Illinois General Assembly - Full Text of SB1138
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Full Text of SB1138  102nd General Assembly


Sen. Michael E. Hastings

Filed: 4/19/2021





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2    AMENDMENT NO. ______. Amend Senate Bill 1138 by replacing
3everything after the enacting clause with the following:
4    "Section 5. The Local Government Revenue Recapture Act is
5amended by changing Sections 5-5, 5-10, 5-15, 5-20, 5-30,
65-35, 5-37, 10-15, 10-20, 10-30, 10-35, and 10-40 as follows:
7    (50 ILCS 355/5-5)
8    Sec. 5-5. Definitions. As used in this Article:
9    "Department" means the Department of Revenue.
10    "Family member" means the following, whether by whole
11blood, half-blood, or adoption:
12        (1) a parent or step-parent;
13        (2) a child or step-child;
14        (3) a grandparent or step-grandparent;
15        (4) an aunt, uncle, great-aunt, or great-uncle;
16        (4.1) a niece, nephew, great-niece, or great-nephew;



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1        (5) a sibling;
2        (6) a spouse or domestic partner; and
3        (7) the spouse or domestic partner of any person
4    referenced in items (1) through (5).
5    "Financial information" means the information provided to
6the municipality or county by the Department under Section 11
7of the Retailers' Occupation Tax Act that is reported to the
8Department by a business located in a given municipality or
10    "Person" means an individual, sole proprietorship,
11corporation, registered limited liability partnership, limited
12liability company, partnership, professional service
13corporation, or any other form of organization.
14    "Misallocation" means tax paid by the taxpayer and
15allocated to one unit of local government that should have
16been allocated to a different unit of local government. This
17includes misallocations discovered by a unit of local
18government through the tax location verification process under
19Section 8-11-16 of the Illinois Municipal Code and
20misallocations discovered by the Department other than through
21an audit of the taxpayer. "Misallocation" does not, however,
22include any amount reported by a taxpayer in an amended return
23or any amount discovered in an audit of the taxpayer by the
24Department or discovered in an audit of the taxpayer by a
25qualified practitioner under Article 10 of this Act.
26"Misallocation" also does not include amounts overpaid by the



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1taxpayer and therefore not owed to any unit of local
2government, nor amounts underpaid by the taxpayer and
3therefore not previously allocated to any unit of local
5    "Monitoring disbursements" means keeping track of payments
6from the Department by a municipality, county, or third party
7for the limited purpose of tracking previous misallocations.
8    "Third party" means a person, partnership, corporation, or
9other entity or individual registered to do business in
10Illinois who contracts with a municipality or county to review
11financial information related to the disbursement of local
12taxes by the Department to the municipality or county.
13(Source: P.A. 101-628, eff. 6-1-20.)
14    (50 ILCS 355/5-10)
15    Sec. 5-10. Contracts with third parties. A municipality or
16county that receives a disbursement of tax proceeds from the
17Department may contract with a third party for the purpose of
18ensuring that the municipality or county receives the correct
19disbursement from the Department and monitoring disbursements.
20The third party may not contact the Department on behalf of the
21municipality or county, but instead must work directly with
22the municipality or county to acquire financial information. A
23third party may, however, directly access a municipality's or
24county's financial information that is provided by the
25Department by electronic means under Section 11 of the



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1Retailers' Occupation Tax Act, provided that the third party
2meets all other conditions under this Section for the receipt
3of financial information. To be eligible to receive financial
4information from the municipality or county, the third party
6        (1) enter into a confidentiality agreement with the
7    municipality or county in the form and manner required by
8    the Department prior to receiving the financial
9    information;
10        (2) have an existing contract with the municipality or
11    county at the time the third party enters into the
12    confidentiality agreement with the municipality or county;
13    a copy of that existing contract must be on file with the
14    Department;
15        (3) abide by the same conditions as the municipality
16    or county with respect to the furnishing of financial
17    information under Section 11 of the Retailers' Occupation
18    Tax Act; and
19        (4) be registered with the Department as required by
20    Section 5-35 of this Act.
21(Source: P.A. 101-628, eff. 6-1-20.)
22    (50 ILCS 355/5-15)
23    Sec. 5-15. Financial information. The third party may use
24the financial information it receives from the contracting
25municipality or county only for the purpose of providing



