Justia Tax Law Opinion Summaries

Articles Posted in Supreme Court of Illinois

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Plaintiff’s class action complaint alleged that Walgreens violated the Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1, by unlawfully collecting a municipal tax imposed by Chicago on purchases of bottled water that were exempt from taxation under the ordinance. The circuit court dismissed the action, citing the voluntary payment doctrine, which provides that money voluntarily paid with full knowledge of the facts cannot be recovered on the ground that the claim for payment was illegal. The appellate court reversed, reasoning that the complaint pleaded that the unlawful collection of the bottled water tax was a deceptive act under the Consumer Fraud Act. The Illinois Supreme Court reinstated the dismissal, first holding that claims under the Consumer Fraud Act are not categorically exempt from the voluntary payment doctrine. The court rejected an argument that the receipt issued by Walgreens constituted a representation that the tax was required by the ordinance. Misrepresentations or mistakes of law cannot form the basis of a claim for fraud. View "McIntosh v. Walgreens Boots Alliance, Inc." on Justia Law

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Municipalities sued other municipalities to recover revenue under the Use Tax Act (35 ILCS 105/1). Use tax is imposed on the privilege of using in Illinois tangible personal property purchased at retail from a retailer outside the state. Retailers who have a sufficient physical presence in Illinois and have out-of-state facilities from which Internet, telephone, and mail-order sales are made of tangible personal property to be used in Illinois must collect use tax from the purchaser and remit the tax to the Illinois Department of Revenue (IDOR) to prevent avoidance of sales tax. The general rate for both sales tax and use tax is 6.25% of the sale price with 5% allocated to the state. For sales tax, the remaining amount is distributed to the municipality and county where the sale occurred. For use tax, the remaining share is distributed to Chicago, the RTA Fund, the Madison County Mass Transit District, and the Build Illinois Fund. The balance is distributed to all other municipalities based on their proportionate share of the state population. The Illinois Supreme Court reinstated the dismissal of the suit. IDOR has been vested, for purposes of plaintiffs’ claims, with exclusive authority to audit the reported transactions that plaintiffs dispute and to redistribute the tax revenue due to an error. In addition, under Municipal Code section 8-11-21, the General Assembly must give a municipality the right to bring suit about missourcing or misreporting of use taxes. View "Chicago v. Kankakee" on Justia Law

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The Diamond law firm filed a qui tam action against My Pillow, under the Illinois False Claims Act, 740 ILCS 175/1, asserting that My Pillow had failed to collect and remit taxes due under the Retailers’ Occupation Tax Act (ROT) and the Use Tax Act (UTA), and had knowingly made false statements, kept false records and avoided obligations under the statutes. The cause was brought in the name of the state but the state elected not to proceed, yielding the litigation to Diamond. At trial, Diamond, who had made the purchases at issue, served as lead trial counsel and testified as a witness. While an outside law firm also appeared as counsel of record for Diamond, its involvement was extremely small. Diamond essentially represented itself. The court ruled in favor of My Pillow on Diamond’s ROT claims, but in favor of Diamond on Diamond’s UTA claims; ordered My Pillow to pay $782,667; and recognized that the litigation had resulted in My Pillow paying an additional $106,970 in use taxes. A private party bringing a successful claim under the Act is entitled to receive 25%-30% of the proceeds. The court held that My Pillow should pay $266,891, to Diamond; found that Diamond was entitled to reasonable attorney fees, costs, and expenses, and awarded Diamond $600,960. The Illinois Supreme Court affirmed the damage award but held that Diamond could not recover attorney fees for work performed by the firm’s own lawyers. To the extent that Diamond prosecuted its own claim using its own lawyers, the law firm was proceeding pro se. View "Schad, Diamond and Shedden, P.C. v. My Pillow, Inc." on Justia Law

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Section 15-86 of the Property Tax Code (35 ILCS 200/15-86 ) provides a charitable property tax exemption specifically for eligible not-for-profit hospitals and their hospital affiliates. In a suit alleging that the section, on its face, violated section 6 of article IX of the Illinois Constitution, which requires that the subject property be “used exclusively for … charitable purposes,” the circuit court granted the defendants summary judgment. The appellate court and Illinois Supreme Court affirmed, based on legislative intent. Section 15-86 does not dispense with the Illinois Constitution’s requirements for charitable property tax exemption but, rather, the Department of Revenue must still evaluate a hospital applicant’s claim for a section 15-86 exemption under constitutional requirements and precedent. The plaintiff also failed to show that section 15-86 was inherently flawed in all circumstances. View "Oswald v. Hamer" on Justia Law

