SB1138eng 102ND GENERAL ASSEMBLY



 


 
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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 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;
17        (5) a sibling;
18        (6) a spouse or domestic partner; and
19        (7) the spouse or domestic partner of any person
20    referenced in items (1) through (5).
21    "Financial information" means the information provided to
22the municipality or county by the Department under Section 11
23of the Retailers' Occupation Tax Act that is reported to the

 

 

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1Department by a business located in a given municipality or
2county.
3    "Person" means an individual, sole proprietorship,
4corporation, registered limited liability partnership, limited
5liability company, partnership, professional service
6corporation, or any other form of organization.
7    "Misallocation" means tax paid by the taxpayer and
8allocated to one unit of local government that should have
9been allocated to a different unit of local government. This
10includes misallocations discovered by a unit of local
11government through the tax location verification process under
12Section 8-11-16 of the Illinois Municipal Code and
13misallocations discovered by the Department other than through
14an audit of the taxpayer. "Misallocation" does not, however,
15include any amount reported by a taxpayer in an amended return
16or any amount discovered in an audit of the taxpayer by the
17Department or discovered in an audit of the taxpayer by a
18qualified practitioner under Article 10 of this Act.
19"Misallocation" also does not include amounts overpaid by the
20taxpayer and therefore not owed to any unit of local
21government, nor amounts underpaid by the taxpayer and
22therefore not previously allocated to any unit of local
23government.
24    "Monitoring disbursements" means keeping track of payments
25from the Department by a municipality, county, or third party
26for the limited purpose of tracking previous misallocations.

 

 

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1    "Third party" means a person, partnership, corporation, or
2other entity or individual registered to do business in
3Illinois who contracts with a municipality or county to review
4financial information related to the disbursement of local
5taxes by the Department to the municipality or county.
6(Source: P.A. 101-628, eff. 6-1-20.)
 
7    (50 ILCS 355/5-10)
8    Sec. 5-10. Contracts with third parties. A municipality or
9county that receives a disbursement of tax proceeds from the
10Department may contract with a third party for the purpose of
11ensuring that the municipality or county receives the correct
12disbursement from the Department and monitoring disbursements.
13The third party may not contact the Department on behalf of the
14municipality or county, but instead must work directly with
15the municipality or county to acquire financial information. A
16third party may, however, directly access a municipality's or
17county's financial information that is provided by the
18Department by electronic means under Section 11 of the
19Retailers' Occupation Tax Act, provided that the third party
20meets all other conditions under this Section for the receipt
21of financial information. To be eligible to receive financial
22information from the municipality or county, the third party
23must:
24        (1) enter into a confidentiality agreement with the
25    municipality or county in the form and manner required by

 

 

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1    the Department prior to receiving the financial
2    information;
3        (2) have an existing contract with the municipality or
4    county at the time the third party enters into the
5    confidentiality agreement with the municipality or county;
6    a copy of that existing contract must be on file with the
7    Department;
8        (3) abide by the same conditions as the municipality
9    or county with respect to the furnishing of financial
10    information under Section 11 of the Retailers' Occupation
11    Tax Act; and
12        (4) be registered with the Department as required by
13    Section 5-35 of this Act.
14(Source: P.A. 101-628, eff. 6-1-20.)
 
15    (50 ILCS 355/5-15)
16    Sec. 5-15. Financial information. The third party may use
17the financial information it receives from the contracting
18municipality or county only for the purpose of providing
19services to the municipality or county as specified in this
20Act and may not use the information for any other purpose.
21Electronic data submitted to third parties or by the
22contracting municipality or county must be accessible only to
23third parties who have entered into a confidentiality
24agreement with the municipality or county or who have an
25existing contract with the municipality or county.

 

 

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1(Source: P.A. 101-628, eff. 6-1-20.)
 
2    (50 ILCS 355/5-20)
3    Sec. 5-20. Retention, collection, disclosure, and
4destruction of financial information.
5    (a) A third party in possession of a taxpayer's financial
6information must permanently destroy that financial
7information pursuant to this Act. The financial information
8shall be destroyed upon the soonest of the following to occur:
9        (1) if the taxpayer is not referred to the Department,
10    within 30 days after receipt of the taxpayer's financial
11    information from either the municipality or county, unless
12    the third party is monitoring disbursements from the
13    Department on an ongoing basis for a municipality or
14    county, in which case, the financial information shall be
15    destroyed no later than 3 years after receipt; or
16        (2) within 30 days after the Department receives a
17    taxpayer audit referral from a third party referring the
18    taxpayer to the Department for additional review.
19    (b) No third party in possession of financial information
20may sell, lease, trade, market, or otherwise utilize or profit
21from a taxpayer's financial information. The , except for a
22fee as negotiated by the municipality or county may, however,
23negotiate a fee with the third party. The fee may be in the
24form of a contingency fee for a percentage of the amount of
25additional distributions the municipality or county receives

 

 