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1services to the municipality or county as specified in this
2Act and may not use the information for any other purpose.
3Electronic data submitted to third parties or by the
4contracting municipality or county must be accessible only to
5third parties who have entered into a confidentiality
6agreement with the municipality or county or who have an
7existing contract with the municipality or county.
8(Source: P.A. 101-628, eff. 6-1-20.)
9    (50 ILCS 355/5-20)
10    Sec. 5-20. Retention, collection, disclosure, and
11destruction of financial information.
12    (a) A third party in possession of a taxpayer's financial
13information must permanently destroy that financial
14information pursuant to this Act. The financial information
15shall be destroyed upon the soonest of the following to occur:
16        (1) if the taxpayer is not referred to the Department,
17    within 30 days after receipt of the taxpayer's financial
18    information from either the municipality or county, unless
19    the third party is monitoring disbursements from the
20    Department on an ongoing basis for a municipality or
21    county, in which case, the financial information shall be
22    destroyed no later than 3 years after receipt; or
23        (2) within 30 days after the Department receives a
24    taxpayer audit referral from a third party referring the
25    taxpayer to the Department for additional review.



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1    (b) No third party in possession of financial information
2may sell, lease, trade, market, or otherwise utilize or profit
3from a taxpayer's financial information. The , except for a
4fee as negotiated by the municipality or county may, however,
5negotiate a fee with the third party. The fee may be in the
6form of a contingency fee for a percentage of the amount of
7additional distributions the municipality or county receives
8for no more than 3 years following the first disbursement to
9the municipality or county as a result of the services of the
10third party under this Act.
11    (c) No third party may permanently or temporarily collect,
12capture, purchase, use, receive through trade, or otherwise
13retain a taxpayer's financial information beyond the scope of
14subsection (a) of this Section.
15    (d) No third party in possession of confidential
16information may disclose, redisclose, share, or otherwise
17disseminate a taxpayer's financial information.
18    (e) A third party must dispose of the materials containing
19financial information in a manner that renders the financial
20information unreadable, unusable, and undecipherable. Proper
21disposal methods include, but are not limited to, the
23        (1) in the case of paper documents, burning,
24    pulverizing, or shredding so that the information cannot
25    practicably be read or reconstructed; and
26        (2) in the case of electronic media and other



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1    non-paper media containing information, destroying or
2    erasing so that information cannot practicably be read,
3    reconstructed, or otherwise utilized by the third party or
4    others.
5(Source: P.A. 101-628, eff. 6-1-20.)
6    (50 ILCS 355/5-30)
7    Sec. 5-30. Posting results. Annually, the third party
8shall provide the municipality or county with a final summary
9of the review for publication. It is the responsibility of the
10third party to ensure that this summary includes no personal
11or identifying information of taxpayers and that all such
12taxpayer information is kept confidential. If the summary
13includes any discussion of tax revenue, it shall include only
14aggregate amounts by tax type, and shall in no way include
15information about an individual return or an individual
16taxpayer, even with identifying information redacted. No
17aggregated data may be published that includes taxpayer
18information for 4 or fewer taxpayers. In addition, due to the
19preliminary nature of such a summary based only on unaudited
20financial information, no claim of specific tax savings or
21revenue generation may be made in the summary.
22(Source: P.A. 101-628, eff. 6-1-20.)
23    (50 ILCS 355/5-35)
24    Sec. 5-35. Third party registration.



