|
September 25, 2020
State and Local Tax
This Week
Illinois General Assembly
The General Assembly is adjourned until the fall veto session.
New legislation
HB 5839 - Spain - Amends the Property Tax Code. Provides that the abatement for property located in an area of urban decay also applies to newly remodeled single-family or duplex residential dwelling units (currently, only newly constructed single-family or duplex dwelling units). Provides that provisions requiring the abatement to be reduced in 20% increments annually during the last 4 years of the abatement period apply only to abatements granted prior to the effective date.
Rulemaking
The September 25 edition of the Illinois Register did not contain any proposed or adopted rulemakings by the Illinois Department of Commerce and Economic Opportunity or the Illinois Department of Revenue..
Court cases
No new tax-related cases this week.
Tax Tribunal
No new decisions were issued by the Tribunal this week.
One new case may be of interest. At issue in OptumRx v. Department of Revenue is whether prescription drugs provided under a Medicare Part D Plan are exempt from tax or are subject to the low rate of tax imposed on sales of prescription drugs.
Optum filed a claim for refund in which it sought a refund for taxes paid on such drugs. The bases of the claim for refund are that the Illinois Service Occupation Tax and Service Use Tax are preempted by federal law and may not be imposed on prescription drugs provided under a Medicare Part D plan, and that sales of prescription pharmaceuticals under Medicare Part D plans are exempt sales to a government contractor on behalf of an exempt governmental body.
OptumRx is represented by Ted Bots of Tax Institute member law firm Baker & McKenzie.
The Tribunal recently filed its Annual Report with the Illinois General Assembly. According to the report, 142 new cases were filed with the Tribunal during the fiscal year (July 1, 2019 through June 30, 2020), and 170 cases were closed. The Tribunal advises that the amount at issue in the new cases is $105 million.
The Tribunal provided an analysis of the new cases by "tax type" and by dollars at issue. Of the 142 new cases the largest number of cases, 50, were characterized as "Uniform Penalty and Interest" with $6.8 million at issue in total. It appears that this is shorthand for personal responsibility penalty cases. This confirms my observation of new cases filed weekly that a large percentage of the cases filed with the Tribunal are personal responsibility cases. It would be interesting to know how the $6.8 million figure was derived.
As many of you know, when a business fails and trust taxes (sales taxes and income tax withholding) remain unpaid, the Department attempts to collect the unpaid taxes from "responsible officers." For example, there may be an outstanding liability from the business of $100,000 and the Department may attempt to collect the tax by asserting personal responsibility penalties from 3 or 4 individuals that they deem responsible officers. The Department will assert the penalty in the amount of the unpaid tax of $100,000 in my example against each of the purported responsible officers. There is no information as to whether in deriving the $6.8 million dollar amount at issue, the Tribunal would count $300,000 or $400,000 or $100,000 in my example.
44 income tax cases were filed during the most recent fiscal year. The Tribunal didn't provide a breakdown of corporate income tax vs. personal income tax cases. These cases also had the largest amount of dollars at issue with $47.8 million. There were 33 new sales tax cases with the total dollar value at issue of $30.9 million.
The Tribunal did not provide any breakdown of the 170 cases that were closed during the fiscal year. It would be interesting to know the percentage of the dollar amounts assessed that were actually collected from taxpayers.
| 
