Illinois General Assembly - Full Text of SB1881
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Full Text of SB1881  101st General Assembly




SB1881 EnrolledLRB101 10946 AWJ 56120 b

1    AN ACT concerning local government.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
Article 1. Short Title.

5    Section 1-1. Short title. This Act may be cited as the
6Local Government Revenue Recapture Act.
Article 5. Local Government Revenue Recapture.

8    Section 5-5. Definitions. As used in this Article:
9    "Department" means the Department of Revenue.
10    "Family member" means the following, whether by whole
11blood, half-blood, or adoption:
12        (1) a parent or step-parent;
13        (2) a child or step-child;
14        (3) a grandparent or step-grandparent;
15        (4) an aunt, uncle, great-aunt, or great-uncle;
16        (5) a sibling;
17        (6) a spouse or domestic partner; and
18        (7) the spouse or domestic partner of any person
19    referenced in items (1) through (5).
20    "Financial information" means the information provided to
21the municipality or county by the Department under Section 11



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1of the Retailers' Occupation Tax Act that is reported to the
2Department by a business located in a given municipality or
4    "Person" means an individual, sole proprietorship,
5corporation, registered limited liability partnership, limited
6liability company, partnership, professional service
7corporation, or any other form of organization.
8    "Misallocation" means tax paid by the taxpayer and
9allocated to one unit of local government that should have been
10allocated to a different unit of local government.
11"Misallocation" does not include amounts overpaid by the
12taxpayer and therefore not owed to any unit of local
13government, nor amounts underpaid by the taxpayer and therefore
14not previously allocated to any unit of local government.
15    "Monitoring disbursements" means keeping track of payments
16from the Department by a municipality, county, or third party
17for the limited purpose of tracking previous misallocations.
18    "Third party" means a person, partnership, corporation, or
19other entity or individual registered to do business in
20Illinois who contracts with a municipality or county to review
21financial information related to the disbursement of local
22taxes by the Department to the municipality or county.
23    Section 5-10. Contracts with third parties. A municipality
24or county that receives a disbursement of tax proceeds from the
25Department may contract with a third party for the purpose of



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1ensuring that the municipality or county receives the correct
2disbursement from the Department and monitoring disbursements.
3The third party may not contact the Department on behalf of the
4municipality or county, but instead must work directly with the
5municipality or county to acquire financial information. To be
6eligible to receive financial information from the
7municipality or county, the third party must:
8        (1) enter into a confidentiality agreement with the
9    municipality or county in the form and manner required by
10    the Department prior to receiving the financial
11    information;
12        (2) have an existing contract with the municipality or
13    county at the time the third party enters into the
14    confidentiality agreement with the municipality or county;
15    a copy of that existing contract must be on file with the
16    Department;
17        (3) abide by the same conditions as the municipality or
18    county with respect to the furnishing of financial
19    information under Section 11 of the Retailers' Occupation
20    Tax Act; and
21        (4) be registered with the Department as required by
22    Section 5-35 of this Act.
23    Section 5-15. Financial information. The third party may
24use the financial information it receives from the contracting
25municipality or county only for the purpose of providing



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1services to the municipality or county as specified in this Act
2and may not use the information for any other purpose.
3Electronic data submitted to third parties or by the
4contracting municipality or county must be accessible only to
5third parties who have entered into a confidentiality agreement
6with the municipality or county or who have an existing
7contract with the municipality or county.
8    Section 5-20. Retention, collection, disclosure, and
9destruction of financial information.
10    (a) A third party in possession of a taxpayer's financial
11information must permanently destroy that financial
12information pursuant to this Act. The financial information
13shall be destroyed upon the soonest of the following to occur:
14        (1) if the taxpayer is not referred to the Department,
15    within 30 days after receipt of the taxpayer's financial
16    information from either the municipality or county, unless
17    the third party is monitoring disbursements from the
18    Department on an ongoing basis for a municipality or
19    county; or
20        (2) within 30 days after the Department receives a
21    taxpayer audit referral from a third party referring the
22    taxpayer to the Department for additional review.
23    (b) No third party in possession of financial information
24may sell, lease, trade, market, or otherwise utilize or profit
25from a taxpayer's financial information, except for a fee as



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1negotiated by the municipality or county. The fee may be in the
2form of a contingency fee for a percentage of the amount of
3additional distributions the municipality or county receives
4for no more than 3 years following the first disbursement to
5the municipality or county as a result of the services of the
6third party under this Act.
7    (c) No third party may permanently or temporarily collect,
8capture, purchase, use, receive through trade, or otherwise
9retain a taxpayer's financial information beyond the scope of
10subsection (a) of this Section.
11    (d) No third party in possession of confidential
12information may disclose, redisclose, share, or otherwise
13disseminate a taxpayer's financial information.
14    (e) A third party must dispose of the materials containing
15financial information in a manner that renders the financial
16information unreadable, unusable, and undecipherable. Proper
17disposal methods include, but are not limited to, the
19        (1) in the case of paper documents, burning,
20    pulverizing, or shredding so that the information cannot
21    practicably be read or reconstructed; and
22        (2) in the case of electronic media and other non-paper
23    media containing information, destroying or erasing so
24    that information cannot practicably be read,
25    reconstructed, or otherwise utilized by the third party or
26    others.



