101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB2906

 

Introduced 2/4/2020, by Sen. Dan McConchie

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 735/3-3  from Ch. 120, par. 2603-3
35 ILCS 735/3-9  from Ch. 120, par. 2603-9

    Amends the Uniform Penalty and Interest Act. Provides that the penalty for failure to pay the tax shown due or required to be shown due on a return shall be 15% (instead of 20%) of any amount that is paid after the date the Department of Revenue has initiated an audit or investigation of the taxpayer. Provides that the penalty shall be abated if the taxpayer paid to the Department at least 95% of the total tax liability (including any additional liability resulting from the audit or investigation) prior to the initiation of the audit or investigation. Effective January 1, 2021.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB2906LRB101 18078 HLH 67517 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Uniform Penalty and Interest Act is amended
5by changing Sections 3-3 and 3-9 as follows:
 
6    (35 ILCS 735/3-3)  (from Ch. 120, par. 2603-3)
7    Sec. 3-3. Penalty for failure to file or pay.
8    (a) This subsection (a) is applicable before January 1,
91996. A penalty of 5% of the tax required to be shown due on a
10return shall be imposed for failure to file the tax return on
11or before the due date prescribed for filing determined with
12regard for any extension of time for filing (penalty for late
13filing or nonfiling). If any unprocessable return is corrected
14and filed within 21 days after notice by the Department, the
15late filing or nonfiling penalty shall not apply. If a penalty
16for late filing or nonfiling is imposed in addition to a
17penalty for late payment, the total penalty due shall be the
18sum of the late filing penalty and the applicable late payment
19penalty. Beginning on the effective date of this amendatory Act
20of 1995, in the case of any type of tax return required to be
21filed more frequently than annually, when the failure to file
22the tax return on or before the date prescribed for filing
23(including any extensions) is shown to be nonfraudulent and has

 

 

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1not occurred in the 2 years immediately preceding the failure
2to file on the prescribed due date, the penalty imposed by
3Section 3-3(a) shall be abated.
4    (a-5) This subsection (a-5) is applicable to returns due on
5and after January 1, 1996 and on or before December 31, 2000. A
6penalty equal to 2% of the tax required to be shown due on a
7return, up to a maximum amount of $250, determined without
8regard to any part of the tax that is paid on time or by any
9credit that was properly allowable on the date the return was
10required to be filed, shall be imposed for failure to file the
11tax return on or before the due date prescribed for filing
12determined with regard for any extension of time for filing.
13However, if any return is not filed within 30 days after notice
14of nonfiling mailed by the Department to the last known address
15of the taxpayer contained in Department records, an additional
16penalty amount shall be imposed equal to the greater of $250 or
172% of the tax shown on the return. However, the additional
18penalty amount may not exceed $5,000 and is determined without
19regard to any part of the tax that is paid on time or by any
20credit that was properly allowable on the date the return was
21required to be filed (penalty for late filing or nonfiling). If
22any unprocessable return is corrected and filed within 30 days
23after notice by the Department, the late filing or nonfiling
24penalty shall not apply. If a penalty for late filing or
25nonfiling is imposed in addition to a penalty for late payment,
26the total penalty due shall be the sum of the late filing

 

 

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1penalty and the applicable late payment penalty. In the case of
2any type of tax return required to be filed more frequently
3than annually, when the failure to file the tax return on or
4before the date prescribed for filing (including any
5extensions) is shown to be nonfraudulent and has not occurred
6in the 2 years immediately preceding the failure to file on the
7prescribed due date, the penalty imposed by Section 3-3(a-5)
8shall be abated.
9    (a-10) This subsection (a-10) is applicable to returns due
10on and after January 1, 2001. A penalty equal to 2% of the tax
11required to be shown due on a return, up to a maximum amount of
12$250, reduced by any tax that is paid on time or by any credit
13that was properly allowable on the date the return was required
14to be filed, shall be imposed for failure to file the tax
15return on or before the due date prescribed for filing
16determined with regard for any extension of time for filing.
17However, if any return is not filed within 30 days after notice
18of nonfiling mailed by the Department to the last known address
19of the taxpayer contained in Department records, an additional
20penalty amount shall be imposed equal to the greater of $250 or
212% of the tax shown on the return. However, the additional
22penalty amount may not exceed $5,000 and is determined without
23regard to any part of the tax that is paid on time or by any
24credit that was properly allowable on the date the return was
25required to be filed (penalty for late filing or nonfiling). If
26any unprocessable return is corrected and filed within 30 days

 

 

