As previously announced, the Illinois Department of Revenue has begun a new amnesty program, running October 1 through November 15, 2019. All taxes paid to the Illinois Department of Revenue for taxable periods ending after June 30, 2011, and prior to July 1, 2018, are eligible for amnesty with relief from penalties and interest. Unlike

Legislators in Sacramento are mulling over one of the most (if not the most) troubling state and local tax bills of the past decade. AB 1270, introduced earlier this year and passed by the Assembly in late May, would amend the California False Claims Act (CFCA) to remove the “tax bar,” a prohibition that exists in the federal False Claims Act and the vast majority of states with similar laws.

If enacted, this bill will open the door for a cottage industry of financially driven plaintiffs’ lawyers to act as bounty hunters in the state and local tax arena. California taxpayers would be forced to defend themselves in high-stakes civil investigations and/or litigation—even when the Attorney General’s Office (AG) declines to intervene. As seen in other states, this racket leads to abusive practices and undermines the goal of voluntary compliance in tax administration.
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The District of Columbia (DC) Office of Tax & Revenue (OTR) implemented sweeping changes to the Qualified High Technology Company (QHTC) certification process this year. As you may remember, beginning last year, OTR implemented a new online QHTC self-certification process for companies to obtain exempt purchase certificates. This year, OTR is expanding the scope of

On December 19, 2018, the US District Court for the Southern District of New York ruled in favor of McDermott’s client, the Healthcare Distribution Alliance (HDA), the trade association for pharmaceutical distributors. In Healthcare Distribution Alliance v. Zucker, the court granted summary judgment and enjoined enforcement of the New York Opioid Stewardship Act, which imposed a $600 million surcharge on manufacturers and distributors of opioid pharmaceutical products. The first $100 million installment was due on January 1, 2019.
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The Illinois Department of Revenue (Department) announced that it will grant abatement of late filing penalties for taxpayers that file their Illinois business income tax returns on or before November 15 and request penalty waivers for reasonable cause. The Department stated that it will waive late penalties due to the “complexity” of recent federal tax

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.
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Overview

Illinois’ July 2017 Revenue Bill for the 2018 fiscal year included the Invest in Kids Act (Act), which creates a new program, effective January 1, 2018, that provides up to $75 million in income tax credits for Illinois taxpayers making contributions to eligible organizations that grant scholarships to students attending private and parochial schools in Illinois. The Act allows approved Illinois taxpayers to receive state income tax credits of 75 percent of their total qualified contributions to Scholarship Granting Organizations (SGOs), up to $1 million annually per taxpayer. For example, a contribution of $100,000 to an SGO allows an approved taxpayer to claim a $75,000 income tax credit. The program is administered by the Illinois Department of Revenue (Department). The Department will allocate the credits among taxpayers on a first-come, first-served basis.

Who Benefits?

The Act is intended to benefit students who are members of households whose federal adjusted gross income does not exceed 300 percent of the federal poverty level before the scholarship and does not exceed 400 percent of the federal poverty level once the scholarship is received. The Illinois State Board of Education will annually provide the Department with a list of eligible private and parochial schools that may participate in the program and receive scholarship contributions from SGOs. As of December 18, 2017, the list of eligible private and parochial schools for 2018 has not been published.
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On December 4, 2017, the US Court of Appeals for the Third Circuit issued its much-anticipated precedential opinion in Marathon Petroleum Corp. et al., v. Secretary of Finance et al., No. 16-4011. The opinion affirms the Third Circuit’s existing view (described in its 2012 New Jersey Retailers Association decision) that US Supreme Court precedent permits a private cause of action to enforce the federal priority rules, overruling the federal district court’s conclusion (in this case and Temple-Inland) that the priority rules only apply to disputes between states.
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Earlier this fall, the Cook County Board voted to repeal its constitutionally suspect, politically unpopular one cent per ounce sweetened beverage tax (Tax). The short-lived Tax will expire at the end of the County’s fiscal year on November 30, 2017.

Having been tasked with implementing the Tax, the Cook County Department of Revenue (Department) is

The New California Office of Tax Appeals (OTA) on November 6, 2017, held an interested parties meeting in Sacramento to discuss the contents of a draft of emergency regulations to guide both income tax appeals from the California Franchise Tax Board and sales and use tax appeals from the California Department of Tax and Fee Appeals (CDTFA). The meeting was chaired by Kristen Kane, the newly appointed Chief Counsel and Acting Director of the OTA, and by Zack Morazzini, the Director and Chief Administrative Law Judge (ALJ) in the Office of Administrative Hearings.  Ms. Kane and Mr. Morazzini provided helpful insight on how the new OTA will operate, including the following:

  • The OTA is in the process of hiring 18 new ALJs.
  • Hearings will be held in Sacramento, Los Angeles and Fresno.
  • Hearings are expected to commence in late January, after a crash training program for the new ALJs.
  • Both Ms. Kane and Mr. Morazzini stressed the intention that the hearings be as informal and conversational as possible, bearing in mind that many, if not most, taxpayers will either appear pro per or be represented by non-attorneys.
  • Taxpayers will open the process by making a written submission, and the agencies will file a written brief in response. The procedures may be similar to the current practice before the State Board of Equalization, where the taxpayer submits a statement of facts and discussion of the law, and the facts as stated by the taxpayer are accepted unless the tax agency objects.
  • Where there is a disagreement on the facts, the burden will be on the taxpayer to come forward with supporting evidence.

In an informal discussion after the conclusion of the meeting, Mr. Morazzini said that the Office of Administrative Hearings is proud of their long and successful run at conducting fair hearings in many contexts with flexibility being a paramount concern. At least at the outset, there will be no written rules on the presentation of evidence. Mr. Morazzini said that the Administrative Procedures Act and, generally, the rules of evidence allow ALJs to fashion orders responsive to discovery requests by either or both of the taxpayer or the agency, as required under the circumstance. Either party will have the right to request a preliminary meeting with an ALJ, or the ALJ can order a preliminary meeting. The preliminary meeting is intended to be informal, and will give taxpayers the opportunity to request the production of documents, stipulations and admissions. Note that OTA anticipates that the preliminary meeting will be attended by only one ALJ, although A.B. 102, the authorizing legislation, calls for a panel of three ALJs.


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