State of Illinois
92nd General Assembly
Legislation

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92_SB1283enr

 
SB1283 Enrolled                               LRB9206807LDprA

 1        AN ACT in relation to audits.

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

 4        Section  5.  The Civil Administrative Code of Illinois is
 5    amended by adding Article 2510 as follows:

 6        (20 ILCS 2510/Art. 2510 heading new)
 7                  ARTICLE 2510. CERTIFIED AUDIT PROGRAM

 8        (20 ILCS 2510/2510-1 new)
 9        Sec. 2510-1. Short title. This Article 2510 of the  Civil
10    Administrative Code of Illinois may be cited as the Certified
11    Audit Program Law.

12        (20 ILCS 2510/2510-3 new)
13        Sec. 2510-3.  Findings.  The General Assembly finds that:
14        (1)  Voluntary   compliance  is  the  cornerstone  of  an
15    effective tax system.
16        (2)  Despite attempts  by  the  General  Assembly,  State
17    taxes are not simple.
18        (3)  Even  the most diligent taxpayers through mistake or
19    inadvertence may not pay all taxes due.
20        (4)  The  Illinois  Department  of  Revenue   lacks   the
21    resources to audit the compliance of all taxpayers.
22        (5)  Illinois   certified   public   accountants  provide
23    valuable advice and assistance to Illinois taxpayers on State
24    tax issues.
25        (6)  A pilot program establishing a  partnership  between
26    taxpayers,  Illinois  certified  public  accountants, and the
27    Illinois Department  of  Revenue  will  provide  guidance  to
28    taxpayers and enhance voluntary compliance.
 
SB1283 Enrolled            -2-                LRB9206807LDprA
 1        (20 ILCS 2510/2510-5 new)
 2        Sec. 2510-5.  Definitions. As used in this Article:
 3        "Certification    program"    means    an   instructional
 4    curriculum,  examination,  and  process  for   certification,
 5    recertification, and revocation of certification of certified
 6    public  accountants  that is administered by the Illinois CPA
 7    Society and that is officially approved by the Department  to
 8    ensure  that  a  certified  public  accountant  possesses the
 9    necessary skills and abilities  to  successfully  perform  an
10    attestation   engagement  for  tax  compliance  review  in  a
11    certified audit project.
12        "Department" means the Illinois Department of Revenue.
13        "Participating taxpayer" means any person subject to  the
14    revenue  laws  administered by the Department who enters into
15    an  engagement  with  a  qualified   practitioner   for   tax
16    compliance review and who is approved by the Department under
17    the certified audit project.
18        "Qualified   practitioner"   means   a  certified  public
19    accountant who is licensed to practice in  Illinois  and  who
20    has   completed   the   certification  program.   The  phrase
21    "completed the certification program" means  the  participant
22    has  met  all  requirements  for the certified audit training
23    course, achieved the required score on the certification test
24    as approved by the Department, and has been certified by  the
25    Department.

26        (20 ILCS 2510/2510-10 new)
27        Sec. 2510-10.  Certified audit project.
28        (a)  Subject   to   appropriation,   the   Department  is
29    authorized to initiate a certified  audit  pilot  project  to
30    further enhance tax compliance reviews performed by qualified
31    practitioners  and  to  encourage taxpayers to hire qualified
32    practitioners at their own expense to review  and  report  on
33    their  sales  tax  and  use tax compliance. The nature of the
 
SB1283 Enrolled            -3-                LRB9206807LDprA
 1    certified audit work  performed  by  qualified  practitioners
 2    shall  be  agreed-upon  procedures in which the Department is
 3    the specified user of the resulting report.
 4        (b)  As an incentive for taxpayers to incur the costs  of
 5    a  certified  audit, the Department shall abate penalties and
 6    interest due on any tax liabilities revealed by  a  certified
 7    audit,  except  that  this  authority  to  abate penalties or
 8    interest shall not apply to any liability for taxes that were
 9    collected by the participating taxpayer but not  remitted  to
10    the Department nor shall the Department have the authority to
11    abate fraud penalties.
12        (c)  The  certified  audit pilot project shall apply only
13    to occupation and use taxes administered and collected by the
14    Department.
15        (d)  The certified audit pilot project shall  not  extend
16    beyond July 1, 2004.

17        (20 ILCS 2510/2510-15 new)
18        Sec.    2510-15.  Practitioner    responsibilities.   Any
19    practitioner  responsible   for   planning,   directing,   or
20    conducting  a certified audit or reporting on a participating
21    taxpayer's tax compliance shall be a qualified  practitioner.
22    For  purposes  of this Section, a practitioner is responsible
23    for:
24             (1)  Planning a certified audit when performing work
25        that involves  determining  the  objectives,  scope,  and
26        methodology  of  the  certified  audit, when establishing
27        criteria to evaluate matters subject  to  the  review  as
28        part  of  the certified audit, when gathering information
29        used  in  planning   the   certified   audit,   or   when
30        coordinating the certified audit with the Department.
31             (2)  Directing  a  certified  audit  when  the  work
32        involves supervising the efforts or reviewing the work of
33        others  to  determine whether it is properly accomplished
 
SB1283 Enrolled            -4-                LRB9206807LDprA
 1        and complete.
 2             (3)  Conducting a certified  audit  when  performing
 3        tests  and  procedures  or  field audit work necessary to
 4        accomplish  the  audit  objectives  in  accordance   with
 5        applicable standards.
 6             (4)  Reporting  on  a  participating  taxpayer's tax
 7        compliance in a certified audit when  determining  report
 8        contents and substance or reviewing reports for technical
 9        content and substance prior to issuance.

