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1 | AN ACT concerning revenue.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 5. The Retailers' Occupation Tax Act is amended by | ||||||||||||||||||||||||
5 | adding Section 6d as follows: | ||||||||||||||||||||||||
6 | (35 ILCS 120/6d new) | ||||||||||||||||||||||||
7 | Sec. 6d. Bad debt credit memorandum or refund. | ||||||||||||||||||||||||
8 | (a) A retailer is relieved from liability for Retailers' | ||||||||||||||||||||||||
9 | Occupation Tax that became due and payable, insofar as the | ||||||||||||||||||||||||
10 | measure of the tax is represented by accounts that have been | ||||||||||||||||||||||||
11 | found to be worthless and charged off for income tax purposes | ||||||||||||||||||||||||
12 | by the retailer or, if the retailer is not required to file | ||||||||||||||||||||||||
13 | income tax returns, charged off in accordance with generally | ||||||||||||||||||||||||
14 | accepted accounting principles. A retailer that has previously | ||||||||||||||||||||||||
15 | paid the tax may, under rules adopted by the Department, take | ||||||||||||||||||||||||
16 | as a deduction the amount found worthless and charged off by | ||||||||||||||||||||||||
17 | the retailer. If these accounts are thereafter in whole or in | ||||||||||||||||||||||||
18 | part collected by the retailer, the amount collected shall be | ||||||||||||||||||||||||
19 | included in the first return filed after the collection and the | ||||||||||||||||||||||||
20 | tax shall be paid with the return. | ||||||||||||||||||||||||
21 | (b) In the case of accounts held by a lender, a retailer or | ||||||||||||||||||||||||
22 | lender who makes a proper election under subsection (d) is | ||||||||||||||||||||||||
23 | entitled to a deduction or refund of the tax that the retailer |
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1 | has previously reported and paid if all of the following | ||||||
2 | conditions are met: | ||||||
3 | (1) no deduction or refund was previously claimed or | ||||||
4 | allowed on any portion of the accounts; | ||||||
5 | (2) the deduction or refund does not exceed the tax | ||||||
6 | that the retailer has previously reported and paid; | ||||||
7 | (3) the accounts have been found to be worthless and | ||||||
8 | have been charged off for income-tax purposes by a lender | ||||||
9 | or, if the lender is not required to file income tax | ||||||
10 | returns, charged off in accordance with generally accepted | ||||||
11 | accounting principles by the lender; and | ||||||
12 | (4) the claim for the deduction or refund was made in | ||||||
13 | the form and manner required by the Department. | ||||||
14 | (c) If the retailer or the lender thereafter collects, in | ||||||
15 | whole or in part, any accounts, then: | ||||||
16 | (1) if the retailer is entitled to the deduction or | ||||||
17 | refund under the election specified in subsection (d), the | ||||||
18 | retailer shall include the amount collected in its first | ||||||
19 | return filed after the collection and pay tax on that | ||||||
20 | amount with the return; or | ||||||
21 | (2) if the lender is entitled to the deduction or | ||||||
22 | refund under the election specified in subsection (d), the | ||||||
23 | lender shall pay the tax to the Department. | ||||||
24 | (d) Prior to claiming any deduction or refund under this | ||||||
25 | Section, the retailer who reported the tax and the lender shall | ||||||
26 | execute and maintain a written election agreement, signed by |
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1 | both parties, designating which party is entitled to claim the
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2 | deduction or refund. | ||||||
3 | (e) A retailer or lender may have its deduction or refund | ||||||
4 | for bad debts claimed on a return or refund filed by an | ||||||
5 | affiliated entity. | ||||||
6 | (f) The retailer or a lender shall maintain adequate books, | ||||||
7 | records, or other documentation supporting the charge off of | ||||||
8 | the accounts for which a deduction was taken or refund was | ||||||
9 | claimed under this Section. If a retailer remits any use or | ||||||
10 | occupation tax to this State and one or more other states, then | ||||||
11 | the claimant under this subdivision may use an apportionment | ||||||
12 | method to substantiate the amount of tax imposed under this Act | ||||||
13 | included in the bad debts to which the deduction or refund | ||||||
14 | applies. The apportionment method must use the retailer's | ||||||
15 | Illinois and non-Illinois sales, the retailer's taxable and | ||||||
16 | nontaxable sales, and the amount of tax the retailer remitted | ||||||
17 | to this State. Alternatively, the claimant under this Section | ||||||
18 | may treat a specified percentage of the accounts as giving rise | ||||||
19 | to a deduction or refund under this subdivision. This | ||||||
20 | percentage is derived from a sampling of the retailer's or a | ||||||
21 | lender's records in accordance with a methodology agreed upon | ||||||
22 | by the Department and the claimant. | ||||||
23 | (g) For purposes of this Section: | ||||||
24 | "Affiliated entity" means any entity affiliated with the | ||||||
25 | retailer under Section 1504 of the Internal Revenue Code of | ||||||
26 | 1986 or an entity that would be an affiliate under that statute |
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1 | had the entity or entities been corporations. | ||||||
2 | "Lender" means any one or more of the following: | ||||||
3 | (1) any person who holds or who has held a retail | ||||||
4 | account that the person purchased directly from a retailer | ||||||
5 | who reported the tax; | ||||||
6 | (2) any person who holds or who has held a retail | ||||||
7 | account pursuant to that person's contract directly with | ||||||
8 | the retailer who reported the tax; and | ||||||
9 | (3) any person who is either an affiliated entity of a | ||||||
10 | person described in items (1) or (2) or an assignee or | ||||||
11 | other transferee of such a person. | ||||||
12 | "Retailer" includes any affiliated entity.
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