Section 470.140  Claims to Recover Erroneously Paid Tax

a)         When a taxpayer has paid to the Department any tax or penalty or interest not due under the provisions of the Act, either as a result of a mistake of fact or an error of law, the taxpayer may file a claim for credit on the form provided by the Department for that purpose and available at www.tax.illinois.gov.  Upon receipt of the claim, the Department will examine the claim. Upon approval, the Department will issue a credit memorandum in the amount of the overpayment.  The credit memorandum may be applied by the taxpayer to discharge any liability for tax or penalty or interest due or to become due from the taxpayer under the Act.

b)         As to any claim for credit or refund filed with the Department on or after each January 1 and July 1, no amounts erroneously paid more than 3 years prior to such January 1 and July 1, respectively, shall be credited or refunded, except that if both the Department and the taxpayer have agreed to an extension of time to issue a notice of tax liability under this Act, the claim may be filed at any time prior to the expiration of the period agreed upon.

c)         Beginning June 25, 2021, for any period included in a claim for credit or refund for which the statute of limitations for issuing a notice of tax liability under this Act will expire less than 6 months after the date a taxpayer files the claim for credit or refund, the statute of limitations is automatically extended for 6 months from the date it would have otherwise expired.  [35 ILCS 615/6].

d)         In no case may a taxpayer deduct, from the amount of tax to be remitted as shown by a return made to the Department, the amount of any overpayment of tax made during any prior period of time unless that deduction is supported by a duly issued credit memorandum.

e)         Credit memoranda issued to any taxpayer on account of any overpayment of taxes or penalties or interest under any other law shall not be used to discharge any liability for tax or penalty or interest under the Act.

f)         A credit memorandum issued under the Act may (subject to reasonable rules of the Department) be assigned by the person to whom the credit memorandum is issued to any other taxpayer under the Act.

g)         In case the Department determines that the claimant is entitled to a refund, that refund shall be made only from the appropriation available for that purpose.  If it appears unlikely that the amount appropriated would permit everyone having a claim allowed during the period covered by that appropriation to elect to receive a cash refund, the Department will make those refunds only in hardship cases (i.e., in cases in which the claimant cannot use a credit memorandum).  The two most likely situations in which this would be the case are when the claimant has discontinued business and when the claimant will have a small volume of liability to the Department in the foreseeable future, but receives such a large credit memorandum that it might take the claimant a long time to liquidate it by using it to pay current taxes.  In these instances, the claimant probably would have to sell the credit memorandum at a loss in order to realize anything from it within any reasonable period of time.

(Source:  Amended at 47 Ill. Reg. 5811, effective April 4, 2023)