10        (20 ILCS 2510/2510-20 new)
11        Sec. 2510-20.  Notification.
12        (a)  A qualified practitioner shall notify the Department
13    of  an  engagement  to  perform  a  certified audit and shall
14    provide the Department with the  information  the  Department
15    deems necessary to identify the taxpayer, to confirm that the
16    taxpayer is not already under audit by the Department, and to
17    establish the basic nature of the taxpayer's business and the
18    taxpayer's  potential exposure to Illinois occupation and use
19    tax laws. The information provided in the notification  shall
20    include  the taxpayer's name, federal employer identification
21    number or  social  security  number,  Illinois  business  tax
22    number,  mailing address, business location, and the specific
23    occupation and use taxes and period proposed to be covered by
24    the engagement for the  certified  audit.  In  addition,  the
25    notice   shall  include  the  name,  address,  identification
26    number, contact person, and telephone number of  the  engaged
27    firm.
28        (b)  If the taxpayer has not been issued a written notice
29    of  intent  to  conduct  an  audit,  the  taxpayer shall be a
30    participating taxpayer and the Department shall so advise the
31    qualified  practitioner  in  writing  within  10  days  after
32    receipt of the engagement notice. However, the Department may
33    exclude a taxpayer from a certified audit or  may  limit  the
 
SB1283 Enrolled            -5-                LRB9206807LDprA
 1    taxes  or periods subject to the certified audit on the basis
 2    that the Department has previously conducted an  audit,  that
 3    it  is in the process of conducting an investigation or other
 4    examination of the taxpayer's records, or for just cause.
 5        (c)  Notice of the qualification  of  a  taxpayer  for  a
 6    certified   audit  shall  toll  the  statute  of  limitations
 7    provided with respect to the taxpayer for the tax and periods
 8    covered by the engagement.
 9        (d)  Within 30  days  after  receipt  of  the  notice  of
10    qualification from the Department, the qualified practitioner
11    shall contact the Department and submit a proposed audit plan
12    and  procedures  for  review and agreement by the Department.
13    The Department may extend the time for submission of the plan
14    and  procedures   for   reasonable   cause.   The   qualified
15    practitioner  shall  initiate action to advise the Department
16    that amendment or modification of the plan and procedures  is
17    necessary  in  the  event  that  the qualified practitioner's
18    inspection  reveals  that  the  taxpayer's  circumstances  or
19    exposure to the revenue laws is substantially different  than
20    as described in the engagement notice.

21        (20 ILCS 2510/2510-25 new)
22        Sec. 2510-25.  Audit performance and review.
23        (a)  Upon the Department's designation of the agreed-upon
24    procedures  to  be  followed by a practitioner in a certified
25    audit,  the  qualified   practitioner   shall   perform   the
26    engagement  and shall timely submit a completed report to the
27    Department.  The  report  shall  affirm  completion  of   the
28    agreed-upon   procedures   and  shall  provide  any  required
29    disclosures.
30        (b)  The  Department  shall  review  the  report  of  the
31    certified audit and shall accept it when it is determined  to
32    be  complete.  Once the report is accepted by the Department,
33    the Department shall issue a notice  of  proposed  assessment
 
SB1283 Enrolled            -6-                LRB9206807LDprA
 1    reflecting  the  determination  of  any  additional liability
 2    reflected in the report and shall provide the  taxpayer  with
 3    all  the  normal  payment,  protest,  and  appeal rights with
 4    respect to the liability, including the right to a review  by
 5    the  Informal  Conference  Board.  In  cases where the report
 6    indicates an overpayment has been made,  the  taxpayer  shall
 7    submit   a   properly   executed  claim  for  refund  to  the
 8    Department. Otherwise, the certified audit report is a  final
 9    and  conclusive  determination  with  respect  to the tax and
10    period covered. No additional assessment may be made  by  the
11    Department  for  the  specific taxes and period referenced in
12    the report, except  upon  a  showing  of  fraud  or  material
13    misrepresentation.   This determination shall not prevent the
14    Department from collecting liabilities  not  covered  by  the
15    report  or  from  conducting  an  audit  or investigation and
16    making an assessment for additional tax, penalty, or interest
17    for any tax or period not covered by the report.

18        (20 ILCS 2510/2510-30 new)
19        Sec. 2510-30.  Rules.  To implement the  certified  audit
20    project,  the  Department shall have authority to adopt rules
21    including, but not limited to:
22             (1)  The availability of the  certification  program
23        required for participation in the project;
24             (2)  The  requirements  and  basis  for establishing
25        just cause for approval or rejection of participation  by
26        taxpayers;
27             (3)  Procedures   for  assessment,  collection,  and
28        payment of liabilities  or  refund  of  overpayments  and
29        provisions  for  taxpayers  to obtain informal and formal
30        review of certified audit results;
31             (4)  The  nature,  frequency,  and  basis  for   the
32        Department's  review  of  certified  audits  conducted by
33        qualified practitioners, including the  requirements  for
 
SB1283 Enrolled            -7-                LRB9206807LDprA
 1        documentation,   work-paper  retention  and  access,  and
 2        reporting; and
 3             (5)  Requirements for  conducting  certified  audits
 4        and for review of agreed-upon procedures.

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

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