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1for no more than 3 years following the first disbursement to
2the municipality or county as a result of the services of the
3third party under this Act.
4    (c) No third party may permanently or temporarily collect,
5capture, purchase, use, receive through trade, or otherwise
6retain a taxpayer's financial information beyond the scope of
7subsection (a) of this Section.
8    (d) No third party in possession of confidential
9information may disclose, redisclose, share, or otherwise
10disseminate a taxpayer's financial information.
11    (e) A third party must dispose of the materials containing
12financial information in a manner that renders the financial
13information unreadable, unusable, and undecipherable. Proper
14disposal methods include, but are not limited to, the
15following:
16        (1) in the case of paper documents, burning,
17    pulverizing, or shredding so that the information cannot
18    practicably be read or reconstructed; and
19        (2) in the case of electronic media and other
20    non-paper media containing information, destroying or
21    erasing so that information cannot practicably be read,
22    reconstructed, or otherwise utilized by the third party or
23    others.
24(Source: P.A. 101-628, eff. 6-1-20.)
 
25    (50 ILCS 355/5-30)

 

 

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1    Sec. 5-30. Posting results. Annually, the third party
2shall provide the municipality or county with a final summary
3of the review for publication. It is the responsibility of the
4third party to ensure that this summary includes no personal
5or identifying information of taxpayers and that all such
6taxpayer information is kept confidential. If the summary
7includes any discussion of tax revenue, it shall include only
8aggregate amounts by tax type, and shall in no way include
9information about an individual return or an individual
10taxpayer, even with identifying information redacted. No
11aggregated data may be published that includes taxpayer
12information for 4 or fewer taxpayers. In addition, due to the
13preliminary nature of such a summary based only on unaudited
14financial information, no claim of specific tax savings or
15revenue generation may be made in the summary.
16(Source: P.A. 101-628, eff. 6-1-20.)
 
17    (50 ILCS 355/5-35)
18    Sec. 5-35. Third party registration.
19    (a) Beginning on January 1, 2021, no person shall engage
20in business as a third party pursuant to this Act in this State
21without first having registered with the Department.
22Application for registration or renewal of registration shall
23be made to the Department, by electronic means, in a form and
24at the time prescribed by the Department. Each applicant for
25registration or renewal of registration under this Section

 

 

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1shall furnish to the Department, in an electronic format
2established by the Department, the following information:
3        (1) the name and address of the applicant;
4        (2) the address of the location at which the applicant
5    proposes to engage in business as a third party in this
6    State;
7        (3) valid and updated contact information;
8        (4) attestation of good standing to do business in
9    Illinois;
10        (5) a copy of each contract it has entered into with a
11    municipality or county; if an applicant has a contract
12    with a municipality or county prior to the effective date
13    of this Act, a copy of all existing contracts must be
14    provided;
15        (6) an annual certification of process letter that:
16            (A) is signed by an attorney or certified public
17        accountant licensed and authorized to practice in the
18        State of Illinois;
19            (B) contains findings that, after due diligence,
20        the author is of the opinion that:
21                (i) the third party's confidentiality
22            standards for storing encrypted data at rest,
23            using a cryptographic algorithm, conform to
24            Security Level 1 of the Federal Information
25            Processing Standard (FIPS) Publication 140-2, or
26            conform to similar security requirements contained

 

 

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1            in any successor publication;
2                (ii) the third party uses multi-factor
3            authentication;
4                (iii) the third party uses HTTPS with at least
5            TLS 1.2 or its successor to protect the data files
6            while in transit between a browser and server;
7                (iv) the third party adheres to best practices
8            as recommended by the Open Web Application
9            Security Project (OWASP);
10                (v) the third party has a firewall which
11            protects against unauthorized use of the data; and
12                (vi) the third party shall maintain a physical
13            location in this State at all times; if, at any
14            time, the third party fails to have a physical
15            location in this State, the third party's
16            registration shall be revoked; and
17        (7) such other additional information as the
18    Department may require by rule.
19    The annual registration fee payable to the Department for
20each third party shall be $15,000. The fee shall be deposited
21into the Tax Compliance and Administration Fund and shall be
22used for the cost of administering the certified audit pilot
23project under Article 10.
24    Each applicant shall pay the fee to the Department at the
25time of submitting its application or renewal to the
26Department. The Department may require an applicant under this

 

 

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1Section to electronically file and pay the fee.
2    (b) The following are ineligible to register as a third
3party under this Act:
4        (1) a person who has been convicted of a felony
5    related to financial crimes under any federal or State
6    law, if the Department, after investigation and a hearing
7    if requested by the applicant, determines that the person
8    has not been sufficiently rehabilitated to warrant the
9    public trust, including an individual or any employee,
10    officer, manager, member, partner, or director of an
11    entity that has been convicted as provided in this
12    paragraph (1);
13        (2) a person, if any employee, contractual employee,
14    officer, manager, or director thereof, or any person or
15    persons owning in the aggregate more than 5% thereof, is
16    employed by or appointed or elected to the corporate
17    authorities of any municipality or county in this State;
18        (3) a person, if any employee, contractual employee,
19    officer, manager, or director thereof, or any person or
20    persons owning in the aggregate more than 5% thereof, is
21    not or would not be eligible to receive a certificate of
22    registration under this Act or a license under the
23    Illinois Public Accounting Act for any reason;
24        (4) a person who is a family member of any person who
25    is employed by or appointed or elected to the corporate
26    authorities of any municipality or county in the State;