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1    (a) Beginning on January 1, 2021, no person shall engage
2in business as a third party pursuant to this Act in this State
3without first having registered with the Department.
4Application for registration or renewal of registration shall
5be made to the Department, by electronic means, in a form and
6at the time prescribed by the Department. Each applicant for
7registration or renewal of registration under this Section
8shall furnish to the Department, in an electronic format
9established by the Department, the following information:
10        (1) the name and address of the applicant;
11        (2) the address of the location at which the applicant
12    proposes to engage in business as a third party in this
13    State;
14        (3) valid and updated contact information;
15        (4) attestation of good standing to do business in
16    Illinois;
17        (5) a copy of each contract it has entered into with a
18    municipality or county; if an applicant has a contract
19    with a municipality or county prior to the effective date
20    of this Act, a copy of all existing contracts must be
21    provided;
22        (6) an annual certification of process letter that:
23            (A) is signed by an attorney or certified public
24        accountant licensed and authorized to practice in the
25        State of Illinois;
26            (B) contains findings that, after due diligence,



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1        the author is of the opinion that:
2                (i) the third party's confidentiality
3            standards for storing encrypted data at rest,
4            using a cryptographic algorithm, conform to
5            Security Level 1 of the Federal Information
6            Processing Standard (FIPS) Publication 140-2, or
7            conform to similar security requirements contained
8            in any successor publication;
9                (ii) the third party uses multi-factor
10            authentication;
11                (iii) the third party uses HTTPS with at least
12            TLS 1.2 or its successor to protect the data files
13            while in transit between a browser and server;
14                (iv) the third party adheres to best practices
15            as recommended by the Open Web Application
16            Security Project (OWASP);
17                (v) the third party has a firewall which
18            protects against unauthorized use of the data; and
19                (vi) the third party shall maintain a physical
20            location in this State at all times; if, at any
21            time, the third party fails to have a physical
22            location in this State, the third party's
23            registration shall be revoked; and
24        (7) such other additional information as the
25    Department may require by rule.
26    The annual registration fee payable to the Department for



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1each third party shall be $15,000. The fee shall be deposited
2into the Tax Compliance and Administration Fund and shall be
3used for the cost of administering the certified audit pilot
4project under Article 10.
5    Each applicant shall pay the fee to the Department at the
6time of submitting its application or renewal to the
7Department. The Department may require an applicant under this
8Section to electronically file and pay the fee.
9    (b) The following are ineligible to register as a third
10party under this Act:
11        (1) a person who has been convicted of a felony
12    related to financial crimes under any federal or State
13    law, if the Department, after investigation and a hearing
14    if requested by the applicant, determines that the person
15    has not been sufficiently rehabilitated to warrant the
16    public trust, including an individual or any employee,
17    officer, manager, member, partner, or director of an
18    entity that has been convicted as provided in this
19    paragraph (1);
20        (2) a person, if any employee, contractual employee,
21    officer, manager, or director thereof, or any person or
22    persons owning in the aggregate more than 5% thereof, is
23    employed by or appointed or elected to the corporate
24    authorities of any municipality or county in this State;
25        (3) a person, if any employee, contractual employee,
26    officer, manager, or director thereof, or any person or



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1    persons owning in the aggregate more than 5% thereof, is
2    not or would not be eligible to receive a certificate of
3    registration under this Act or a license under the
4    Illinois Public Accounting Act for any reason;
5        (4) a person who is a family member of any person who
6    is employed by or appointed or elected to the corporate
7    authorities of any municipality or county in the State;
8        (5) a person who is a qualified practitioner, as
9    defined by Section 10-15 of this Act;
10        (6) a third party owned, in whole or in part, by any
11    entity that competes directly or indirectly with any
12    taxpayer whose financial information they are seeking or
13    receiving; and
14        (7) a third party owning in whole or in part, directly
15    or indirectly, any entity that competes, directly or
16    indirectly, with any taxpayer whose financial information
17    they are seeking or receiving.
18    (c) The Department shall begin accepting applications no
19later than January 1, 2021. Upon receipt of an application and
20registration fee in proper form from a person who is eligible
21to register as a third party under this Act, the Department
22shall issue, within 60 days after receipt of an application, a
23certificate of registration to such applicant in such form as
24prescribed by the Department. That certificate of registration
25shall permit the applicant to whom it is issued to engage in
26business as a third party under this Act. All certificates of



