SB2875eng 95TH GENERAL ASSEMBLY

SB2875 Engrossed LRB095 18332 BDD 44416 b

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Department of Revenue Law of the Civil Administrative Code of Illinois is amended by changing Section 2505-200 as follows:

(20 ILCS 2505/2505-200) (was 20 ILCS 2505/39c-1a)

Sec. 2505-200. Electronic filing rules.

(a) The Department may adopt rules to authorize the electronic filing of any return or document required to be filed under any Act administered by the Department.

(b) The Department may adopt rules to require the electronic filing of the income and replacement tax return required to be filed under the Illinois Income Tax Act for a taxable year by any taxpayer (other than an individual) who is required to file its federal income tax return electronically for the taxable year.

(c) In the case of an electronically filed return or other document required to be filed with the Department or maintained by any taxpayer, these rules may set forth standards that provide for acceptance of a signature in a form other than in the proper handwriting of the person.

(Source: P.A. 91-239, eff. 1-1-00.)

Section 10. The Illinois Income Tax Act is amended by changing Sections 502, 911.1, and 911.2 as follows:

(35 ILCS 5/502) (from Ch. 120, par. 5-502)

Sec. 502. Returns and notices.

(a) In general. A return with respect to the taxes imposed by this Act shall be made by every person for any taxable year:

(1) for which such person is liable for a tax imposed by this Act, or

(2) in the case of a resident or in the case of a corporation which is qualified to do business in this State, for which such person is required to make a federal income tax return, regardless of whether such person is liable for a tax imposed by this Act. However, this paragraph shall not require a resident to make a return if such person has an Illinois base income of the basic amount in Section 204(b) or less and is either claimed as a dependent on another person's tax return under the Internal Revenue Code of 1986, or is claimed as a dependent on another person's tax return under this Act.

Notwithstanding the provisions of paragraph (1), a nonresident whose Illinois income tax liability under subsections (a), (b), (c), and (d) of Section 201 of this Act is paid in full after taking into account the credits allowed under subsection (f) of this Section or allowed under Section 709.5 of this Act shall not be required to file a return under this subsection (a).

(b) Fiduciaries and receivers.

(1) Decedents. If an individual is deceased, any return or notice required of such individual under this Act shall be made by his executor, administrator, or other person charged with the property of such decedent.

(2) Individuals under a disability. If an individual is unable to make a return or notice required under this Act, the return or notice required of such individual shall be made by his duly authorized agent, guardian, fiduciary or other person charged with the care of the person or property of such individual.

(3) Estates and trusts. Returns or notices required of an estate or a trust shall be made by the fiduciary thereof.

(4) Receivers, trustees and assignees for corporations. In a case where a receiver, trustee in bankruptcy, or assignee, by order of a court of competent jurisdiction, by operation of law, or otherwise, has possession of or holds title to all or substantially all the property or business of a corporation, whether or not such property or business is being operated, such receiver, trustee, or assignee shall make the returns and notices required of such corporation in the same manner and form as corporations are required to make such returns and notices.

(c) Joint returns by husband and wife.

(1) Except as provided in paragraph (3): ,

(A) if a husband and wife file a joint federal income tax return for a taxable year ending before December 31, 2008 they shall file a joint return under this Act for such taxable year and their liabilities shall be joint and several; , but

(B) if a husband and wife file a joint federal income tax return for a taxable year ending on or after December 31, 2008, they may elect to file separate returns under this Act for such taxable year. The election under this paragraph must be made on or before the due date (including extensions) of the return and, once made, shall be irrevocable. If no election is timely made under this paragraph for a taxable year:

(i) the couple must file a joint return under this Act for such taxable year,

(ii) their liabilities shall be joint and several, and

(iii) any overpayment for that taxable year may be withheld under Section 909 of this Act or under Section 2505-275 of the Civil Administrative Code of Illinois and applied against a debt of either spouse without regard to the amount of the overpayment attributable to the other spouse; and

(C) if the federal income tax liability of either spouse is determined on a separate federal income tax return, they shall file separate returns under this Act.