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1after notice by the Department, the late filing or nonfiling
2penalty shall not apply. If a penalty for late filing or
3nonfiling is imposed in addition to a penalty for late payment,
4the total penalty due shall be the sum of the late filing
5penalty and the applicable late payment penalty. In the case of
6any type of tax return required to be filed more frequently
7than annually, when the failure to file the tax return on or
8before the date prescribed for filing (including any
9extensions) is shown to be nonfraudulent and has not occurred
10in the 2 years immediately preceding the failure to file on the
11prescribed due date, the penalty imposed by this subsection
12(a-10) shall be abated. This subsection (a-10) does not apply
13to transaction reporting returns required by Section 3 of the
14Retailers' Occupation Tax Act and Section 9 of the Use Tax Act
15that would not, when properly prepared and filed, result in the
16imposition of a tax; however, those returns are subject to the
17penalty set forth in subsection (a-15).
18    (a-15) A penalty of $100 shall be imposed for failure to
19file a transaction reporting return required by Section 3 of
20the Retailers' Occupation Tax Act and Section 9 of the Use Tax
21Act on or before the date a return is required to be filed;
22provided, however, that this penalty shall be imposed only if
23the return when properly prepared and filed would not result in
24the imposition of a tax. If such a transaction reporting return
25would result in the imposition of a tax when properly prepared
26and filed, then that return is subject to the provisions of

 

 

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1subsection (a-10).
2    (b) This subsection is applicable before January 1, 1998. A
3penalty of 15% of the tax shown on the return or the tax
4required to be shown due on the return shall be imposed for
5failure to pay:
6        (1) the tax shown due on the return on or before the
7    due date prescribed for payment of that tax, an amount of
8    underpayment of estimated tax, or an amount that is
9    reported in an amended return other than an amended return
10    timely filed as required by subsection (b) of Section 506
11    of the Illinois Income Tax Act (penalty for late payment or
12    nonpayment of admitted liability); or
13        (2) the full amount of any tax required to be shown due
14    on a return and which is not shown (penalty for late
15    payment or nonpayment of additional liability), within 30
16    days after a notice of arithmetic error, notice and demand,
17    or a final assessment is issued by the Department. In the
18    case of a final assessment arising following a protest and
19    hearing, the 30-day period shall not begin until all
20    proceedings in court for review of the final assessment
21    have terminated or the period for obtaining a review has
22    expired without proceedings for a review having been
23    instituted. In the case of a notice of tax liability that
24    becomes a final assessment without a protest and hearing,
25    the penalty provided in this paragraph (2) shall be imposed
26    at the expiration of the period provided for the filing of

 

 

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1    a protest.
2    (b-5) This subsection is applicable to returns due on and
3after January 1, 1998 and on or before December 31, 2000. A
4penalty of 20% of the tax shown on the return or the tax
5required to be shown due on the return shall be imposed for
6failure to pay:
7        (1) the tax shown due on the return on or before the
8    due date prescribed for payment of that tax, an amount of
9    underpayment of estimated tax, or an amount that is
10    reported in an amended return other than an amended return
11    timely filed as required by subsection (b) of Section 506
12    of the Illinois Income Tax Act (penalty for late payment or
13    nonpayment of admitted liability); or
14        (2) the full amount of any tax required to be shown due
15    on a return and which is not shown (penalty for late
16    payment or nonpayment of additional liability), within 30
17    days after a notice of arithmetic error, notice and demand,
18    or a final assessment is issued by the Department. In the
19    case of a final assessment arising following a protest and
20    hearing, the 30-day period shall not begin until all
21    proceedings in court for review of the final assessment
22    have terminated or the period for obtaining a review has
23    expired without proceedings for a review having been
24    instituted. In the case of a notice of tax liability that
25    becomes a final assessment without a protest and hearing,
26    the penalty provided in this paragraph (2) shall be imposed

 

 

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1    at the expiration of the period provided for the filing of
2    a protest.
3    (b-10) This subsection (b-10) is applicable to returns due
4on and after January 1, 2001 and on or before December 31,
52003. A penalty shall be imposed for failure to pay:
6        (1) the tax shown due on a return on or before the due
7    date prescribed for payment of that tax, an amount of
8    underpayment of estimated tax, or an amount that is
9    reported in an amended return other than an amended return
10    timely filed as required by subsection (b) of Section 506
11    of the Illinois Income Tax Act (penalty for late payment or
12    nonpayment of admitted liability). The amount of penalty
13    imposed under this subsection (b-10)(1) shall be 2% of any
14    amount that is paid no later than 30 days after the due
15    date, 5% of any amount that is paid later than 30 days
16    after the due date and not later than 90 days after the due
17    date, 10% of any amount that is paid later than 90 days
18    after the due date and not later than 180 days after the
19    due date, and 15% of any amount that is paid later than 180
20    days after the due date. If notice and demand is made for
21    the payment of any amount of tax due and if the amount due
22    is paid within 30 days after the date of the notice and
23    demand, then the penalty for late payment or nonpayment of
24    admitted liability under this subsection (b-10)(1) on the
25    amount so paid shall not accrue for the period after the
26    date of the notice and demand.