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1registration issued by the Department under this Section shall
2be valid for a period not to exceed one year after issuance
3unless sooner revoked or suspended as provided in this Act. No
4certificate of registration issued under this Section is
5transferable or assignable. A person who obtains a certificate
6of registration as a third party who ceases to do business as
7specified in the certificate of registration, or who never
8commenced business, or whose certificate of registration is
9suspended or revoked, shall immediately surrender the
10certificate of registration to the Department.
11    (d) Any person aggrieved by any decision of the Department
12under this Section may, within 60 days after notice of the
13decision, protest and request a hearing. Upon receiving a
14request for a hearing, the Department shall give written
15notice to the person requesting the hearing of the time and
16place fixed for the hearing and shall hold a hearing and then
17issue its final administrative decision in the matter to that
18person within 60 days after the date of the hearing or at a
19later date upon agreement of all of the parties. In the absence
20of a protest and request for a hearing within 60 days, the
21Department's decision shall become final without any further
22determination being made or notice given.
23    (e) All final decisions by the Department under this
24Section are subject to judicial review under the provisions of
25the Administrative Review Law.
26(Source: P.A. 101-628, eff. 6-1-20.)



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1    (50 ILCS 355/5-37)
2    Sec. 5-37. Insurance policy requirement. A third party is
3required to file and maintain in force an insurance policy
4issued by an insurance company authorized to transact fidelity
5and surety business in the State of Illinois. The insurance
6policy shall be for coverage of potential legal claims,
7including, but by not limited to, penalties set forth under
8Section 5-60, embezzlement, dishonesty, fraud, omissions or
9errors, or other financial wrongdoing in the course of
10providing services. The policy shall be in the form prescribed
11by the Department in the sum of $500,000. The policy shall be
12continuous in form and run concurrently with the original and
13each renewal certification period unless terminated by the
14insurance company. An insurance company may terminate a policy
15and avoid further liability by filing a 60-day notice of
16termination with the Department and at the same time sending
17the same notice to the licensee. A licensee that receives a
18notice of termination must promptly notify each municipality
19and county with whom it has a contract under this Act of the
20notice of termination. A license shall be canceled on the
21termination date of the policy unless a new policy is filed
22with the Department and becomes effective at the termination
23date of the prior policy. If a policy has been canceled under
24this Section, the third party must file a new application and
25will be considered a new applicant if it obtains a new policy.



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1(Source: P.A. 101-628, eff. 6-1-20.)
2    (50 ILCS 355/10-15)
3    Sec. 10-15. Definitions. As used in this Article:
4    "Audit" means an agreed-upon procedures engagement in
5accordance with Statements on Standards for the Attestation
6Engagements (AICPA Professional Standards, AT-C Section 315
7(Compliance Attestation Attest)).
8    "Certification program" means an instructional curriculum,
9examination, and process for certification, recertification,
10and revocation of certification of certified public
11accountants that is administered by the Department with the
12assistance of the Illinois CPA Society and that is officially
13approved by the Department to ensure that a certified public
14accountant possesses the necessary skills and abilities to
15successfully perform an attestation engagement for a
16limited-scope tax compliance review in a certified audit
17project under this Act.
18    "Department" means the Department of Revenue.
19    "Family member" means the following, whether by whole
20blood, half-blood, or adoption:
21        (1) a parent or step-parent;
22        (2) a child or step-child;
23        (3) a grandparent or step-grandparent;
24        (4) an aunt, uncle, great-aunt, or great-uncle;
25        (4.1) a niece, nephew, great-niece, or great-nephew;



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1        (5) a sibling;
2        (6) a spouse or domestic partner; and
3        (7) the spouse or domestic partner of any person
4    referenced in items (1) through (5).
5    "Misallocation" means tax paid by the taxpayer and
6allocated to one unit of local government that should have
7been allocated to a different unit of local government. This
8includes misallocations discovered by a unit of local
9government through the tax location verification process under
10Section 8-11-16 of the Illinois Municipal Code and
11misallocations discovered by the Department other than through
12an audit of the taxpayer. "Misallocation" does not, however,
13include any amount reported by a taxpayer in an amended return
14or any amount discovered in an audit of the taxpayer by the
15Department or discovered in an audit of the taxpayer by a
16qualified practitioner under Article 10 of this Act.
17"Misallocation" also does not include amounts overpaid by the
18taxpayer and therefore not owed to any unit of local
19government, nor amounts underpaid by the taxpayer and
20therefore not previously allocated to any unit of local
22    "Participating taxpayer" means any person subject to the
23revenue laws administered by the Department who is the subject
24of a tax compliance referral by a municipality, county, or
25third party, who enters into an engagement with a qualified
26practitioner for a limited-scope tax compliance review under