(2) If neither spouse is required to file a federal income tax return and either or both are required to file a return under this Act, they may elect to file separate or joint returns and pursuant to such election their liabilities shall be separate or joint and several.

(3) If either husband or wife is a resident and the other is a nonresident, they shall file separate returns in this State on such forms as may be required by the Department in which event their tax liabilities shall be separate; but if they file a joint federal income tax return for a taxable year, they may elect to determine their joint net income and file a joint return for that taxable year under the provisions of paragraph (i) of this subsection as if both were residents and in such case, their liabilities shall be joint and several.

(4) Innocent spouses.

(A) However, for tax liabilities arising and paid prior to August 13, 1999, an innocent spouse shall be relieved of liability for tax (including interest and penalties) for any taxable year for which a joint return has been made, upon submission of proof that the Internal Revenue Service has made a determination under Section 6013(e) of the Internal Revenue Code, for the same taxable year, which determination relieved the spouse from liability for federal income taxes. If there is no federal income tax liability at issue for the same taxable year, the Department shall rely on the provisions of Section 6013(e) to determine whether the person requesting innocent spouse abatement of tax, penalty, and interest is entitled to that relief.

(B) For tax liabilities arising on and after August 13, 1999 or which arose prior to that date, but remain unpaid as of that date, if an individual who filed a joint return for any taxable year has made an election under this paragraph, the individual's liability for any tax shown on the joint return shall not exceed the individual's separate return amount and the individual's liability for any deficiency assessed for that taxable year shall not exceed the portion of the deficiency properly allocable to the individual. For purposes of this paragraph:

(i) An election properly made pursuant to Section 6015 of the Internal Revenue Code shall constitute an election under this paragraph, provided that the election shall not be effective until the individual has notified the Department of the election in the form and manner prescribed by the Department.

(ii) If no election has been made under Section 6015, the individual may make an election under this paragraph in the form and manner prescribed by the Department, provided that no election may be made if the Department finds that assets were transferred between individuals filing a joint return as part of a scheme by such individuals to avoid payment of Illinois income tax and the election shall not eliminate the individual's liability for any portion of a deficiency attributable to an error on the return of which the individual had actual knowledge as of the date of filing.

(iii) In determining the separate return amount or portion of any deficiency attributable to an individual, the Department shall follow the provisions in subsections (c) and (d) of Section 6015 of the Internal Revenue Code.

(iv) In determining the validity of an individual's election under subparagraph (ii) and in determining an electing individual's separate return amount or portion of any deficiency under subparagraph (iii), any determination made by the Secretary of the Treasury, by the United States Tax Court on petition for review of a determination by the Secretary of the Treasury, or on appeal from the United States Tax Court under Section 6015 of the Internal Revenue Code regarding criteria for eligibility or under subsection (d) of Section 6015 of the Internal Revenue Code regarding the allocation of any item of income, deduction, payment, or credit between an individual making the federal election and that individual's spouse shall be conclusively presumed to be correct. With respect to any item that is not the subject of a determination by the Secretary of the Treasury or the federal courts, in any proceeding involving this subsection, the individual making the election shall have the burden of proof with respect to any item except that the Department shall have the burden of proof with respect to items in subdivision (ii).

(v) Any election made by an individual under this subsection shall apply to all years for which that individual and the spouse named in the election have filed a joint return.

(vi) After receiving a notice that the federal election has been made or after receiving an election under subdivision (ii), the Department shall take no collection action against the electing individual for any liability arising from a joint return covered by the election until the Department has notified the electing individual in writing that the election is invalid or of the portion of the liability the Department has allocated to the electing individual. Within 60 days (150 days if the individual is outside the United States) after the issuance of such notification, the individual may file a written protest of the denial of the election or of the Department's determination of the liability allocated to him or her and shall be granted a hearing within the Department under the provisions of Section 908. If a protest is filed, the Department shall take no collection action against the electing individual until the decision regarding the protest has become final under subsection (d) of Section 908 or, if administrative review of the Department's decision is requested under Section 1201, until the decision of the court becomes final.