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1    Section 5-25. Notice of intent to contract; award of
2contracts. A municipality or county that chooses to contract
3with a third party pursuant to this Act shall follow all rules
4set forth in the Illinois Municipal Code or the Counties Code,
5as applicable, concerning those contracts.
6    Section 5-30. Posting results. Annually, the third party
7shall provide the municipality or county with a final summary
8of the review for publication. It is the responsibility of the
9third party to ensure that this summary includes no personal or
10identifying information of taxpayers and that all such taxpayer
11information is kept confidential. If the summary includes any
12discussion of tax revenue, it shall include only aggregate
13amounts by tax type, and shall in no way include information
14about an individual return or an individual taxpayer, even with
15identifying information redacted. In addition, due to the
16preliminary nature of such a summary based only on unaudited
17financial information, no claim of specific tax savings or
18revenue generation may be made in the summary.
19    Section 5-35. Third party registration.
20    (a) Beginning on January 1, 2021, no person shall engage in
21business as a third party pursuant to this Act in this State
22without first having registered with the Department.
23Application for registration or renewal of registration shall



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1be made to the Department, by electronic means, in a form and
2at the time prescribed by the Department. Each applicant for
3registration or renewal of registration under this Section
4shall furnish to the Department, in an electronic format
5established by the Department, the following information:
6        (1) the name and address of the applicant;
7        (2) the address of the location at which the applicant
8    proposes to engage in business as a third party in this
9    State;
10        (3) valid and updated contact information;
11        (4) attestation of good standing to do business in
12    Illinois;
13        (5) a copy of each contract it has entered into with a
14    municipality or county; if an applicant has a contract with
15    a municipality or county prior to the effective date of
16    this Act, a copy of all existing contracts must be
17    provided;
18        (6) an annual certification of process letter that:
19            (A) is signed by an attorney or certified public
20        accountant licensed and authorized to practice in the
21        State of Illinois;
22            (B) contains findings that, after due diligence,
23        the author is of the opinion that:
24                (i) the third party's confidentiality
25            standards for storing encrypted data at rest,
26            using a cryptographic algorithm, conform to the



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1            Federal Information Processing Standard (FIPS)
2            Publication 140-2;
3                (ii) the third party uses multi-factor
4            authentication;
5                (iii) the third party uses HTTPS with at least
6            TLS 1.2 or its successor to protect the data files
7            while in transit between a browser and server;
8                (iv) the third party adheres to best practices
9            as recommended by the Open Web Application
10            Security Project (OWASP);
11                (v) the third party has a firewall which
12            protects against unauthorized use of the data; and
13                (vi) the third party shall maintain a physical
14            location in this State at all times; if, at any
15            time, the third party fails to have a physical
16            location in this State, the third party's
17            registration shall be revoked; and
18        (7) such other additional information as the
19    Department may require by rule.
20    The annual registration fee payable to the Department for
21each third party shall be $15,000. The fee shall be deposited
22into the Tax Compliance and Administration Fund and shall be
23used for the cost of administering the certified audit pilot
24project under Article 10.
25    Each applicant shall pay the fee to the Department at the
26time of submitting its application or renewal to the



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1Department. The Department may require an applicant under this
2Section to electronically file and pay the fee.
3    (b) The following are ineligible to register as a third
4party under this Act:
5        (1) a person who has been convicted of a felony related
6    to financial crimes under any federal or State law, if the
7    Department, after investigation and a hearing if requested
8    by the applicant, determines that the person has not been
9    sufficiently rehabilitated to warrant the public trust,
10    including an individual or any employee, officer, manager,
11    member, partner, or director of an entity that has been
12    convicted as provided in this paragraph (1);
13        (2) a person, if any employee, contractual employee,
14    officer, manager, or director thereof, or any person or
15    persons owning in the aggregate more than 5% thereof, is
16    employed by or appointed or elected to the corporate
17    authorities of any municipality or county in this State;
18        (3) a person, if any employee, contractual employee,
19    officer, manager, or director thereof, or any person or
20    persons owning in the aggregate more than 5% thereof, is
21    not or would not be eligible to receive a certificate of
22    registration under this Act or a license under the Illinois
23    Public Accounting Act for any reason;
24        (4) a person who is a family member of any person who
25    is employed by or appointed or elected to the corporate
26    authorities of any municipality or county in the State;



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1        (5) a person who is a qualified practitioner, as
2    defined by Section 10-15 of this Act;
3        (6) a third party owned, in whole or in part, by any
4    entity that competes directly or indirectly with any
5    taxpayer whose financial information they are seeking or
6    receiving; and
7        (7) a third party owning in whole or in part, directly
8    or indirectly, any entity that competes, directly or
9    indirectly, with any taxpayer whose financial information
10    they are seeking or receiving.
11    (c) The Department shall begin accepting applications no
12later than January 1, 2021. Upon receipt of an application and
13registration fee in proper form from a person who is eligible
14to register as a third party under this Act, the Department
15shall issue, within 60 days after receipt of an application, a
16certificate of registration to such applicant in such form as
17prescribed by the Department. That certificate of registration
18shall permit the applicant to whom it is issued to engage in
19business as a third party under this Act. All certificates of
20registration issued by the Department under this Section shall
21be valid for a period not to exceed one year after issuance
22unless sooner revoked or suspended as provided in this Act. No
23certificate of registration issued under this Section is
24transferable or assignable. A person who obtains a certificate
25of registration as a third party who ceases to do business as
26specified in the certificate of registration, or who never



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1commenced business, or whose certificate of registration is
2suspended or revoked, shall immediately surrender the
3certificate of registration to the Department.
4    (d) Any person aggrieved by any decision of the Department
5under this Section may, within 60 days after notice of the
6decision, protest and request a hearing. Upon receiving a
7request for a hearing, the Department shall give written notice
8to the person requesting the hearing of the time and place
9fixed for the hearing and shall hold a hearing and then issue
10its final administrative decision in the matter to that person
11within 60 days after the date of the hearing. In the absence of
12a protest and request for a hearing within 60 days, the
13Department's decision shall become final without any further
14determination being made or notice given.
15    (e) All final decisions by the Department under this
16Section are subject to judicial review under the provisions of
17the Administrative Review Law.
18    Section 5-37. Insurance policy requirement. A third party
19is required to file and maintain in force an insurance policy
20issued by an insurance company authorized to transact fidelity
21and surety business in the State of Illinois. The insurance
22policy shall be for coverage of potential legal claims,
23including, by not limited to, penalties set forth under Section
245-60, embezzlement, dishonesty, fraud, omissions or errors, or
25other financial wrongdoing in the course of providing services.