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1this Act, and who is approved by the Department under the local
2government revenue recapture certified audit pilot project.
3    "Qualified practitioner" means a certified public
4accountant who is licensed or registered to perform
5accountancy activities in Illinois under Section 8.05 of the
6Illinois Public Accounting Act and who has met all
7requirements for the local government revenue recapture
8certified audit training course, achieved the required score
9on the certification test as approved by the Department, and
10been certified by the Department. "Qualified practitioner"
11does not include a third party, as defined by Section 5-5 of
12this Act, or any employee, contractual employee, officer,
13manager, or director thereof, any person or persons owning in
14the aggregate more than 5% of such third party, or a person who
15is a family member of any person who is employed by or is an
16appointed or elected member of any corporate authorities, as
17defined in the Illinois Municipal Code.
18(Source: P.A. 101-628, eff. 6-1-20; revised 8-20-20.)
19    (50 ILCS 355/10-20)
20    Sec. 10-20. Local government revenue recapture certified
21audit project.
22    (a) The Department shall initiate a certified audit pilot
23project to further enhance tax compliance reviews performed by
24qualified practitioners and to encourage taxpayers to hire
25qualified practitioners at their own expense to review and



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1report on certain aspects of their sales tax and use tax
2compliance in cases where the Department has notified the
3taxpayer that it has received a tax compliance referral from a
4municipality, county, or third party under this Act. The
5nature of the certified audit work performed by qualified
6practitioners shall be agreed-upon procedures of a Compliance
7Attestation in which the Department is the specified user of
8the resulting report. Qualified practitioners are prohibited
9from using information obtained from audit manuals, training
10materials, or any other materials provided by the Department
11under this Act for any purpose other than to perform the tax
12compliance reviews under the certified audit pilot program
13under this Act.
14    The tax compliance reviews shall be limited in scope and
15may include only: (i) whether the taxpayer is reporting
16receipts in the proper jurisdiction; (ii) whether tangible
17personal property asset purchases that were used or consumed
18by the taxpayer were taxed properly; (iii) an evaluation of
19sales reported as exempt from tax; (iv) whether the proper tax
20rate was charged; (v) whether the tax was properly reported as
21retailers' occupation tax or use tax; and (vi) any other
22factor that impacts the Department's allocation of sales and
23use tax revenues to the jurisdiction in which the taxpayer
24reports sales or use tax.
25    (b) As an incentive for taxpayers to incur the costs of a
26certified audit, the Department shall abate penalties due on



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1any tax liabilities revealed by a certified audit, except that
2this authority to abate penalties shall not apply to any
3liability for taxes that were collected by the participating
4taxpayer but not remitted to the Department, nor shall the
5Department have the authority to abate fraud penalties.
6    (c) The certified audit pilot project shall apply only to
7taxpayers who have been notified that an audit referral has
8been received by the Department under this Act and only to
9occupation and use taxes administered and collected by the
11    (c-5) The Department shall charge a fee of $2,500 to each
12participant in the certification program under this Article.
13    (d) The certified audit pilot project shall begin with
14audit referrals received on and after January 1, 2021. Upon
15obtaining proper certification, qualified practitioners may
16initiate certified audits beginning January 1, 2021.
17(Source: P.A. 101-628, eff. 6-1-20.)
18    (50 ILCS 355/10-30)
19    Sec. 10-30. Local government revenue recapture audit
21    (a) A third party shall not refer a taxpayer to the
22Department for audit consideration unless the third party is
23registered with the Department pursuant to Section 5-35.
24    (b) If, based on a review of the financial information
25provided by the Department to a municipality or county, or



