Metro. Life Ins. Co. v. Hamer

The Illinois Tax Delinquency Amnesty Act established a period, October 1, 2003 until November 17, 2003, during which "all taxes due" from 1983 through the first half of 2002 could be paid without interest or penalties. Tax liabilities not paid within the amnesty period would incur interest at 200%. Illinois Department of Revenue regulations provided that a taxpayer participating in the program must pay its entire tax liability regardless of whether that liability was known to the Department or the taxpayer. Those who were unsure of their tax liability were to pay a good-faith estimate during the amnesty period. An audit of the plaintiffs’ federal tax returns for 1998 and 1999 began in 2000 and ended in 2004, after the amnesty period expired and caused changes in their Illinois tax liability. The plaintiffs paid the taxes, along with single interest, but the Department assessed an interest penalty of 200%, (more than $2 million), which they paid under protest before filing suit. The circuit and appellate courts ruled in favor of plaintiffs. The Illinois Supreme Court reversed in favor of the Department. The phrase “all taxes due” means taxes due when initial returns are required to be filed, rather than taxes known to be due during the amnesty period. Taxpayers who were under IRS audit and were, therefore, uncertain about their ultimate Illinois tax liability could participate in the amnesty program by making a good-faith estimate pursuant to the regulations and making payment based on it. There was no constitutional violation because those in the plaintiffs’ position had an opportunity to avoid 200% interest by making a good-faith estimate of tax liability and paying it during the amnesty period, with the possibility of a refund. View "Metro. Life Ins. Co. v. Hamer" on Justia Law