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1The policy shall be in the form prescribed by the Department in
2the sum of $500,000. The policy shall be continuous in form and
3run concurrently with the original and each renewal
4certification period unless terminated by the insurance
5company. An insurance company may terminate a policy and avoid
6further liability by filing a 60-day notice of termination with
7the Department and at the same time sending the same notice to
8the licensee. A license shall be canceled on the termination
9date of the policy unless a new policy is filed with the
10Department and becomes effective at the termination date of the
11prior policy. If a policy has been canceled under this Section,
12the third party must file a new application and will be
13considered a new applicant if it obtains a new policy.
14    Section 5-40. Revocation or suspension of certification.
15    (a) A contracting municipality or county shall refuse to
16provide any information, including financial information, to
17any third party who violates this Act or rules adopted pursuant
18to this Act or the Retailers' Occupation Tax Act or rules
19adopted pursuant to the Retailers' Occupation Tax Act.
20    (b) The Department may, after notice and a hearing, revoke
21or suspend the certificate of registration of any third party
22for a violation of any provision of this Act, for noncompliance
23with any provision contained in this Act, or because the
24Department determines that the third party is ineligible for a
25certificate of registration for any one or more of the reasons



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1provided for in Section 5-35 of this Act. The decision whether
2to suspend or revoke and, if a suspension is in order, the
3duration of the suspension shall be made by taking into account
4factors that include but are not limited to, the registrant's
5previous history of compliance with the Act as of its creation,
6the number, seriousness, and duration of the violations, and
7the registrant's cooperation in discontinuing and correcting
9    Section 5-50. Audit referrals; restrictions.
10    (a) Upon entering into a contract with a municipality or
11county, a third party shall be prohibited from communicating
12directly or indirectly in any manner with a taxpayer known or
13believed to be operating within that municipality or county
14about any matters directly or indirectly related to, or covered
15by, the contract.
16    (b) If, based on a review of the financial information
17provided by the Department to a municipality or a county, or
18provided by a municipality or county to a registered third
19party, a municipality, county, or third party discovers that
20local retailers' or service occupation tax may have been
21underpaid, then it may refer the matter to the Department for a
22limited-scope audit in accordance with Article 10 of this Act.
23    (c) With respect to taxes administered by the Department,
24units of local government and third parties are not authorized
25to (i) access, review, or compel the production of taxpayers'



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1actual tax returns or (ii) access, review, or compel the
2production of taxpayers' books and records.
3    (d) With respect to taxes administered by the Department,
4units of local government and third parties are prohibited from
5(i) engaging in an audit of any taxpayer, (ii) assessing tax
6against any taxpayer, (iii) engaging in collection actions
7against any taxpayer for the tax, or (iv) engaging in any other
8action related to such taxes that is assigned by law to the
10    (e) A local government shall not share any financial
11information received with another local government or another
12third party. Further, a local government may not share the
13findings of a third party with another local government or
14another third party.
15    Section 5-60. Penalties.
16    (a) Any third party who violates any provision of this Act
17shall be subject to the penalties set forth in Section 11 of
18the Retailers' Occupation Tax Act.
19    (b) Any third party who violates Section 5-20 is subject to
20a civil penalty of not more than $10,000 for each taxpayer with
21respect to whom financial information is improperly disclosed,
22profited from, or disposed of in violation of that Section. The
23Attorney General may impose a civil penalty not to exceed
24$50,000 for each instance of improper disposal of materials
25containing financial information. The Attorney General may



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1impose a civil penalty after notice to the person accused of
2violating Section 5-20 and an opportunity for that person to be
3heard in the matter. The Attorney General may file a civil
4action in the circuit court to recover any penalty imposed for
5a violation of Section 5-20. In addition to the authority to
6impose a civil penalty under this Section, the Attorney General
7may bring an action in the circuit court to remedy a violation
8of this Section, seeking any appropriate relief.
9    (c) Neither the State nor any municipality or county shall
10be held liable for the mishandling of information by a third
11party, including information from the Department or any other
12financial information of taxpayers.
13    (d) Any taxpayer aggrieved by a violation of this Act shall
14have a right of action in a State circuit court or as a
15supplemental claim in federal district court against a third
16party. A taxpayer may recover for each violation:
17        (1) against a third party that, by gross negligence,
18    violates a provision of this Act, liquidated damages of
19    $5,000 or actual damages, whichever is greater;
20        (2) against a third party that intentionally or
21    recklessly violates a provision of this Act, liquidated
22    damages of $10,000 or actual damages, whichever is greater;
23        (3) reasonable attorney's fees and costs, including
24    expert witness fees and other litigation expenses; and
25        (4) other relief, including an injunction, as the State
26    or federal court may deem appropriate.



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Article 10. Local Government Revenue Recapture Certified Audit
Pilot Program.

