Justia Tax Law Opinion Summaries

Hartney, a fuel oil retailer with a home office in Forest View, in Cook County, accepted purchase orders in the Village of Mark, in Putnam County, through a business with which it contracted. No Hartney employees were involved there. By so structuring sales, Hartney avoided liability for retail occupation taxes of Cook County, Forest View, and the Regional Transportation Authority. Hartney’s interpretation of the law was consistent with regulations published at the time. However, The Illinois Department of Revenue determined, through audit, that Hartney’s sales were attributable to the company’s Forest View office, rather than the Mark location reported by the company, and issued a notice of tax liability. Hartney paid penalties of $23,111,939 under protest and filed suit. The court agreed that the bright-line test for the situs of sale is where purchase orders are accepted. The appellate court affirmed. The Illinois Supreme Court, court disagreed. The court found the “Jurisdictional Questions” regulations of the Administrative Code inconsistent with the statutes and case law. The legislature has not adopted a single-factor test for the situs of retail activity. The court’s own precedent calls for fact-intensive inquiry where there is a composite of many activities, and the legislature, by consistently employing the “business of selling” language, has effectively invoked that precedent. The Department of Revenue must abate Hartney’s penalties and tax liability for the relevant period because Hartney’s actions were consistent with its regulations in effect at the time.View "Hartney Fuel Oil Co. v. Village of Forest View" on Justia Law

WRB owns the Wood River Petroleum Refinery in Madison County. Following major renovations, WRB applied to the Illinois Environmental Protection Agency under the Property Tax Code (35 ILCS 200/11-25) to have 28 of the refinery’s systems, methods, devices, and facilities certified as “pollution control facilities” for preferential tax assessment. IEPA recommended approval of two of the requests by the Pollution Control Board (PCB), which accepted the IEPA’s recommendations. The Board of Education sought to intervene in the proceedings where certification had been granted, arguing that it had a legally cognizable interest because the certifications would ultimately deprive it of tax revenue. PCB denied the petitions as moot. While requests to reconsider were pending, the IEPA recommended that the PCB approve WRB’s applications to certify the remaining 26 systems. Before PCB took action on those cases, the Board of Education sought to intervene. PCB denied the motion and granted certification in each case. The appellate court dismissed the Board of Education’s consolidated appeal for lack of jurisdiction under section 41 of the Illinois Environmental Protection Act, under which the Board of Education sought review The court noted the specific provision for appeals in proceedings involving PCB’s “issuance, refusal to issue, denial, revocation, modification or restriction of a pollution control certificate,” contained in the Property Tax Code,35 ILCS 200/11-60. That provision requires that proceedings originate in the circuit court, rather than by direct administrative review in the appellate court. The Illinois Supreme Court affirmed. View "Bd of Educ. of Roxana Cmty. Unit Sch. Dist/ No. 1 v. Pollution Control Bd." on Justia Law

WRB owns the Wood River Petroleum Refinery in Madison County. Following major renovations, WRB applied to the Illinois Environmental Protection Agency under the Property Tax Code (35 ILCS 200/11-25) to have 28 of the refinery’s systems, methods, devices, and facilities certified as “pollution control facilities” for preferential tax assessment. IEPA recommended approval of two of the requests by the Pollution Control Board (PCB), which accepted the IEPA’s recommendations. The Board of Education sought to intervene in the proceedings where certification had been granted, arguing that it had a legally cognizable interest because the certifications would ultimately deprive it of tax revenue. PCB denied the petitions as moot. While requests to reconsider were pending, the IEPA recommended that the PCB approve WRB’s applications to certify the remaining 26 systems. Before PCB took action on those cases, the Board of Education sought to intervene. PCB denied the motion and granted certification in each case. The appellate court dismissed the Board of Education’s consolidated appeal for lack of jurisdiction under section 41 of the Illinois Environmental Protection Act, under which the Board of Education sought review The court noted the specific provision for appeals in proceedings involving PCB’s “issuance, refusal to issue, denial, revocation, modification or restriction of a pollution control certificate,” contained in the Property Tax Code,35 ILCS 200/11-60. That provision requires that proceedings originate in the circuit court, rather than by direct administrative review in the appellate court. The Illinois Supreme Court affirmed. View "Bd. of Educ. of Roxana Cmty. Unit Sch. Dist. No. 1 v. Pollution Control Bd." on Justia Law

The ability of consumers to make purchases on the internet from out-of-state merchants without paying Illinois sales or use taxes caused Illinois retailers to ask the legislature to “level the playing field.” The result was a taxing statute, Public Act 96-1544, effective in 2011, called the “click-through” nexus law. The law was challenged by a group of internet publishers that display website texts or images, such as a retailer’s logo, containing a link to a retailer’s website; they are compensated by the retailer when a consumer clicks on the link and makes a purchase from the retailer. Out-of-state retailers who use such arrangements to generate sales of over $10,000 per year become subject to taxation under the statute. Their challenge was based on the federal Internet Tax Freedom Act, 47 U.S.C. 151, which prohibits discriminatory taxes on electronic transactions, and the commerce clause of the U.S. Constitution. The Illinois Supreme Court held that the statute is invalid. The court noted that such marketing, when conducted through print media or on-the-air broadcasting, does not give rise to tax obligations under the Illinois statute. The enactment is a discriminatory tax on electronic commerce within the meaning of federal law, which preempts it. The court did not reach the commerce clause issue. View "Performance Mktg. Ass'n, Inc. v. Hamer" on Justia Law