 

 

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1        (2) the full amount of any tax required to be shown due
2    on a return and that is not shown (penalty for late payment
3    or nonpayment of additional liability), within 30 days
4    after a notice of arithmetic error, notice and demand, or a
5    final assessment is issued by the Department. In the case
6    of a final assessment arising following a protest and
7    hearing, the 30-day period shall not begin until all
8    proceedings in court for review of the final assessment
9    have terminated or the period for obtaining a review has
10    expired without proceedings for a review having been
11    instituted. The amount of penalty imposed under this
12    subsection (b-10)(2) shall be 20% of any amount that is not
13    paid within the 30-day period. In the case of a notice of
14    tax liability that becomes a final assessment without a
15    protest and hearing, the penalty provided in this
16    subsection (b-10)(2) shall be imposed at the expiration of
17    the period provided for the filing of a protest.
18    (b-15) This subsection (b-15) is applicable to returns due
19on and after January 1, 2004 and on or before December 31,
202004. A penalty shall be imposed for failure to pay the tax
21shown due or required to be shown due on a return on or before
22the due date prescribed for payment of that tax, an amount of
23underpayment of estimated tax, or an amount that is reported in
24an amended return other than an amended return timely filed as
25required by subsection (b) of Section 506 of the Illinois
26Income Tax Act (penalty for late payment or nonpayment of

 

 

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1admitted liability). The amount of penalty imposed under this
2subsection (b-15)(1) shall be 2% of any amount that is paid no
3later than 30 days after the due date, 10% of any amount that
4is paid later than 30 days after the due date and not later
5than 90 days after the due date, 15% of any amount that is paid
6later than 90 days after the due date and not later than 180
7days after the due date, and 20% of any amount that is paid
8later than 180 days after the due date. If notice and demand is
9made for the payment of any amount of tax due and if the amount
10due is paid within 30 days after the date of this notice and
11demand, then the penalty for late payment or nonpayment of
12admitted liability under this subsection (b-15)(1) on the
13amount so paid shall not accrue for the period after the date
14of the notice and demand.
15    (b-20) This subsection (b-20) is applicable to returns due
16on and after January 1, 2005.
17        (1) A penalty shall be imposed for failure to pay,
18    prior to the due date for payment, any amount of tax the
19    payment of which is required to be made prior to the filing
20    of a return or without a return (penalty for late payment
21    or nonpayment of estimated or accelerated tax). The amount
22    of penalty imposed under this paragraph (1) shall be 2% of
23    any amount that is paid no later than 30 days after the due
24    date and 10% of any amount that is paid later than 30 days
25    after the due date.
26        (2) A penalty shall be imposed for failure to pay the

 

 

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1    tax shown due or required to be shown due on a return on or
2    before the due date prescribed for payment of that tax or
3    an amount that is reported in an amended return other than
4    an amended return timely filed as required by subsection
5    (b) of Section 506 of the Illinois Income Tax Act (penalty
6    for late payment or nonpayment of tax). The amount of
7    penalty imposed under this paragraph (2) shall be 2% of any
8    amount that is paid no later than 30 days after the due
9    date, 10% of any amount that is paid later than 30 days
10    after the due date and prior to the date the Department has
11    initiated an audit or investigation of the taxpayer, and
12    15% 20% of any amount that is paid after the date the
13    Department has initiated an audit or investigation of the
14    taxpayer; provided that the 15% penalty under this
15    paragraph (2) shall be abated reduced to 15% if, prior to
16    the initiation of the audit or investigation, the taxpayer
17    paid to the Department at least 95% of the total tax
18    liability for the filing period, which includes any
19    additional liability resulting from the audit or
20    investigation. The changes made by this amendatory Act of
21    the 101st General Assembly do not apply for the purposes of
22    determining the amount of penalty assessed under this
23    subsection prior to the effective date of this amendatory
24    Act of the 101st General Assembly. the entire amount due is
25    paid not later than 30 days after the Department has
26    provided the taxpayer with an amended return (following

 

 