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In 2011, Dr. Parmar died, leaving an estate valued at more than $5 million. Plaintiff was appointed as executor of the estate. At the time of Parmar’s death, the estate was not subject to taxation under the Estate Tax Act, 35 ILCS 405/1. Two days after Parmar’s death, the state revived the tax for the estates of persons who died after December 31, 2010. Plaintiff filed the estate’s Illinois estate tax return and paid the tax liability. Plaintiff eventually filed a second amended return, claiming that the amendment to the Estate Tax Act did not apply to his mother’s estate and no tax was due, then filed a purported class action challenging the retroactivity and constitutionality of the Act. Plaintiff requested a declaration that the Estate Tax Act applies only to the estates of persons who died on or after the amendment’s effective date or that the Estate Tax Act is unconstitutional. The Illinois Supreme Court upheld the suit’s dismissal for lack of jurisdiction; because the complaint seeks a money judgment against the state, it is barred under the State Lawsuit Immunity Act (745 ILCS 5/1). The complaint must be filed in the Illinois Court of Claims. The damages that plaintiff seeks go beyond the exclusive purpose and limits of the Estate Tax Refund Fund and potentially subject the state to liability. Plaintiff could have filed suit in the circuit court under the Protest Moneys Act (30 ILCS 230/1). View "Parmar v. Madigan" on Justia Law

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Citibank provided sales financing to Illinois retailers who offered customers the option of financing their purchases, including the amount of Illinois tax due on the purchases. Citibank originated or acquired consumer charge accounts and receivables from the retailers on a non-recourse basis. When a customer financed a purchase using that account, Citibank remitted to the retailer the amount the customer financed, which included some or all of the purchase price and the sales tax owed based on the selling price. The retailers then remitted the sales tax to the state. Under the agreements between Citibank and the retailers, Citibank acquired “any and all applicable contractual rights relating thereto, including the right to any and all payments from the customers and the right to claim Retailer’s Occupation Tax (ROT) refunds or credits.” Citibank filed a claim for tax refunds under 35 ILCS 120/6 for ROT taxes paid through retailers on transactions that ultimately resulted in uncollectible debt. The Department denied Citibank’s claim. The Illinois Supreme Court reinstated the denial, noting the legislature’s clearly expressed preference in the statutory framework for reporting, remission, and refund only through the retailer. Sophisticated lending institutions no doubt anticipate the eventuality of default and can order their commercial relationships accordingly. View "Citibank, N.A. v. Illinois Department of Revenue" on Justia Law

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Plaintiff (Carle Foundation) owns four Urbana parcels of land that are used in connection with the operation of plaintiff’s affiliate, Carle Foundation Hospital. Before 2004, the parcels were deemed exempt from taxation under the Property Tax Code (35 ILCS 200/15-65(a) because their use was for charitable purposes. From 2004-2011, the Cunningham Township assessor terminated plaintiff’s charitable-use tax exemption. For tax years 2004-2008, plaintiff filed unsuccessful applications with the county board of review to exempt the parcels. Plaintiff filed no applications for tax years 2009-2011. In 2007, plaintiff filed suit. In 2012, Public Act 97-688 (section 15-86) took effect, establishing a new charitable-use exemption specifically for hospitals. Plaintiff argued that section 15-86 applies retroactively. The court agreed, but held that it was “obvious that resolution of the question of whether the standard established by section 15-86(c) applies to plaintiff’s claims will not resolve the merits of those claims.” The appellate court reversed, finding that section 15-86 violated the Illinois Constitution. The Illinois Supreme Court vacated, holding that the court lacked appellate jurisdiction because the trial court erred in entering an order under Rule 304(a). Plaintiff’s exemption claims and plaintiff’s request for a declaration as to what law governs those claims matters are “so closely related that they must be deemed part of a single claim for relief.” View "Carle Foundation v. Cunningham Township" on Justia Law

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Chicago's personal property lease transaction tax ordinance levies a tax on the lease or rental in the city of personal property or the privilege of using in the city personal property that is leased or rented outside the city. The lessee is obliged to pay the tax. In 2011, the department of revenue issued Ruling 11, as guidance to suburban vehicle rental agencies located within three miles of Chicago’s borders. Ruling 11 stated that, in the event of an audit, the department of revenue would hold suburban rental agencies responsible for paying the tax unless there was written proof that the lessee was exempt, based upon the use of the leased vehicle outside the city. Absent such proof, the department would assume that a customer who is a Chicago resident would use the leased vehicle primarily in the city and that a customer who is not a Chicago resident would use the vehicle primarily outside the city. Hertz and Enterprise filed suit. The circuit court enjoined enforcement of the ordinance against plaintiffs with respect to short-term vehicle rental transactions occurring outside the city’s borders. The appellate court reversed. The Illinois Supreme Court found the tax unconstitutional under the state constitution Home Rule Provision. Absent an actual connection to Chicago, Ruling 11, which imposed the tax based on only a lessee’s stated intention or a conclusive presumption of use in Chicago based solely on residency, imposed a tax on transactions that take place wholly outside Chicago borders. View "Hertz Corp. v. City of Chicago" on Justia Law