(d) Partnerships. Every partnership having any base income allocable to this State in accordance with section 305(c) shall retain information concerning all items of income, gain, loss and deduction; the names and addresses of all of the partners, or names and addresses of members of a limited liability company, or other persons who would be entitled to share in the base income of the partnership if distributed; the amount of the distributive share of each; and such other pertinent information as the Department may by forms or regulations prescribe. The partnership shall make that information available to the Department when requested by the Department.

(e) For taxable years ending on or after December 31, 1985, and before December 31, 1993, taxpayers that are corporations (other than Subchapter S corporations) having the same taxable year and that are members of the same unitary business group may elect to be treated as one taxpayer for purposes of any original return, amended return which includes the same taxpayers of the unitary group which joined in the election to file the original return, extension, claim for refund, assessment, collection and payment and determination of the group's tax liability under this Act. This subsection (e) does not permit the election to be made for some, but not all, of the purposes enumerated above. For taxable years ending on or after December 31, 1987, corporate members (other than Subchapter S corporations) of the same unitary business group making this subsection (e) election are not required to have the same taxable year.

For taxable years ending on or after December 31, 1993, taxpayers that are corporations (other than Subchapter S corporations) and that are members of the same unitary business group shall be treated as one taxpayer for purposes of any original return, amended return which includes the same taxpayers of the unitary group which joined in filing the original return, extension, claim for refund, assessment, collection and payment and determination of the group's tax liability under this Act.

(f) The Department may promulgate regulations to permit nonresident individual partners of the same partnership, nonresident Subchapter S corporation shareholders of the same Subchapter S corporation, and nonresident individuals transacting an insurance business in Illinois under a Lloyds plan of operation, and nonresident individual members of the same limited liability company that is treated as a partnership under Section 1501 (a)(16) of this Act, to file composite individual income tax returns reflecting the composite income of such individuals allocable to Illinois and to make composite individual income tax payments. The Department may by regulation also permit such composite returns to include the income tax owed by Illinois residents attributable to their income from partnerships, Subchapter S corporations, insurance businesses organized under a Lloyds plan of operation, or limited liability companies that are treated as partnership under Section 1501(a)(16) of this Act, in which case such Illinois residents will be permitted to claim credits on their individual returns for their shares of the composite tax payments. This paragraph of subsection (f) applies to taxable years ending on or after December 31, 1987.

For taxable years ending on or after December 31, 1999, the Department may, by regulation, also permit any persons transacting an insurance business organized under a Lloyds plan of operation to file composite returns reflecting the income of such persons allocable to Illinois and the tax rates applicable to such persons under Section 201 and to make composite tax payments and shall, by regulation, also provide that the income and apportionment factors attributable to the transaction of an insurance business organized under a Lloyds plan of operation by any person joining in the filing of a composite return shall, for purposes of allocating and apportioning income under Article 3 of this Act and computing net income under Section 202 of this Act, be excluded from any other income and apportionment factors of that person or of any unitary business group, as defined in subdivision (a)(27) of Section 1501, to which that person may belong.

For taxable years ending on or after December 31, 2008, every nonresident shall be allowed a credit against his or her liability under subsections (a) and (b) of Section 201 for any amount of tax reported on a composite return and paid on his or her behalf under this subsection (f). Residents (other than persons transacting an insurance business organized under a Lloyds plan of operation) may claim a credit for taxes reported on a composite return and paid on their behalf under this subsection (f) only as permitted by the Department by rule.

(f-5) For taxable years ending on or after December 31, 2008, the Department may adopt rules to provide that, when a partnership or Subchapter S corporation has made an error in determining the amount of any item of income, deduction, addition, subtraction, or credit required to be reported on its return that affects the liability imposed under this Act on a partner or shareholder, the partnership or Subchapter S corporation may report the changes in liabilities of its partners or shareholders and claim a refund of the resulting overpayments, or pay the resulting underpayments, on behalf of its partners and shareholders.