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1provided by a municipality or county to a registered third
2party, the municipality or county discovers that a taxpayer
3may have underpaid local retailers' or service occupation
4taxes, then it may refer the matter to the Department for audit
5consideration. The tax compliance referral may be made only by
6the municipality, county, or third party and shall be made in
7the form and manner required by the Department, including any
8requirement that the referral be submitted electronically. The
9tax compliance referral shall, at a minimum, include proof of
10registration as a third party, a copy of a contract between the
11third party and the county or municipality, the taxpayer's
12name, Department account identification number, mailing
13address, and business location, and the specific reason for
14the tax compliance referral, including as much detail as
16    (c) The Department shall complete its evaluation of all
17audit referrals under this Act within 90 60 days after receipt
18of the referral and shall handle all audit referrals as
20        (1) the Department shall evaluate the referral to
21    determine whether it is sufficient to warrant further
22    action based on the information provided in the referral,
23    any other information the Department possesses, and audit
24    selection procedures of the Department;
25        (2) if the Department determines that the referral is
26    not actionable, then the Department shall notify the local



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1    government that it has evaluated the referral and has
2    determined that no action is deemed necessary and provide
3    the local government with an explanation for that
4    decision, including, but not limited to an explanation
5    that (i) the Department has previously conducted an audit;
6    (ii) the Department is in the process of conducting an
7    investigation or other examination of the taxpayer's
8    records; (iii) the taxpayer has already been referred to
9    the Department and the Department determined an audit
10    referral is not actionable; (iv) the Department or a
11    qualified practitioner has previously conducted an audit
12    after referral under this Section 10-30; or (v) for just
13    cause;
14        (3) if the Department determines that the referral is
15    actionable, then it shall determine whether the taxpayer
16    is currently under audit or scheduled for audit by the
17    Department;
18            (A) if the taxpayer is not currently under audit
19        by the Department or scheduled for audit by the
20        Department, the Department shall determine whether it
21        will schedule the taxpayer for audit; and
22            (B) if the taxpayer is not under audit by the
23        Department or scheduled for audit by the Department
24        and the Department decides under subparagraph (A) not
25        to schedule the taxpayer for audit by the Department,
26        then the Department shall notify the taxpayer that the



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1        Department has received an actionable audit referral
2        on the taxpayer and issue a notice to the taxpayer as
3        provided under subsection (d) of this Section.
4    (d) The notice to the taxpayer required by subparagraph
5(B) of paragraph (3) of subsection (c) shall include, but not
6be limited to, the following:
7        (1) that the taxpayer must either: (A) engage a
8    qualified practitioner, at the taxpayer's expense, to
9    complete a certified audit, limited in scope to the
10    taxpayer's Retailers' Occupation Tax, Use Tax, Service
11    Occupation Tax, or Service Use Tax liability, and the
12    taxpayer's liability for any local retailers' or service
13    occupation tax administered by the Department; or (B) be
14    subject to audit by the Department;
15        (2) that, as an incentive, for taxpayers who agree to
16    the limited-scope certified audit, the Department shall
17    abate penalties as provided in Section 10-20; and
18        (3) A statement that reads: "[INSERT THE NAME OF THE
20    contracted with [INSERT THIRD PARTY] to review your
21    Retailers' Occupation Tax, Use Tax, Service Occupation
22    Tax, Service Use Tax, and any local retailers' or service
23    occupation taxes reported to the Illinois Department of
24    Revenue ("Department"). [INSERT THE NAME OF THE ELECTED
26    THE THIRD PARTY] have selected and referred your business



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1    to the Department for a certified audit of your Retailers'
2    Occupation Tax, Use Tax, Service Occupation Tax, Service
3    Use Tax, and any local retailers' or service occupation
4    taxes reported to the Department pursuant to the Local
5    Government Revenue Recapture Act. The purpose of the audit
6    is to verify that your business reported and submitted the
7    proper Retailers' Occupation Tax, Use Tax, Service
8    Occupation Tax, Service Use Tax, and any local retailers'
9    or service occupation taxes administered by the
10    Department. The Department is required to disclose your
11    confidential financial information to [INSERT THE NAME OF
13    and [INSERT THE THIRD PARTY]. Additional information can
14    be accessed from the Department's website and publications
15    for a basic overview of your rights as a Taxpayer. If you
16    have questions regarding your business's referral to the
17    Department for audit, please contact [CORPORATE
18    AUTHORITY'S] mayor, village president, or any other person
19    serving as [CORPORATE AUTHORITY'S] chief executive officer
20    or chief financial officer. [INSERT THIRD PARTY] is
21    prohibited from discussing this matter with you directly
22    or indirectly in any manner regardless of who initiates
23    the contact. If [INSERT THIRD PARTY] contacts you, please
24    contact the Department.".
25    (e) Within 90 days after notice by the Department, the
26taxpayer must respond by stating in writing whether it will or



