January 18, 2019
State and Local Tax this week
Illinois General Assembly
The House and the Senate are scheduled to return to Springfield January 29 through January 31.
The Senate Democrats released their committee appointments on January 14. The Senate Revenue committee will have the following Democrat members:
Toi Hutchinson, Chair
Christina Castro, Vice-Chair
As of this morning, I haven't seen any other committee appointments.
The flood of new legislation introduced by members of the 101st General Assembly has begun. As of this morning, 807 bills have been introduced in the House and 62 bills have been introduced in the Senate. Of the bills filed thus far in the House, over 400 are "shell" bills. There are a number of tax-related bills that have been introduced this week:
- (Tom Morrison) -
Amends the Property Tax Code. Provides that upon establishing the compensation of board of review employees fixed by the county board, the county shall, at all times, ensure that each of the commissioners on the board of review receives equitable resources and staffing.
HB 366 - (Marron) - Amends the Property Tax Code. In a Section granting a natural disaster homestead exemption, removes language providing that the square footage of the rebuilt residential structure may not be more than 110% of the square footage of the original residential structure as it existed immediately prior to the natural disaster. Removes provisions providing that the taxpayer's initial application for a natural disaster homestead exemption must be made no later than the first taxable year after the residential structure is rebuilt. Provides that, if the square footage of the rebuilt structure exceeds 110% of the square footage of the original residential structure as it existed immediately prior to the natural disaster, then the amount of the natural disaster homestead exemption is the equalized assessed value per square foot of the rebuilt structure multiplied by 110% of the square footage of the original residential structure as it existed immediately prior to the natural disaster minus the base amount. Provides that the amendatory Act is retroactive to the 2012 taxable year. Sets forth provisions concerning the valuation of farm improvements that have been rebuilt following a natural disaster. Effective immediately.
HB 368 - (Windhorst) - Amends the Property Tax Code. Provides that the homestead exemption for veterans with disabilities carries over to the benefit of the veteran's surviving spouse if the veteran resided outside of the State but otherwise qualified for the exemption at the time of his or her death and the surviving spouse relocates to Illinois after the death of the veteran.
HB 369 - (Parkhurst) - Amends the Illinois Income Tax Act. Creates an income tax deduction in an amount equal to the out-of-pocket costs incurred by a taxpayer during the taxable year for expenses associated with long-term care for the taxpayer or the taxpayer's family member. Effective immediately.
Governor's Executive Orders
Provides that the Department of Commerce and Economic Opportunity shall deliver reports to the Governor containing: a comprehensive review of industries the Department has identified for targeted growth to determine the ongoing effectiveness of investment in those industries and to identify emerging opportunities for investment in growing industries; a comprehensive review of the return on investment for targeted industries with recommendations for improving the efficiency and effectiveness of existing investment, and best practices and lessons learned for future investment in emerging growth industries; and comprehensive recommendations for improving alignment of workforce resources for communities that have been disenfranchised, including rural and urban communities. Contains provisions regarding: savings; prior executive orders; severability; and other matters. Effective immediately.
did not contain any new rulemakings by the Illinois Department of Commerce and Economic Opportunity.
Today's edition of the Illinois contains 5 new rulemakings by the Illinois Department of Revenue. The amendment to the Retailers' Occupation Tax rules is described as follows:
"The amendments to Sections 130.801 and 130.901 implement PA 100-940. Pursuant to the public act, any person who fails to keep books and records or fails to produce books and records for examination, as required by Section 7 of the Retailers' Occupation Tax Act, is liable to pay to the Department, for deposit into the Tax Compliance and Administration Fund, a penalty of $1,000 for the first failure to keep books and records or produce books and records for examination and a penalty of $3,000 for each subsequent failure to keep books and records or produce books and records for examination. The penalty will not apply if the taxpayer shows that he or she acted with ordinary business care and prudence."
