In a question of first impression for Illinois, on May 12, 2015, Judge Schmidt of the Circuit Court of Sangamon County granted a summary judgment for the Illinois Department of Revenue, holding that the proper test for corporate income tax nexus is whether a “significant economic presence” exists in Illinois. Capital One Financial Corporation v. Brian Hamer, et al., 2012-TX-0001/02 (5/12/15). The substance of the court’s ruling is found in a docket entry accessible here. Citing Tax Comm’r v. MBNA, 260 S.E.2d 226 (W.Va. 2006), the circuit court found the taxpayer had a significant economic presence in Illinois because it (1) collected “millions of dollars” in fees and interest from Illinois residents, (2) “systematically and continuously” solicited Illinois customers (via telephone, email and direct mail solicitation) to apply for credit, (3) used Illinois courts to collect debts and (4) filed and enforced judgment liens in the state. The circuit court rejected the plaintiff’s argument that physical presence was required to create nexus for income tax purposes, and stated that it agreed with the Illinois Department of Revenue that the significant economic presence test was the “fairest test of corporate income tax given the current internet based world.”

A notice of appeal was filed on June 17, 2015, and the record on appeal (which triggers appellate briefing) was filed on August 6, 2015. Appellate briefing is likely to be completed over the next several months.

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