3    Section 10-5. Findings. The General Assembly finds that:
4        (1) Voluntary compliance is the cornerstone of an
5    effective tax system.
6        (2) Despite attempts by the General Assembly, State
7    taxes are not simple.
8        (3) Even the most diligent taxpayers, through mistake
9    or inadvertence, may not pay all taxes due.
10        (4) The Department lacks the resources to audit the
11    compliance of all taxpayers.
12        (5) Illinois certified public accountants provide
13    valuable advice and assistance to Illinois taxpayers on
14    State tax issues.
15        (6) A pilot program establishing a partnership between
16    taxpayers, Illinois certified public accountants, and the
17    Department will provide guidance to taxpayers and enhance
18    voluntary compliance.
19        (7) A pilot project to establish a certified audit
20    program to address underpayment of local occupation and use
21    taxes would address concerns raised by units of local
22    government.
23    Section 10-10. Purpose. The purpose of this Article is to



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1create a certified audit program under a 5-year pilot project
2that begins on January 1, 2021 and that is limited in scope to
3specifically address concerns related to the proper reporting
4and payment of local occupation and use taxes that are
5collected and distributed to municipalities and counties by the
7    Section 10-15. Definitions. As used in this Article:
8    "Audit" means an agreed-upon procedures engagement in
9accordance with Statements on Standards for the Attestation
10Engagements (AICPA Professional Standards, AT-C Section 315
11(Compliance Attest)).
12    "Certification program" means an instructional curriculum,
13examination, and process for certification, recertification,
14and revocation of certification of certified public
15accountants that is administered by the Department with the
16assistance of the Illinois CPA Society and that is officially
17approved by the Department to ensure that a certified public
18accountant possesses the necessary skills and abilities to
19successfully perform an attestation engagement for a
20limited-scope tax compliance review in a certified audit
21project under this Act.
22    "Department" means the Department of Revenue.
23    "Family member" means the following, whether by whole
24blood, half-blood, or adoption:
25        (1) a parent or step-parent;



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1        (2) a child or step-child;
2        (3) a grandparent or step-grandparent;
3        (4) an aunt, uncle, great-aunt, or great-uncle;
4        (5) a sibling;
5        (6) a spouse or domestic partner; and
6        (7) the spouse or domestic partner of any person
7    referenced in items (1) through (5).
8    "Misallocation" means tax paid by the taxpayer and
9allocated to one unit of local government that should have been
10allocated to a different unit of local government.
11"Misallocation" does not include amounts overpaid by the
12taxpayer and therefore not owed to any unit of local
13government, nor amounts underpaid by the taxpayer and therefore
14not previously allocated to any unit of local government.
15    "Participating taxpayer" means any person subject to the
16revenue laws administered by the Department who is the subject
17of a tax compliance referral by a municipality, county, or
18third party, who enters into an engagement with a qualified
19practitioner for a limited-scope tax compliance review under
20this Act, and who is approved by the Department under the local
21government revenue recapture certified audit pilot project.
22    "Qualified practitioner" means a certified public
23accountant who is licensed or registered to perform accountancy
24activities in Illinois under Section 8.05 of the Illinois
25Public Accounting Act and who has met all requirements for the
26local government revenue recapture certified audit training



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1course, achieved the required score on the certification test
2as approved by the Department, and been certified by the
3Department. "Qualified practitioner" does not include a third
4party, as defined by Section 5-5 of this Act, or any employee,
5contractual employee, officer, manager, or director thereof,
6any person or persons owning in the aggregate more than 5% of
7such third party, or a person who is a family member of any
8person who is employed by or is an appointed or elected member
9of any corporate authorities, as defined in the Illinois
10Municipal Code.
11    Section 10-20. Local government revenue recapture
12certified audit project.
13    (a) The Department shall initiate a certified audit pilot
14project to further enhance tax compliance reviews performed by
15qualified practitioners and to encourage taxpayers to hire
16qualified practitioners at their own expense to review and
17report on certain aspects of their sales tax and use tax
18compliance in cases where the Department has notified the
19taxpayer that it has received a tax compliance referral from a
20municipality, county, or third party under this Act. The nature
21of the certified audit work performed by qualified
22practitioners shall be agreed-upon procedures of a Compliance
23Attestation in which the Department is the specified user of
24the resulting report. Qualified practitioners are prohibited
25from using information obtained from audit manuals, training



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1materials, or any other materials provided by the Department
2under this Act for any purpose other than to perform the tax
3compliance reviews under the certified audit pilot program
4under this Act.
5    The tax compliance reviews shall be limited in scope and
6may include only: (i) whether the taxpayer is reporting
7receipts in the proper jurisdiction; (ii) whether asset
8purchases by the taxpayer were taxed properly; (iii) an
9evaluation of sales reported as exempt from tax; (iv) whether
10the proper tax rate was charged; (v) whether the tax was
11properly reported as retailers' occupation tax or use tax; and
12(vi) any other factor that impacts the Department's allocation
13of sales and use tax revenues to the jurisdiction in which the
14taxpayer reports sales or use tax.
15    (b) As an incentive for taxpayers to incur the costs of a
16certified audit, the Department shall abate penalties due on
17any tax liabilities revealed by a certified audit, except that
18this authority to abate penalties shall not apply to any
19liability for taxes that were collected by the participating
20taxpayer but not remitted to the Department, nor shall the
21Department have the authority to abate fraud penalties.
22    (c) The certified audit pilot project shall apply only to
23taxpayers who have been notified that an audit referral has
24been received by the Department under this Act and only to
25occupation and use taxes administered and collected by the