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

In 2009, plaintiffs alleged that the defendants, in 1999 and 2000, marketed and sold to them investments, known as the 1999 Digital Options Strategy and the 2000 COINS Strategy, which were promoted as producing profits and reducing tax liabilities. Plaintiffs were charged substantial fees, but the promised benefits did not occur. The parties agree that the five-year statute of limitations for actions not otherwise provided for is applicable. The circuit court dismissed; the appellate court reversed and remanded. The Illinois Supreme Court affirmed, applying the “discovery rule” that a limitation period begins to run when the plaintiff knows or reasonably should know of the injury and its wrongful cause. The limitation period began to run when the IRS issued deficiency notices to plaintiffs in 2008. The complaint adequately alleged breach of fiduciary duty; that there was no basis for dismissing the claim as legally insufficient.View "Khan v. Deutsche Bank AG" on Justia Law

Effective with 1982 legislation, a portion of each motorcycle registration fee was deposited in the state treasury to fund a motorcycle safety training program. In 1993, the amount set aside for the program was increased to be the total amount of each fee, and the monies were to be placed in a trust fund outside of the state treasury. Without amending the Act, the legislature began, in 1992, to authorize the transfer of money from the motorcycle fund and other funds into the General Revenue Fund, through budget implementation acts and amendments to the State Finance Act. A nonprofit corporation initiated a class action. Summary judgment was granted for the defense, and the appellate court affirmed. The Illinois Supreme Court affirmed, finding no evidence that the cycle fees are private. The court rejected an argument based in trust-law principles, arguing that the trust was irrevocable because no power to revoke the trust was conferred by the legislation that created it. A general assembly cannot control the actions of a subsequent elected body. It has long been recognized that the legislature has the authority to order monies collected in one fund to be transferred to a different fund.

The U.S. Court of Appeals for the Seventh Circuit, considering a suit by the city to collect taxes from a ticket reseller, requested a determination of whether municipalities may require electronic intermediaries to collect and remit amusement taxes on resold tickets. The Illinois Supreme Court held that state law preempts such a tax. The state has a long history of protecting consumers and has regulated auctioneers for more than 10 years and ticket resales for 20 years; it has regulated scalping in some form since 1923. The statutory scheme, and the debates which produced the Ticket Sale and Resale Act (720 ILCS 375/0.01) evince an intent to allow internet auction listing services to opt out of any obligation regarding local tax collection. The city overstepped its home rule authority.

Taxpayers challenged three substantive bills and one appropriation bill, part of capital projects, signed by the governor in July 2009. The appellate court held that Public Act 96–34 violated the single-subject clause of the Illinois Constitution, and that the other acts were invalid because they were contingent on enactment of Public Act 96–34. The supreme court reversed, reinstating the trial court's dismissal. All of the substantive provisions in Act 96–34 are connected to capital projects; they establish revenue sources to be deposited into the Capital Projects Fund or are related to the overall subject of the Act in that they help implement other provisions. The court upheld the other acts against single-subject challenges, including challenges based on the contingency clauses. Nothing in the state constitution prohibits making legislation contingent on a separate legislative enactment. The enactments did not violate the separation of powers doctrine, public funds clause, uniformity clause, or run afoul of constitutional veto procedures. An enactment that authorizes expenditure of public funds for a public purpose is not unconstitutional for incidental benefit to private interests. There is nothing constitutionally impermissible about the inclusion of the "as approximated below" language.

Tax valuation objection cases, filed between 2000 and 2005, settled with a 2006 agreed order under which the Cook County treasurer was to refund overpaid taxes with interest. The Property Tax Code interest rate was 5% until December 31, 2005; legislation (35 ILCS 200/23-20) effective January 1, 2006, provides for interest of the lesser of 5% or the Consumer Price Index. The supreme court held: The circuit court retained jurisdiction to award judgment interest after an appeal was filed. Because the treasurer had not appealed the issue of interest on two refunds, the court upheld judgment requiring that interest be paid at 5% from the date the taxes were paid through December 31, 2005 and based on the lower CPI rate from January 1, 2006, forward. The court properly applied the amendment. An objector did not forfeit judgment interest by failing to raise the issue before the trial court. The Property Tax Code controls interest that must be paid until there is a full refund of taxes paid in protest; if interest on the tax refund is not paid in full, judgment interest under the Code of Civil Procedure is allowed on the amount of outstanding interest.