(g) The Department may adopt rules to authorize the electronic filing of any return required to be filed under this Section.

(Source: P.A. 94-1074, eff. 12-26-06; 95-233, eff. 8-16-07.)

(35 ILCS 5/911.1) (from Ch. 120, par. 9-911.1)

Sec. 911.1. If the Department withholds any refund due under this Act because of any other liability to the State and if the return for which such refund is due is a joint return for a taxable year ending before December 31, 2008, the taxpayer who jointly filed such return and who is not liable to the State shall be entitled to that portion of the refund attributable to himself or herself.

(Source: P.A. 85-473.)

(35 ILCS 5/911.2)

Sec. 911.2. Refunds withheld; tax claims of other states.

(a) Definitions. In this Section the following terms have the meanings indicated.

"Claimant state" means any state or the District of Columbia that requests the withholding of a refund pursuant to this Section and that extends a like comity for the collection of taxes owed to this State.

"Income tax" means any amount of income tax imposed on taxpayers under the laws of the State of Illinois or the claimant state, including additions to tax for penalties and interest.

"Refund" means a refund of overpaid income taxes imposed by the State of Illinois or the claimant state.

"Tax officer" means a unit or official of the claimant state, or the duly authorized agent of that unit or official, charged with the imposition, assessment, or collection of state income taxes.

"Taxpayer" means any individual person identified by a claimant state under this Section as owing taxes to that claimant state, and in the case of a refund arising from the filing of a joint return, the taxpayer's spouse.

(b) In general. Except as provided in subsection (c) of this Section, a tax officer may:

(1) certify to the Director the existence of a taxpayer's delinquent income tax liability; and

(2) request the Director to withhold any refund to which the taxpayer is entitled.

(c) Comity. A tax officer may not certify or request the Director to withhold a refund unless the laws of the claimant state:

(1) allow the Director to certify an income tax liability;

(2) allow the Director to request the tax officer to withhold the taxpayer's tax refund; and

(3) provide for the payment of the refund to the State of Illinois.

(d) Certification. A certification by a tax officer to the Director shall include:

(1) the full name and address of the taxpayer and any other names known to be used by the taxpayer;

(2) the social security number or federal tax identification number of the taxpayer;

(3) the amount of the income tax liability; and

(4) a statement that all administrative and judicial remedies and appeals have been exhausted or have lapsed and that the assessment of tax, interest, and penalty has become final.

(e) Notification. As to any taxpayer due a refund, the Director shall:

(1) notify the taxpayer that a claimant state has provided certification of the existence of an income tax liability;

(2) inform the taxpayer of the tax liability certified, including a detailed statement for each taxable year showing tax, interest, and penalty;

(3) inform the taxpayer that failure to file a protest in accordance with subsection (f) of this Section shall constitute a waiver of any demand against this State for the amount certified;

(3.5) inform the taxpayer that the refund has been withheld and that the tax liability has been paid to the claimant state as provided in subsection (i) of this Section;

(4) provide the taxpayer with notice of an opportunity to request a hearing to challenge the certification; and

(5) inform the taxpayer that the hearing may be requested (i) pursuant to Section 910 of this Act, or (ii) with the tax officer, in accordance with the laws of the claimant state.

(f) Protest of withholding. A taxpayer may protest the withholding of a refund pursuant to Section 910 of this Act (except that the protest shall be filed within 30 days after the date of the Director's notice of certification pursuant to subsection (e) of this Section).

(g) Certification as prima facie evidence. If the taxpayer requests a hearing pursuant to Section 910 of this Act, the certification of the tax officer shall be prima facie evidence of the correctness of the taxpayer's delinquent income tax liability to the certifying state.