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1    (d) The certified audit pilot project shall begin with
2audit referrals received on and after January 1, 2021. Upon
3obtaining proper certification, qualified practitioners may
4initiate certified audits beginning January 1, 2021.
5    Section 10-25. Practitioner responsibilities. Any
6practitioner responsible for planning, directing, or
7conducting a certified audit or reporting on a participating
8taxpayer's tax compliance shall be a qualified practitioner.
9For purposes of this Section, a qualified practitioner is
10responsible for:
11        (1) planning a certified audit when performing work
12    that involves determining the objectives, scope, and
13    methodology of the certified audit, when establishing
14    criteria to evaluate matters subject to the review as part
15    of the certified audit, when gathering information used in
16    planning the certified audit, or when coordinating the
17    certified audit with the Department;
18        (2) directing a certified audit when the work involves
19    supervising the efforts or reviewing the work of others to
20    determine whether it is properly accomplished and
21    complete;
22        (3) conducting a certified audit when performing tests
23    and procedures or field audit work necessary to accomplish
24    the audit objectives in accordance with applicable
25    professional standards;



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1        (4) reporting on a participating taxpayer's tax
2    compliance in a certified audit when determining report
3    contents and substance or reviewing reports for technical
4    content and substance prior to issuance; and
5        (5) answering questions by Department review staff,
6    answering questions raised by the Informal Conference
7    Board, and testifying in any administrative or court
8    proceeding regarding the audit or report.
9    Section 10-30. Local government revenue recapture audit
11    (a) A third party shall not refer a taxpayer to the
12Department for audit consideration unless the third party is
13registered with the Department pursuant to Section 5-35.
14    (b) If, based on a review of the financial information
15provided by the Department to a municipality or county, or
16provided by a municipality or county to a registered third
17party, the municipality or county discovers that a taxpayer may
18have underpaid local retailers' or service occupation taxes,
19then it may refer the matter to the Department for audit
20consideration. The tax compliance referral may be made only by
21the municipality, county, or third party and shall be made in
22the form and manner required by the Department, including any
23requirement that the referral be submitted electronically. The
24tax compliance referral shall, at a minimum, include proof of
25registration as a third party, a copy of a contract between the



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1third party and the county or municipality, the taxpayer's
2name, Department account identification number, mailing
3address, and business location, and the specific reason for the
4tax compliance referral, including as much detail as possible.
5    (c) The Department shall complete its evaluation of all
6audit referrals under this Act within 60 days after receipt of
7the referral and shall handle all audit referrals as follows:
8        (1) the Department shall evaluate the referral to
9    determine whether it is sufficient to warrant further
10    action based on the information provided in the referral,
11    any other information the Department possesses, and audit
12    selection procedures of the Department;
13        (2) if the Department determines that the referral is
14    not actionable, then the Department shall notify the local
15    government that it has evaluated the referral and has
16    determined that no action is deemed necessary and provide
17    the local government with an explanation for that decision;
18        (3) if the Department determines that the referral is
19    actionable, then it shall determine whether the taxpayer is
20    currently under audit or scheduled for audit;
21            (A) if the taxpayer is not currently under audit or
22        scheduled for audit, the Department shall determine
23        whether it will schedule the taxpayer for audit; and
24            (B) if the taxpayer is not under audit by the
25        Department or scheduled for audit by the Department and
26        the Department decides to schedule the taxpayer for



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1        audit, then the Department shall notify the taxpayer
2        that the Department has received an actionable audit
3        referral on the taxpayer and issue a notice to the
4        taxpayer as provided under subsection (d) of this
5        Section.
6    (d) The notice to the taxpayer required by subparagraph (B)
7of paragraph (3) of subsection (c) shall include, but not be
8limited to, the following:
9        (1) that the taxpayer must either: (A) engage a
10    qualified practitioner, at the taxpayer's expense, to
11    complete a certified audit, limited in scope to the
12    taxpayer's Retailers' Occupation Tax, Use Tax, Service
13    Occupation Tax, or Service Use Tax liability, and the
14    taxpayer's liability for any local retailers' or service
15    occupation tax administered by the Department; or (B) be
16    subject to audit by the Department;
17        (2) that, as an incentive, for taxpayers who agree to
18    the limited-scope certified audit, the Department shall
19    abate penalties as provided in Section 10-20; and
20        (3) A statement that reads: "[INSERT THE NAME OF THE
22    contracted with [INSERT THIRD PARTY] to review your
23    Retailers' Occupation Tax, Use Tax, Service Occupation
24    Tax, Service Use Tax, and any local retailers' or service
25    occupation taxes reported to the Illinois Department of
26    Revenue ("Department"). [INSERT THE NAME OF THE ELECTED



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2    THIRD PARTY] have selected and referred your business to
3    the Department for a certified audit of your Retailers'
4    Occupation Tax, Use Tax, Service Occupation Tax, Service
5    Use Tax, and any local retailers' or service occupation
6    taxes reported to the Department pursuant to the Local
7    Government Revenue Recapture Act. The purpose of the audit
8    is to verify that your business reported and submitted the
9    proper Retailers' Occupation Tax, Use Tax, Service
10    Occupation Tax, Service Use Tax, and any local retailers'
11    or service occupation taxes administered by the
12    Department. The Department is required to disclose your
13    confidential financial information to [INSERT THE NAME OF
15    [INSERT THE THIRD PARTY]. Additional information can be
16    accessed from the Department's website and publications
17    for a basic overview of your rights as a Taxpayer. If you
18    have questions regarding your business's referral to the
19    Department for audit, please contact [CORPORATE
20    AUTHORITY'S] mayor, village president, or any other person
21    serving as [CORPORATE AUTHORITY'S] chief executive officer
22    or chief financial officer. [INSERT THIRD PARTY] is
23    prohibited from discussing this matter with you directly or
24    indirectly in any manner regardless of who initiates the
25    contact. If [INSERT THIRD PARTY] contacts you, please
26    contact the Department.".