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1    completion of an occupation, use, or excise tax audit) or a
2    form for waiver of restrictions on assessment (following
3    completion of an income tax audit); provided further that
4    the reduction to 15% shall be rescinded if the taxpayer
5    makes any claim for refund or credit of the tax, penalties,
6    or interest determined to be due upon audit, except in the
7    case of a claim filed pursuant to subsection (b) of Section
8    506 of the Illinois Income Tax Act or to claim a carryover
9    of a loss or credit, the availability of which was not
10    determined in the audit. For purposes of this paragraph
11    (2), any overpayment reported on an original return that
12    has been allowed as a refund or credit to the taxpayer
13    shall be deemed to have not been paid on or before the due
14    date for payment and any amount paid under protest pursuant
15    to the provisions of the State Officers and Employees Money
16    Disposition Act shall be deemed to have been paid after the
17    Department has initiated an audit. and more than 30 days
18    after the Department has provided the taxpayer with an
19    amended return (following completion of an occupation,
20    use, or excise tax audit) or a form for waiver of
21    restrictions on assessment (following completion of an
22    income tax audit).
23        (3) The penalty imposed under this subsection (b-20)
24    shall be deemed assessed at the time the tax upon which the
25    penalty is computed is assessed, except that, if the
26    reduction of the penalty imposed under paragraph (2) of

 

 

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1    this subsection (b-20) to 15% is rescinded because a claim
2    for refund or credit has been filed, the increase in
3    penalty shall be deemed assessed at the time the claim for
4    refund or credit is filed.
5    (c) For purposes of the late payment penalties, the basis
6of the penalty shall be the tax shown or required to be shown
7on a return, whichever is applicable, reduced by any part of
8the tax which is paid on time and by any credit which was
9properly allowable on the date the return was required to be
10filed.
11    (d) A penalty shall be applied to the tax required to be
12shown even if that amount is less than the tax shown on the
13return.
14    (e) This subsection (e) is applicable to returns due before
15January 1, 2001. If both a subsection (b)(1) or (b-5)(1)
16penalty and a subsection (b)(2) or (b-5)(2) penalty are
17assessed against the same return, the subsection (b)(2) or
18(b-5)(2) penalty shall be assessed against only the additional
19tax found to be due.
20    (e-5) This subsection (e-5) is applicable to returns due on
21and after January 1, 2001. If both a subsection (b-10)(1)
22penalty and a subsection (b-10)(2) penalty are assessed against
23the same return, the subsection (b-10)(2) penalty shall be
24assessed against only the additional tax found to be due.
25    (f) If the taxpayer has failed to file the return, the
26Department shall determine the correct tax according to its

 

 

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1best judgment and information, which amount shall be prima
2facie evidence of the correctness of the tax due.
3    (g) The time within which to file a return or pay an amount
4of tax due without imposition of a penalty does not extend the
5time within which to file a protest to a notice of tax
6liability or a notice of deficiency.
7    (h) No return shall be determined to be unprocessable
8because of the omission of any information requested on the
9return pursuant to Section 2505-575 of the Department of
10Revenue Law (20 ILCS 2505/2505-575).
11    (i) If a taxpayer has a tax liability for the taxable
12period ending after June 30, 1983 and prior to July 1, 2002
13that is eligible for amnesty under the Tax Delinquency Amnesty
14Act and the taxpayer fails to satisfy the tax liability during
15the amnesty period provided for in that Act for that taxable
16period, then the penalty imposed by the Department under this
17Section shall be imposed in an amount that is 200% of the
18amount that would otherwise be imposed under this Section.
19    (j) If a taxpayer has a tax liability for the taxable
20period ending after June 30, 2002 and prior to July 1, 2009
21that is eligible for amnesty under the Tax Delinquency Amnesty
22Act, except for any tax liability reported pursuant to Section
23506(b) of the Illinois Income Tax Act (35 ILCS 5/506(b)) that
24is not final, and the taxpayer fails to satisfy the tax
25liability during the amnesty period provided for in that Act
26for that taxable period, then the penalty imposed by the

 

 

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1Department under this Section shall be imposed in an amount
2that is 200% of the amount that would otherwise be imposed
3under this Section.
4(Source: P.A. 98-425, eff. 8-16-13; 99-335, eff. 8-10-15.)
 
5    (35 ILCS 735/3-9)  (from Ch. 120, par. 2603-9)
6    Sec. 3-9. Application of provisions.
7    (a) The provisions of this Act shall apply to the rates of
8interest for periods on and after the effective date of this
9Act. Interest for periods prior to the effective date of this
10Act shall be computed at the rates in effect prior to that
11date.
12    (b) Except as otherwise provided in subsection (b-20) of
13Section 3-3, penalties Penalties shall be imposed at the rate
14and in the manner in effect at the time the tax liability
15became due.
16    (c) Interest shall not be paid on claims filed after the
17effective date of this Act except such interest which is paid
18in accordance with this Act.
19    (d) Payments received from a taxpayer shall be applied
20against the outstanding liability of the taxpayer, or to an
21agreed portion of the outstanding liability, in the following
22order: the principal amount of the tax, then penalty, and then
23interest.
24(Source: P.A. 87-205.)
 
25    Section 99. Effective date. This Act takes effect January

 

 

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11, 2021.