(h) Rights of spouses to refunds from joint returns. If a certification is based upon the tax debt of only one taxpayer and if the refund is based upon a joint personal income tax return for a taxable year ending before December 31, 2008, the nondebtor spouse shall have the right to:

(1) notification, as provided in subsection (e) of this Section;

(2) protest, as to the withholding of such spouse's share of the refund, as provided in subsection (f) of this Section; and

(3) payment of his or her share of the refund, provided the amount of the overpayment refunded to the spouse shall not exceed the amount of the joint overpayment.

(i) Withholding and payment of refund. Upon receipt of a request for withholding in accordance with subsection (b) of this Section, the Director shall:

(1) withhold any refund that is certified by the tax officer;

(2) pay to the claimant state the entire refund or the amount certified, whichever is less;

(3) pay any refund in excess of the amount certified to the taxpayer; and

(4) if a refund is less than the amount certified, withhold amounts from subsequent refunds due the taxpayer, if the laws of the claimant state provide that the claimant state shall withhold subsequent refunds of taxpayers certified to that state by the Director.

(j) Determination that withholding cannot be made. After receiving a certification from a tax officer, the Director shall notify the claimant state if the Director determines that a withholding cannot be made.

(k) Director's authority. The Director shall have the authority to enter into agreements with the tax officers of claimant state relating to:

(1) procedures and methods to be employed by a claimant state with respect to the operation of this Section;

(2) safeguards against the disclosure or inappropriate use of any information obtained or maintained pursuant to this Section that identifies, directly or indirectly, a particular taxpayer;

(3) a minimum tax debt, amounts below which, in light of administrative expenses and efficiency, shall, in the Director's discretion, not be subject to the withholding procedures set forth in this Section.

(l) Remedy not exclusive. The collection procedures prescribed by this Section are in addition to, and not in substitution for, any other remedy available by law.

(Source: P.A. 92-492, eff. 1-1-02; 92-826, eff. 8-21-02.)

Section 15. The Use Tax Act is amended by changing Section 10 as follows:

(35 ILCS 105/10) (from Ch. 120, par. 439.10)

Sec. 10. Except as to motor vehicles, aircraft, watercraft, and trailers, and except as to cigarettes as defined in the Cigarette Use Tax, when tangible personal property is purchased from a retailer for use in this State by a purchaser who did not pay the tax imposed by this Act to the retailer, and who does not file returns with the Department as a retailer under Section 9 of this Act, such purchaser (by the last day of the month following the calendar month in which such purchaser makes any payment upon the selling price of such property) shall, except as provided in this Section, file a return with the Department and pay the tax upon that portion of the selling price so paid by the purchaser during the preceding calendar month. When tangible personal property, including but not limited to motor vehicles and aircraft, is purchased by a lessor, under a lease for one year or longer, executed or in effect at the time of purchase to an interstate carrier for hire, who did not pay the tax imposed by this Act to the retailer, such lessor (by the last day of the month following the calendar month in which such property reverts to the use of such lessor) shall file a return with the Department and pay the tax upon the fair market value of such property on the date of such reversion. However, in determining the fair market value at the time of reversion, the fair market value of such property shall not exceed the original purchase price of the property that was paid by the lessor at the time of purchase. Such return shall be filed on a form prescribed by the Department and shall contain such information as the Department may reasonably require. Such return and payment from the purchaser shall be submitted to the Department sooner than the last day of the month after the month in which the purchase is made to the extent that that may be necessary in order to secure the title to a motor vehicle or the certificate of registration for an aircraft. However, except as to motor vehicles and aircraft, and except as to cigarettes as defined in the Cigarette Use Tax Act, if the purchaser's annual use tax liability does not exceed $600, the purchaser may file the return on an annual basis on or before April 15th of the year following the year use tax liability was incurred.

If cigarettes, as defined in the Cigarette Use Tax Act, are purchased from a retailer for use in this State by a purchaser who did not pay the tax imposed by this Act to the retailer, and who does not file returns with the Department as a retailer under Section 9 of this Act, such purchaser must, within 30 days after acquiring the cigarettes, file a return with the Department and pay the tax upon that portion of the selling price so paid by the purchaser for the cigarettes.