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1    (e) Within 90 days after notice by the Department, the
2taxpayer must respond by stating in writing whether it will or
3will not arrange for the performance of a certified audit under
4this Act. If the taxpayer states that it will arrange for the
5performance of a certified audit, then it must do so within 60
6days after responding to the Department or within 90 days after
7notice by the Department, whichever comes first. If the
8taxpayer states that it will not arrange for the performance of
9a certified audit or if the taxpayer does not arrange for the
10performance of a certified audit within 180 days after notice
11by the Department, then the Department may schedule the
12taxpayer for audit by the Department.
13    (f) The certified audit must not be a contingent-fee
14engagement and must be completed in accordance with this
15Article 10.
16    Section 10-35. Notification by qualified practitioner.
17    (a) A qualified practitioner hired by a taxpayer who elects
18to perform a certified audit under Section 10-30 shall notify
19the Department of an engagement to perform a certified audit
20and shall provide the Department with the information the
21Department deems necessary to identify the taxpayer, to confirm
22that the taxpayer is not already under audit by the Department,
23and to establish the basic nature of the taxpayer's business
24and the taxpayer's potential exposure to Illinois occupation
25and use tax laws. The information provided in the notification



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1shall be submitted in the form and manner required by the
2Department and shall include the taxpayer's name, federal
3employer identification number or social security number,
4Department account identification number, mailing address, and
5business location, and the specific occupation and use taxes
6and period proposed to be covered by the engagement for the
7certified audit. In addition, the notice shall include the
8name, address, identification number, contact person, and
9telephone number of the engaged firm. An engagement for a
10qualified practitioner to perform a certified audit under this
11Act shall not be authorized by the Department unless the
12taxpayer received notice from the Department under
13subparagraph (b) of paragraph (3) of subsection (c) of Section
15    (b) If the taxpayer has received notice of an audit
16referral from the Department and has not been issued a written
17notice of intent to conduct an audit, the taxpayer shall be a
18participating taxpayer and the Department shall so advise the
19qualified practitioner in writing within 10 days after receipt
20of the engagement notice. However, the Department may exclude a
21taxpayer from a certified audit or may limit the taxes or
22periods subject to the certified audit on the basis that: (i)
23the Department has previously conducted an audit; (ii) the
24Department is in the process of conducting an investigation or
25other examination of the taxpayer's records; (iii) the taxpayer
26has already been referred to the Department pursuant to Section



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110-30 and the Department determined an audit referral is not
2actionable; (iv) the Department or a qualified practitioner has
3previously conducted an audit under Section 10-30 of this Act;
4or (v) for just cause.
5    (c) Within 30 days after receipt of the notice of
6qualification from the Department under subsection (b), the
7qualified practitioner shall contact the Department and
8submit, for review and agreement by the Department, a proposed
9audit plan and procedures. The Department may extend the time
10for submission of the plan and procedures for reasonable cause.
11The qualified practitioner shall initiate action to advise the
12Department that amendment or modification of the plan and
13procedures is necessary if the qualified practitioner's
14inspection reveals that the taxpayer's circumstances or
15exposure to the revenue laws is substantially different from
16those described in the engagement notice.
17    Section 10-40. Audit performance and review.
18    (a) Upon the Department's designation of the agreed-upon
19procedures to be followed by a practitioner in a certified
20audit, the qualified practitioner shall perform the engagement
21and shall timely submit a completed report to the Department in
22the form and manner required by the Department and professional
23standards. The report shall affirm completion of the
24agreed-upon procedures and shall provide any required



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1    (b) The Department shall review the report of the certified
2audit and shall accept it when it is determined to be complete
3by the qualified practitioner. Once the report is accepted by
4the Department, the Department shall issue a notice of proposed
5assessment reflecting the determination of any additional
6liability reflected in the report and shall provide the
7taxpayer with all the normal payment, protest, and appeal
8rights with respect to the liability, including the right to a
9review by the Informal Conference Board. In cases in which the
10report indicates an overpayment has been made, the taxpayer
11shall submit a properly executed claim for credit or refund to
12the Department. Otherwise, the certified audit report is a
13final and conclusive determination with respect to the tax and
14period covered. No additional assessment may be made by the
15Department for the specific taxes and period referenced in the
16report, except upon a showing of fraud or material
17misrepresentation. This determination shall not prevent the
18Department from collecting liabilities not covered by the
19report or from conducting an audit or investigation and making
20an assessment for additional tax, penalty, or interest for any
21tax or period not covered by the report.
22    (c) A notice of proposed assessment issued by the
23Department under this Act is subject to the statute of
24limitations for assessments under the Retailers' Occupation
25Tax Act, the Use Tax Act, the Service Occupation Tax Act, the
26Service Use Tax Act, and any local retailers' or service



SB1881 Enrolled- 30 -LRB101 10946 AWJ 56120 b

1occupation tax, as appropriate, and local taxes collected on
2assessments issued shall be allocated to units of local
3government for the full period of the statute of limitations in
4accordance with those Acts and any applicable local retailers'
5or service occupation tax Act. The Department shall provide
6notice in writing to the municipality or county and the third
7party, if applicable, of any audit findings, determinations, or
8collections once finalized.
9    Claims for credit or refund filed by taxpayers under this
10Act are subject to the statute of limitations under the
11Retailers' Occupation Tax Act, the Use Tax Act, the Service
12Occupation Tax Act, the Service Use Tax Act, and any local
13retailers' or service occupation tax Act, as appropriate, and
14any credit or refund of local taxes allowed to the taxpayer
15shall be de-allocated from units of local government for the
16full period of the statute of limitations in accordance with
17those Acts and any applicable local retailers' or service
18occupation tax Act.
19    With respect to misallocations discovered under this Act,
20the Department shall increase or decrease the amount allocated
21to a unit of local government by an amount necessary to offset
22any misallocation of previous disbursements. The offset amount
23shall be the amount erroneously disbursed within the previous 6
24months from the time a misallocation is discovered.
25    (d) Under no circumstances may a person, including a
26municipality or county or third party, other than the person