You should note the amendment to Section 130.801(g). Currently, this section quotes Section 7 of the Act which provides that an auditor or investigator may demand documentary evidence to support a claim for exemption and the taxpayer shall have 60 days to produce the documentation. If the Department doesn't receive the documentation within the 60 period, or during the period of any extension, "the matter shall be closed, and the transaction shall be conclusively presumed to be taxable. The Department has added an example to this rule dealing with a request for resale and exemption certificates and provideing that if the retailer fails to produce the certificates the retailer is subject to the new penalty to keep or produce books and records.
The enactment of this new penalty makes it even more incumbent upon taxpayers to maintain up to date documentation of exemption and resale certificates. Prior to this law, taxpayers subject to audit who gaps in documentation would be able to fill in those gaps during the audit and up to and through litigation. Taxpayers will still be able to fill in the gaps, but this new penalty provision will allow Department auditors utilize the threat of the penalty to push for earlier compliance with document requests.
Also note that in subsection (i)(2) of the proposed rules, the Department announced its intent to require the production of books and records for inspection "during unscheduled visits by unauthorized agents and employees of the Department at the retailer's place of business during business hours."
The Service Occupation Tax Act rules proposed amendments also incorporate the new books and records penalty.
The Cigarette Tax Act and Cigarette Use Tax Act rules contain proposed rules on the new books and records penalty, and have some additional amendments addressing other statutory changes. The description of the Cigarette Tax At rules states as follows:
"Section 440.110 is amended to implement PA 100-940. Pursuant to the public act, any person who fails to keep books and records or fails to produce books and records for examination, as required by Sections 11, 11a, 11b and 11c of the Cigarette Tax Act, is liable to pay to the Department, for deposit into the Tax Compliance and Administration Fund, a penalty of $1,000 for the first failure to keep books and records or produce books and records for examination and a penalty of $3,000 for each subsequent failure to keep books and records or produce books and records for examination. In response to PA 100-940, a new Section 440.75 is added. The public act requires that cigarettes only be sold in packages of 20 or 25 cigarettes; the sale of individual or loose cigarettes is prohibited. Any person who violates this prohibition is liable to pay to the Department, for deposit in the Tax Compliance and Administration Fund, a penalty of $1,000 for the first violation and $3,000 for any subsequent violation. In addition, Section 440.110 is updated by adding the recordkeeping requirements for secondary distributors, manufacturer representatives, and retailers enacted by PA 98-1055 and PA 99-152; by adding statutory requirements imposed on distributors relating to the issuance of invoices; and by adding the existing statutory penalties for failure to maintain books and records."
Finally, the Tobacco Products Tax Act rules are amended.In addition to rules on the new books and records penalties, included in the amendments is an amendment to Section 660.20(e) which provides that " Every retailer who purchases rolls, made wholly or in part of tobacco, when those rolls have an integrated cellulose acetate filter and a wrapper or cover that is made in whole or in part of tobacco and the rolls are contained in packages of 20 or 25, shall procure an invoice from the seller that states whether the rolls weigh less than 4 pounds per thousand or weigh 4 pounds or more per thousand. If a person fails to produce an invoice for inspection by the Department upon request that states whether the rolls weigh less than 4 pounds per thousand or weigh 4 pounds or more per thousand, a prima facie presumption shall arise that the rolls weigh less than 4 pounds per thousand. If the rolls do not contain a tax stamp in accordance with Section 10-10 of the Act, the rolls are contraband and subject to seizure and forfeiture."
No new tax-related cases this week.
No new decisions were issued this week by the Tribunal. One
new case may be of interest.
Although the details in the petition are a bit sparse, it appears that the Department has again taken the position that a payment for drugs for Medicaid recipients via a managed care organization is not an exempt sale to the government. The Department cited Section 130.2080 of its rules which provides in pertinent part ". . . only sales of tangible personal property invoiced directly to and paid by governmental bodies that possess active E-numbers are exempt."