On December 29, 2017, the Illinois Appellate Court issued a ruling reversing the decision of the Illinois Independent Tax Tribunal (Tribunal) in Waste Management of Ill., Inc. v. Ill. Independent Tax Tribunal, 2017 IL App (1st) 162830-U. This is the second appellate court to consider a Tax Tribunal ruling, and the first to overturn a decision of the Tribunal. The appellate court overturned the Tribunal’s grant of summary judgment in favor of the Illinois Department of Revenue (Department) and held that for the time periods at issue, the Motor Fuel Tax Law (Tax) (35 ILCS 505/1 et seq.) did not impose tax on compressed natural gas (CNG). In this case, Waste Management filed monthly returns reporting and paying the Tax on its usage of CNG. Following an amendment to a Department regulation that explicitly provided that CNG was subject to the Tax (see 86 Ill. Admin. Code § 500.200(c)), Waste Management amended its returns and sought a refund of Tax paid on CNG-powered vehicles for time periods prior to the amendment. The Department denied the refund claims, and Waste Management appealed the Department’s denial to the Tribunal. On the parties’ cross motions for summary judgement, the Tribunal found in the Department’s favor, on the basis that CNG was a taxable “motor fuel” under the Tax statutes. A copy of the Tribunal’s Order (Order) is linked here. On appeal, the question under review was whether CNG was a taxable “motor fuel,” a term defined by Section 1.1 of the Tax. 2017 IL App (1st) 162830-U, ¶ 14. The court found the standard of review to be de novo, the standard that applies to both appellate review of rulings on motions for summary judgment and questions of statutory interpretation. Id. ¶ 15. Relying on the plain language of the taxing statutes, the court held that during the time periods at issue, the statutorily defined term “motor fuel,” upon which the Tax was imposed (see 35 ILCS 505/2(a)), was unambiguous and did not include CNG because CNG is not a “liquid” or a “special fuel.” See 35 ILCS 505/1.1 (defining “motor fuel” as “all volatile and inflammable liquids produced, blended or compounded for the purpose of, or which are suitable or practicable for, operating motor vehicles.”) The court rejected the Tribunal’s decision to expand the tax base to include CNG based on the phrase “among other things” in the statutory definition of “motor fuel” and the language of Section 17 suggesting a broad reading of the Tax. 2017 IL App (1st) 162830-U, ¶¶ 21-22, 24. The court also rejected the Tribunal’s conclusion that CNG should be treated as taxable because distributors are required to report invoiced gallons of “combustible gases.” The court reasoned that “whether CNG is subject to a tax under section 2 of the Act is unrelated to whether distributors must report transactions involving motor fuel and combustible gases. …” Id. ¶ 23. Interestingly, while the appellate court’s ruling was pending, the legislature amended Section 2 of the Tax to expressly provide that CNG is taxable. The court refused to apply the legislation amendment retroactively, because the amendment was a substantive change in the law and it was silent as to the time period to which it was to be applied. Id. ¶ 13. The time periods have not yet expired for the Department to seek reconsideration or leave to appeal from the appellate court’s ruling.