SB1881 Enrolled- 31 -LRB101 10946 AWJ 56120 b

1audited and his or her attorney, have any right to participate
2in an appeal or other proceeding regarding the audit,
3participate in settlement negotiations, challenge the validity
4of any settlement between the Department and any person, or
5review any materials, other than financial information as
6otherwise provided in this Act, that are subject to the
7confidentiality provisions of the underlying tax Act. In
8addition, the Department's determination of whether to audit a
9taxpayer or the result of the audit creates no justiciable
10cause of action, and any adjudication related to this program
11is limited to the taxpayer's rights in an administrative
12hearing held by the Department, an administrative hearing held
13by the Illinois Independent Tax Tribunal, or related to
14payments made under protest as provided in Section 2a.1 of the
15State Officers and Employees Money Disposition Act, as
17    Section 10-45. Rules. To implement the certified audit
18project, the Department shall have authority to adopt rules,
19including, but not limited to:
20        (1) rules concerning the availability of the
21    certification program required for participation in the
22    project;
23        (2) rules concerning the requirements and basis for
24    establishing just cause for approval or rejection of
25    participation by taxpayers;



SB1881 Enrolled- 32 -LRB101 10946 AWJ 56120 b

1        (3) rules setting forth procedures for assessment,
2    collection, and payment of liabilities or refund of
3    overpayments and provisions for taxpayers to obtain
4    informal and formal review of certified audit results;
5        (4) rules concerning the nature, frequency, and basis
6    for the Department's review of certified audits conducted
7    by qualified practitioners, including the requirements for
8    documentation, work-paper retention and access, and
9    reporting; and
10        (5) rules setting forth requirements for conducting
11    certified audits and for review of agreed-upon procedures.
Article 900. Amendatory Provisions.

13    Section 900-5. The Retailers' Occupation Tax Act is amended
14by changing Section 11 as follows:
15    (35 ILCS 120/11)  (from Ch. 120, par. 450)
16    Sec. 11. All information received by the Department from
17returns filed under this Act, or from any investigation
18conducted under this Act, shall be confidential, except for
19official purposes, and any person, including a third party as
20defined in the Local Government Revenue Recapture Act, who
21divulges any such information in any manner, except in
22accordance with a proper judicial order or as otherwise
23provided by law, including the Local Government Revenue



SB1881 Enrolled- 33 -LRB101 10946 AWJ 56120 b

1Recapture Act, shall be guilty of a Class B misdemeanor with a
2fine not to exceed $7,500.
3    Nothing in this Act prevents the Director of Revenue from
4publishing or making available to the public the names and
5addresses of persons filing returns under this Act, or
6reasonable statistics concerning the operation of the tax by
7grouping the contents of returns so the information in any
8individual return is not disclosed.
9    Nothing in this Act prevents the Director of Revenue from
10divulging to the United States Government or the government of
11any other state, or any officer or agency thereof, for
12exclusively official purposes, information received by the
13Department in administering this Act, provided that such other
14governmental agency agrees to divulge requested tax
15information to the Department.
16    The Department's furnishing of information derived from a
17taxpayer's return or from an investigation conducted under this
18Act to the surety on a taxpayer's bond that has been furnished
19to the Department under this Act, either to provide notice to
20such surety of its potential liability under the bond or, in
21order to support the Department's demand for payment from such
22surety under the bond, is an official purpose within the
23meaning of this Section.
24    The furnishing upon request of information obtained by the
25Department from returns filed under this Act or investigations
26conducted under this Act to the Illinois Liquor Control



SB1881 Enrolled- 34 -LRB101 10946 AWJ 56120 b

1Commission for official use is deemed to be an official purpose
2within the meaning of this Section.
3    Notice to a surety of potential liability shall not be
4given unless the taxpayer has first been notified, not less
5than 10 days prior thereto, of the Department's intent to so
6notify the surety.
7    The furnishing upon request of the Auditor General, or his
8authorized agents, for official use, of returns filed and
9information related thereto under this Act is deemed to be an
10official purpose within the meaning of this Section.
11    Where an appeal or a protest has been filed on behalf of a
12taxpayer, the furnishing upon request of the attorney for the
13taxpayer of returns filed by the taxpayer and information
14related thereto under this Act is deemed to be an official
15purpose within the meaning of this Section.
16    The furnishing of financial information to a municipality
17or county, upon request of the chief executive officer thereof,
18is an official purpose within the meaning of this Section,
19provided the municipality or county agrees in writing to the
20requirements of this Section. Information provided to
21municipalities and counties under this paragraph shall be
22limited to: (1) the business name; (2) the business address;
23(3) the standard classification number assigned to the
24business; (4) net revenue distributed to the requesting
25municipality or county that is directly related to the
26requesting municipality's or county's local share of the



SB1881 Enrolled- 35 -LRB101 10946 AWJ 56120 b

1proceeds under the Use Tax Act, the Service Use Tax Act, the
2Service Occupation Tax Act, and the Retailers' Occupation Tax
3Act distributed from the Local Government Tax Fund, and, if
4applicable, any locally imposed retailers' occupation tax or
5service occupation tax; and (5) a listing of all businesses
6within the requesting municipality or county by account
7identification number and address. On and after July 1, 2015,
8the furnishing of financial information to municipalities and
9counties under this paragraph may be by electronic means. If
10the Department may furnish financial information to a
11municipality or county under this paragraph, then the chief
12executive officer of the municipality or county may, in turn,
13provide that financial information to a third party pursuant to
14the Local Government Revenue Recapture Act. However, the third
15party shall agree in writing to the requirements of this
16Section and meet the requirements of the Local Government
17Revenue Recapture Act.
18    Information so provided shall be subject to all
19confidentiality provisions of this Section. The written
20agreement shall provide for reciprocity, limitations on
21access, disclosure, and procedures for requesting information.
22For the purposes of furnishing financial information to a
23municipality or county under this Section, "chief executive
24officer" means the mayor of a city, the village board president
25of a village, the mayor or president of an incorporated town,
26the county executive of a county that has adopted the county