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1will not arrange for the performance of a certified audit
2under this Act. If the taxpayer states that it will arrange for
3the performance of a certified audit, then it must do so within
460 days after responding to the Department or within 90 days
5after notice by the Department, whichever comes first. If the
6taxpayer states that it will not arrange for the performance
7of a certified audit or if the taxpayer does not arrange for
8the performance of a certified audit within 180 days after
9notice by the Department, then the Department may schedule the
10taxpayer for audit by the Department.
11    (f) The certified audit must not be a contingent-fee
12engagement and must be completed in accordance with this
13Article 10.
14(Source: P.A. 101-628, eff. 6-1-20.)
15    (50 ILCS 355/10-35)
16    Sec. 10-35. Notification by qualified practitioner.
17    (a) A qualified practitioner hired by a taxpayer who
18elects to perform a certified audit under Section 10-30 shall
19notify the Department of an engagement to perform a certified
20audit and shall provide the Department with the information
21the Department deems necessary to identify the taxpayer, to
22confirm that the taxpayer is not already under audit by the
23Department, and to establish the basic nature of the
24taxpayer's business and the taxpayer's potential exposure to
25Illinois occupation and use tax laws. The information provided



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1in the notification shall be submitted in the form and manner
2required by the Department and shall include the taxpayer's
3name, federal employer identification number or social
4security number, Department account identification number,
5mailing address, and business location, and the specific
6occupation and use taxes and period proposed to be covered by
7the engagement for the certified audit. In addition, the
8notice shall include the name, address, identification number,
9contact person, and telephone number of the engaged firm. An
10engagement for a qualified practitioner to perform a certified
11audit under this Act shall not be authorized by the Department
12unless the taxpayer received notice from the Department under
13subparagraph (B) (b) of paragraph (3) of subsection (c) of
14Section 10-30.
15    (b) If the taxpayer has received notice of an audit
16referral from the Department and has not been issued a written
17notice of intent to conduct an audit, the taxpayer shall be a
18participating taxpayer and the Department shall so advise the
19qualified practitioner in writing within 10 days after receipt
20of the engagement notice. However, the Department may exclude
21a taxpayer from a certified audit or may limit the taxes or
22periods subject to the certified audit on the basis that: (i)
23the Department has previously conducted an audit; (ii) the
24Department is in the process of conducting an investigation or
25other examination of the taxpayer's records; (iii) the
26taxpayer has already been referred to the Department pursuant



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1to Section 10-30 and the Department determined an audit
2referral is not actionable; (iv) the Department or a qualified
3practitioner has previously conducted an audit under Section
410-30 of this Act; or (v) for just cause.
5    (c) Within 30 days after receipt of the notice of
6qualification from the Department under subsection (b), the
7qualified practitioner shall contact the Department and
8submit, for review and agreement by the Department, a proposed
9audit plan and procedures. The Department may extend the time
10for submission of the plan and procedures for reasonable
11cause. The qualified practitioner shall initiate action to
12advise the Department that amendment or modification of the
13plan and procedures is necessary if the qualified
14practitioner's inspection reveals that the taxpayer's
15circumstances or exposure to the revenue laws is substantially
16different from those described in the engagement notice.
17(Source: P.A. 101-628, eff. 6-1-20.)
18    (50 ILCS 355/10-40)
19    Sec. 10-40. Audit performance and review.
20    (a) Upon the Department's designation of the agreed-upon
21procedures to be followed by a practitioner in a certified
22audit, the qualified practitioner shall perform the engagement
23and shall timely submit a completed report to the Department
24in the form and manner required by the Department and
25professional standards. The report shall affirm completion of