In addition with respect to motor vehicles, aircraft, watercraft, and trailers, a purchaser of such tangible personal property for use in this State, who purchases such tangible personal property from an out-of-state retailer, shall file with the Department, upon a form to be prescribed and supplied by the Department, a return for each such item of tangible personal property purchased, except that if, in the same transaction, (i) a purchaser of motor vehicles, aircraft, watercraft, or trailers who is a retailer of motor vehicles, aircraft, watercraft, or trailers purchases more than one motor vehicle, aircraft, watercraft, or trailer for the purpose of resale or (ii) a purchaser of motor vehicles, aircraft, watercraft, or trailers purchases more than one motor vehicle, aircraft, watercraft, or trailer for use as qualifying rolling stock as provided in Section 3-55 of this Act, then the purchaser may report the purchase of all motor vehicles, aircraft, watercraft, or trailers involved in that transaction to the Department on a single return prescribed by the Department. Such return in the case of motor vehicles and aircraft must show the name and address of the seller, the name, address of purchaser, the amount of the selling price including the amount allowed by the retailer for traded in property, if any; the amount allowed by the retailer for the traded-in tangible personal property, if any, to the extent to which Section 2 of this Act allows an exemption for the value of traded-in property; the balance payable after deducting such trade-in allowance from the total selling price; the amount of tax due from the purchaser with respect to such transaction; the amount of tax collected from the purchaser by the retailer on such transaction (or satisfactory evidence that such tax is not due in that particular instance if that is claimed to be the fact); the place and date of the sale, a sufficient identification of the property sold, and such other information as the Department may reasonably require.

Such return shall be filed not later than 30 days after such motor vehicle or aircraft is brought into this State for use.

For purposes of this Section, "watercraft" means a Class 2, Class 3, or Class 4 watercraft as defined in Section 3-2 of the Boat Registration and Safety Act, a personal watercraft, or any boat equipped with an inboard motor.

The return and tax remittance or proof of exemption from the tax that is imposed by this Act may be transmitted to the Department by way of the State agency with which, or State officer with whom, the tangible personal property must be titled or registered (if titling or registration is required) if the Department and such agency or State officer determine that this procedure will expedite the processing of applications for title or registration.

With each such return, the purchaser shall remit the proper amount of tax due (or shall submit satisfactory evidence that the sale is not taxable if that is the case), to the Department or its agents, whereupon the Department shall issue, in the purchaser's name, a tax receipt (or a certificate of exemption if the Department is satisfied that the particular sale is tax exempt) which such purchaser may submit to the agency with which, or State officer with whom, he must title or register the tangible personal property that is involved (if titling or registration is required) in support of such purchaser's application for an Illinois certificate or other evidence of title or registration to such tangible personal property.

When a purchaser pays a tax imposed by this Act directly to the Department, the Department (upon request therefor from such purchaser) shall issue an appropriate receipt to such purchaser showing that he has paid such tax to the Department. Such receipt shall be sufficient to relieve the purchaser from further liability for the tax to which such receipt may refer.

A user who is liable to pay use tax directly to the Department only occasionally and not on a frequently recurring basis, and who is not required to file returns with the Department as a retailer under Section 9 of this Act, or under the "Retailers' Occupation Tax Act", or as a registrant with the Department under the "Service Occupation Tax Act" or the "Service Use Tax Act", need not register with the Department. However, if such a user has a frequently recurring direct use tax liability to pay to the Department, such user shall be required to register with the Department on forms prescribed by the Department and to obtain and display a certificate of registration from the Department. In that event, all of the provisions of Section 9 of this Act concerning the filing of regular monthly, quarterly or annual tax returns and all of the provisions of Section 2a of the "Retailers' Occupation Tax Act" concerning the requirements for registrants to post bond or other security with the Department, as the provisions of such sections now exist or may hereafter be amended, shall apply to such users to the same extent as if such provisions were included herein.

(Source: P.A. 91-541, eff. 8-13-99; 91-901, eff. 1-1-01.)

Section 99. Effective date. This Act takes effect upon becoming law.