SB1881 Enrolled- 36 -LRB101 10946 AWJ 56120 b

1executive form of government, the president of the board of
2commissioners of Cook County, or the chairperson of the county
3board or board of county commissioners of any other county.
4    The Department may make available to the Board of Trustees
5of any Metro East Mass Transit District information contained
6on transaction reporting returns required to be filed under
7Section 3 of this Act that report sales made within the
8boundary of the taxing authority of that Metro East Mass
9Transit District, as provided in Section 5.01 of the Local Mass
10Transit District Act. The disclosure shall be made pursuant to
11a written agreement between the Department and the Board of
12Trustees of a Metro East Mass Transit District, which is an
13official purpose within the meaning of this Section. The
14written agreement between the Department and the Board of
15Trustees of a Metro East Mass Transit District shall provide
16for reciprocity, limitations on access, disclosure, and
17procedures for requesting information. Information so provided
18shall be subject to all confidentiality provisions of this
20    The Director may make available to any State agency,
21including the Illinois Supreme Court, which licenses persons to
22engage in any occupation, information that a person licensed by
23such agency has failed to file returns under this Act or pay
24the tax, penalty and interest shown therein, or has failed to
25pay any final assessment of tax, penalty or interest due under
26this Act. The Director may make available to any State agency,



SB1881 Enrolled- 37 -LRB101 10946 AWJ 56120 b

1including the Illinois Supreme Court, information regarding
2whether a bidder, contractor, or an affiliate of a bidder or
3contractor has failed to collect and remit Illinois Use tax on
4sales into Illinois, or any tax under this Act or pay the tax,
5penalty, and interest shown therein, or has failed to pay any
6final assessment of tax, penalty, or interest due under this
7Act, for the limited purpose of enforcing bidder and contractor
8certifications. The Director may make available to units of
9local government and school districts that require bidder and
10contractor certifications, as set forth in Sections 50-11 and
1150-12 of the Illinois Procurement Code, information regarding
12whether a bidder, contractor, or an affiliate of a bidder or
13contractor has failed to collect and remit Illinois Use tax on
14sales into Illinois, file returns under this Act, or pay the
15tax, penalty, and interest shown therein, or has failed to pay
16any final assessment of tax, penalty, or interest due under
17this Act, for the limited purpose of enforcing bidder and
18contractor certifications. For purposes of this Section, the
19term "affiliate" means any entity that (1) directly,
20indirectly, or constructively controls another entity, (2) is
21directly, indirectly, or constructively controlled by another
22entity, or (3) is subject to the control of a common entity.
23For purposes of this Section, an entity controls another entity
24if it owns, directly or individually, more than 10% of the
25voting securities of that entity. As used in this Section, the
26term "voting security" means a security that (1) confers upon



SB1881 Enrolled- 38 -LRB101 10946 AWJ 56120 b

1the holder the right to vote for the election of members of the
2board of directors or similar governing body of the business or
3(2) is convertible into, or entitles the holder to receive upon
4its exercise, a security that confers such a right to vote. A
5general partnership interest is a voting security.
6    The Director may make available to any State agency,
7including the Illinois Supreme Court, units of local
8government, and school districts, information regarding
9whether a bidder or contractor is an affiliate of a person who
10is not collecting and remitting Illinois Use taxes for the
11limited purpose of enforcing bidder and contractor
13    The Director may also make available to the Secretary of
14State information that a limited liability company, which has
15filed articles of organization with the Secretary of State, or
16corporation which has been issued a certificate of
17incorporation by the Secretary of State has failed to file
18returns under this Act or pay the tax, penalty and interest
19shown therein, or has failed to pay any final assessment of
20tax, penalty or interest due under this Act. An assessment is
21final when all proceedings in court for review of such
22assessment have terminated or the time for the taking thereof
23has expired without such proceedings being instituted.
24    The Director shall make available for public inspection in
25the Department's principal office and for publication, at cost,
26administrative decisions issued on or after January 1, 1995.



SB1881 Enrolled- 39 -LRB101 10946 AWJ 56120 b

1These decisions are to be made available in a manner so that
2the following taxpayer information is not disclosed:
3        (1) The names, addresses, and identification numbers
4    of the taxpayer, related entities, and employees.
5        (2) At the sole discretion of the Director, trade
6    secrets or other confidential information identified as
7    such by the taxpayer, no later than 30 days after receipt
8    of an administrative decision, by such means as the
9    Department shall provide by rule.
10    The Director shall determine the appropriate extent of the
11deletions allowed in paragraph (2). In the event the taxpayer
12does not submit deletions, the Director shall make only the
13deletions specified in paragraph (1).
14    The Director shall make available for public inspection and
15publication an administrative decision within 180 days after
16the issuance of the administrative decision. The term
17"administrative decision" has the same meaning as defined in
18Section 3-101 of Article III of the Code of Civil Procedure.
19Costs collected under this Section shall be paid into the Tax
20Compliance and Administration Fund.
21    Nothing contained in this Act shall prevent the Director
22from divulging information to any person pursuant to a request
23or authorization made by the taxpayer or by an authorized
24representative of the taxpayer.
25(Source: P.A. 98-1058, eff. 1-1-15; 99-517, eff. 6-30-16.)