for receiving development assistance. Provides that compliance with good corporate citizen eligibility is required throughout the term of a development assistance agreement. Provides that the Department may suspend the development assistance for noncompliance and may seek revocation of any credits or exemptions that were earned or used during a time when the business or its corporate parent or affiliate was not in compliance with any applicable requirements. Allows a business whose development assistance is suspended to be issued certificates of verification or exemption in suspended status under specified circumstances. Modifies defined terms.

HB 2054 - Bennett - Replaces everything after the enacting clause. Amends the Counties Code. Provides that 1% of the school facility occupation taxes collected shall be distributed to the regional superintendent of schools (currently, these moneys are deposited into the Tax Compliance and Administration Fund) to cover the costs in administering and enforcing the provisions of the school facility occupation taxes Section of the Code. Effective July 1, 2021.

The April 16 edition of the Illinois Register did not contain any proposed or adopted rulemakings by the Department of Commerce and Economic Opportunity or the Department of Revenue.

No tax-related cases this week.

One new decision was issued by the Tribunal this week. Pepsico Inc. and Affiliates v. Department of Revenue. This case is a protest of Notices of Deficiency. The notices were based on audit adjustments that contested PepsiCo's determination that Frito-Lay North America was an 80/20 company. Including Frito-Lay North America to the unitary business group had the effect of adding around $2.5 billion each year to the unitary business group's income.

PepsiCo filed a Motion for Summary Judgment in which it disputed the Department's contention that FLNA should not be treated as an 80/20 and, among other things, explained how the payroll factor used to determine FLNA's eligibility as an 80/20 should be calculated.

The Tribunal denied PepsiCo's motion for summary judgment. My very cursory description of the case doesn't do it justice. I recommend that you not only read the Tribunal decision, but also PepsiCo's filings in support of its motion for summary judgment, as well as the Department's responses. Here is a link to the filings.

I find this decision disturbing on a number of levels - first on the substantive issue of the proper definition of the 80/20, second, the fact that this case evidences the determination of the Department or Revenue's litigation division to "win at all costs," rather than attempting to reach the correct answer, and third my perception that the Tribunal does not appear to take an independent look at issues before it.

Ted Botts and Drew Hemmings of Tax Institute member law firm Baker & McKenzie represented Pepsico.

One of the new cases filed with the Tribunal may be of interest. Evonik Corporation v. Department of Revenue .is a protest of Notices of Deficiency for corporate income tax resulting from an audit. The Department asserted in its explanation of adjustments that the petitioner should have (1) added back to its base income interest paid to a foreign affiliate, (2) added back to its base income intangible expenses (i.e., royalties) paid to a foreign affiliate: and (3) included in the numerator of Petitioner's sales factor merchandise shipped to foreign countries.

Evonik protested the notices of deficiencies and asked the Tribunal to find and declare that Evonik is not required to add back to its base income expenses subtracted for interest and royalties paid to its foreign affiliate, or include merchandise shipped to foreign countries in Evonik's sales factor numerator for the tax years at issue within the Audit Period.

Evonik is represented by David Dorner of Tax Institute member law firm Reed Smith.