HB0552 94TH GENERAL ASSEMBLY

LRB094 06727 BDD 36826 b

94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB0552

Introduced 1/27/2005, by Rep. William B. Black

SYNOPSIS AS INTRODUCED:

35 ILCS 130/3-2 new
35 ILCS 135/3-2 new
35 ILCS 143/10-32 new

Amends the Cigarette Tax Act, the Cigarette Use Tax Act, and the Tobacco Products Tax Act of 1995. Provides that, beginning on January 1, 2006, a distributor may deduct the amount of bad debts from the tax imposed under these Acts. Provides that "bad debt" means the taxes attributable to any portion of a debt owed to the distributor that is related to a sale of cigarettes or tobacco products subject to tax under these Acts, that is not otherwise deductible or excludable, that has become worthless or uncollectible, and that meets other criteria. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning taxes.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Cigarette Tax Act is amended by adding Section 3-2 as follows:

(35 ILCS 130/3-2 new)

Sec. 3-2. Bad debts deductible.

(a) Beginning on January 1, 2006, a distributor may deduct the amount of bad debts from the tax imposed under Section 2. The amount deducted must be charged off as uncollectible on the books of the distributor. If a person pays all or part of a bad debt with respect to which a distributor claimed a deduction under this Section, the distributor shall be liable for the amount of taxes deducted in connection with that portion of the debt for which payment is received and shall remit these taxes in his or her next payment to the Department under Section 3.

(b) Any claim for a bad debt deduction under this Section shall be supported by all of the following:

(1) A copy of the original invoice.

(2) Evidence that the cigarettes described in the invoice were delivered to the person who ordered them.

(3) Evidence that the person who ordered and received the cigarettes did not pay the distributor for the cigarettes and that the distributor used reasonable collection practices in attempting to collect the debt.

(4) As used in this Section, "bad debt" means the taxes attributable to any portion of a debt that is related to a sale of cigarettes subject to tax under Section 2 that is not otherwise deductible or excludable, that has become worthless or uncollectible in the time period between the date when taxes accrue to the State for the distributor's preceding tax return and the date when taxes accrue to the State for the present return, and that is eligible to be claimed, or could be eligible to be claimed if the distributor kept accounts on an accrual basis, as a deduction pursuant to Section 166 of the Internal Revenue Code. A bad debt shall not include any interest on the wholesale price of a cigarette, uncollectible amounts on property that remains in the possession of the distributor until the full purchase price is paid, expenses incurred in attempting to collect any account receivable or any portion of the debt recovered, any accounts receivable that have been sold to a third party for collection, and repossessed property.

Section 10. The Cigarette Use Tax Act is amended by adding Section 3-2 as follows:

(35 ILCS 135/3-2 new)

Sec. 3-2. Bad debts deductible.

(a) Beginning on January 1, 2006, a distributor may deduct the amount of bad debts from the tax imposed under Section 2. The amount deducted must be charged off as uncollectible on the books of the distributor. If a person pays all or part of a bad debt with respect to which a distributor claimed a deduction under this Section, the distributor shall be liable for the amount of taxes deducted in connection with that portion of the debt for which payment is received and shall remit these taxes in his or her next payment to the Department under Section 3.

(b) Any claim for a bad debt deduction under this Section shall be supported by all of the following:

(1) A copy of the original invoice.

(2) Evidence that the cigarettes described in the invoice were delivered to the person who ordered them.

(3) Evidence that the person who ordered and received the cigarettes did not pay the distributor for the cigarettes and that the distributor used reasonable collection practices in attempting to collect the debt.

(4) As used in this Section, "bad debt" means the taxes attributable to any portion of a debt that is related to a sale of tobacco products subject to tax under Section 10-10 that is not otherwise deductible or excludable, that has become worthless or uncollectible in the time period between the date when taxes accrue to the State for the distributor's preceding tax return and the date when taxes accrue to the State for the present return, and that is eligible to be claimed, or could be eligible to be claimed if the distributor kept accounts on an accrual basis, as a deduction pursuant to Section 166 of the Internal Revenue Code. A bad debt shall not include any interest on the wholesale price of a tobacco product, uncollectible amounts on property that remains in the possession of the distributor until the full purchase price is paid, expenses incurred in attempting to collect any account receivable or any portion of the debt recovered, any accounts receivable that have been sold to a third party for collection, and repossessed property.

Section 15. The Tobacco Products Tax Act of 1995 is amended by adding Section 10-32 as follows:

(35 ILCS 143/10-32 new)

Sec. 10-32. Bad debts deductible.

(a) Beginning on January 1, 2006, a distributor may deduct the amount of bad debts from the tax imposed under Section 10-10. The amount deducted must be charged off as uncollectible on the books of the distributor. If a person pays all or part of a bad debt with respect to which a distributor claimed a deduction under this Section, the distributor shall be liable for the amount of taxes deducted in connection with that portion of the debt for which payment is received and shall remit these taxes in his or her next payment to the Department under Section 10-30.

(b) Any claim for a bad debt deduction under this Section shall be supported by all of the following:

(1) A copy of the original invoice.

(2) Evidence that the tobacco products described in the invoice were delivered to the person who ordered them.

(3) Evidence that the person who ordered and received the tobacco products did not pay the distributor for the tobacco products and that the distributor used reasonable collection practices in attempting to collect the debt.

(4) As used in this Section, "bad debt" means the taxes attributable to any portion of a debt that is related to a sale of tobacco products subject to tax under Section 10-10 that is not otherwise deductible or excludable, that has become worthless or uncollectible in the time period between the date when taxes accrue to the State for the distributor's preceding tax return and the date when taxes accrue to the State for the present return, and that is eligible to be claimed, or could be eligible to be claimed if the distributor kept accounts on an accrual basis, as a deduction pursuant to Section 166 of the Internal Revenue Code. A bad debt shall not include any interest on the wholesale price of a tobacco product, uncollectible amounts on property that remains in the possession of the distributor until the full purchase price is paid, expenses incurred in attempting to collect any account receivable or any portion of the debt recovered, any accounts receivable that have been sold to a third party for collection, and repossessed property.

Section 99. Effective date. This Act takes effect upon becoming law.