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1the agreed-upon procedures and shall provide any required
3    (b) The Department shall review the report of the
4certified audit and shall accept it when it is determined to be
5complete by the qualified practitioner. Once the report is
6accepted by the Department, the Department shall issue a
7notice of proposed assessment reflecting the determination of
8any additional liability reflected in the report and shall
9provide the taxpayer with all the normal payment, protest, and
10appeal rights with respect to any the liability reflected in
11the report, including the right to a review by the Informal
12Conference Board. In cases in which the report indicates an
13overpayment has been made, the taxpayer shall submit a
14properly executed claim for credit or refund to the
15Department. Otherwise, the certified audit report is a final
16and conclusive determination with respect to the tax and
17period covered. No additional assessment may be made by the
18Department for the specific taxes and period referenced in the
19report, except upon a showing of fraud or material
20misrepresentation. This determination shall not prevent the
21Department from collecting liabilities not covered by the
22report or from conducting an audit or investigation and making
23an assessment for additional tax, penalty, or interest for any
24tax or period not covered by the report.
25    (c) Any A notice of proposed assessment issued by the
26Department under this Act is subject to the statute of



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1limitations for assessments under the Retailers' Occupation
2Tax Act, the Use Tax Act, the Service Occupation Tax Act, the
3Service Use Tax Act, and any local retailers' or service
4occupation tax, as appropriate, and local taxes collected on
5assessments issued shall be allocated to units of local
6government for the full period of the statute of limitations
7in accordance with those Acts and any applicable local
8retailers' or service occupation tax Act. The Department shall
9provide notice in writing to the municipality or county and
10the third party, if applicable, of any audit findings,
11determinations, or collections once finalized, but limited to
12the amount of additional liability, if any, for distribution
13to the municipality or county as part of the municipality's or
14county's share of the State Retailers' Occupation Tax or
15Service Occupation Tax or under the municipality's or county's
16locally-imposed retailer's or service occupation tax.
17    Claims for credit or refund filed by taxpayers under this
18Act are subject to the statute of limitations under the
19Retailers' Occupation Tax Act, the Use Tax Act, the Service
20Occupation Tax Act, the Service Use Tax Act, and any local
21retailers' or service occupation tax Act, as appropriate, and
22any credit or refund of local taxes allowed to the taxpayer
23shall be de-allocated from units of local government for the
24full period of the statute of limitations in accordance with
25those Acts and any applicable local retailers' or service
26occupation tax Act.



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1    If a reallocation of tax from one unit of local government
2to another occurs as a result of an amended return filed by a
3taxpayer or an audit of a taxpayer, the Department shall make
4the reallocation for the full period of the statute of
5limitations under the Retailer's Occupation Tax Act, the Use
6Tax Act, the Service Occupation Tax Act, the Service Use Tax
7Act, and any applicable local retailer's or service occupation
8tax Act.
9    With respect to misallocations discovered under this Act,
10the Department shall increase or decrease the amount allocated
11to a unit of local government by an amount necessary to offset
12any misallocation of previous disbursements. The offset amount
13shall be the amount erroneously disbursed within the previous
146 months from the time a misallocation is discovered.
15    (d) Under no circumstances may a person, including a
16municipality or county or third party, other than the person
17audited and his or her attorney, have any right to participate
18in an appeal or other proceeding regarding the audit,
19participate in settlement negotiations, challenge the validity
20of any settlement between the Department and any person, or
21review any materials, other than financial information as
22otherwise provided in this Act, that are subject to the
23confidentiality provisions of the underlying tax Act. In
24addition, the Department's determination of whether to audit a
25taxpayer or the result of the audit creates no justiciable
26cause of action, and any adjudication related to this program



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1is limited to the taxpayer's rights in an administrative
2hearing held by the Department, an administrative hearing held
3by the Illinois Independent Tax Tribunal, or related to
4payments made under protest as provided in Section 2a.1 of the
5State Officers and Employees Money Disposition Act, as
7(Source: P.A. 101-628, eff. 6-1-20.)
8    Section 99. Effective date. This Act takes effect upon
9becoming law.".