 

 

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1        (5) a person who is a qualified practitioner, as
2    defined by Section 10-15 of this Act;
3        (6) a third party owned, in whole or in part, by any
4    entity that competes directly or indirectly with any
5    taxpayer whose financial information they are seeking or
6    receiving; and
7        (7) a third party owning in whole or in part, directly
8    or indirectly, any entity that competes, directly or
9    indirectly, with any taxpayer whose financial information
10    they are seeking or receiving.
11    (c) The Department shall begin accepting applications no
12later than January 1, 2021. Upon receipt of an application and
13registration fee in proper form from a person who is eligible
14to register as a third party under this Act, the Department
15shall issue, within 60 days after receipt of an application, a
16certificate of registration to such applicant in such form as
17prescribed by the Department. That certificate of registration
18shall permit the applicant to whom it is issued to engage in
19business as a third party under this Act. All certificates of
20registration issued by the Department under this Section shall
21be valid for a period not to exceed one year after issuance
22unless sooner revoked or suspended as provided in this Act. No
23certificate of registration issued under this Section is
24transferable or assignable. A person who obtains a certificate
25of registration as a third party who ceases to do business as
26specified in the certificate of registration, or who never

 

 

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1commenced business, or whose certificate of registration is
2suspended or revoked, shall immediately surrender the
3certificate of registration to the Department.
4    (d) Any person aggrieved by any decision of the Department
5under this Section may, within 60 days after notice of the
6decision, protest and request a hearing. Upon receiving a
7request for a hearing, the Department shall give written
8notice to the person requesting the hearing of the time and
9place fixed for the hearing and shall hold a hearing and then
10issue its final administrative decision in the matter to that
11person within 60 days after the date of the hearing or at a
12later date upon agreement of all of the parties. In the absence
13of a protest and request for a hearing within 60 days, the
14Department's decision shall become final without any further
15determination being made or notice given.
16    (e) All final decisions by the Department under this
17Section are subject to judicial review under the provisions of
18the Administrative Review Law.
19(Source: P.A. 101-628, eff. 6-1-20.)
 
20    (50 ILCS 355/5-37)
21    Sec. 5-37. Insurance policy requirement. A third party is
22required to file and maintain in force an insurance policy
23issued by an insurance company authorized to transact fidelity
24and surety business in the State of Illinois. The insurance
25policy shall be for coverage of potential legal claims,

 

 

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1including, but by not limited to, penalties set forth under
2Section 5-60, embezzlement, dishonesty, fraud, omissions or
3errors, or other financial wrongdoing in the course of
4providing services. The policy shall be in the form prescribed
5by the Department in the sum of $500,000. The policy shall be
6continuous in form and run concurrently with the original and
7each renewal certification period unless terminated by the
8insurance company. An insurance company may terminate a policy
9and avoid further liability by filing a 60-day notice of
10termination with the Department and at the same time sending
11the same notice to the licensee. A licensee that receives a
12notice of termination must promptly notify each municipality
13and county with whom it has a contract under this Act of the
14notice of termination. A license shall be canceled on the
15termination date of the policy unless a new policy is filed
16with the Department and becomes effective at the termination
17date of the prior policy. If a policy has been canceled under
18this Section, the third party must file a new application and
19will be considered a new applicant if it obtains a new policy.
20(Source: P.A. 101-628, eff. 6-1-20.)
 
21    (50 ILCS 355/10-15)
22    Sec. 10-15. Definitions. As used in this Article:
23    "Audit" means an agreed-upon procedures engagement in
24accordance with Statements on Standards for the Attestation
25Engagements (AICPA Professional Standards, AT-C Section 315

 

 

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1(Compliance Attestation Attest)).
2    "Certification program" means an instructional curriculum,
3examination, and process for certification, recertification,
4and revocation of certification of certified public
5accountants that is administered by the Department with the
6assistance of the Illinois CPA Society and that is officially
7approved by the Department to ensure that a certified public
8accountant possesses the necessary skills and abilities to
9successfully perform an attestation engagement for a
10limited-scope tax compliance review in a certified audit
11project under this Act.
12    "Department" means the Department of Revenue.
13    "Family member" means the following, whether by whole
14blood, half-blood, or adoption:
15        (1) a parent or step-parent;
16        (2) a child or step-child;
17        (3) a grandparent or step-grandparent;
18        (4) an aunt, uncle, great-aunt, or great-uncle;
19        (4.1) a niece, nephew, great-niece, or great-nephew;
20        (5) a sibling;
21        (6) a spouse or domestic partner; and
22        (7) the spouse or domestic partner of any person
23    referenced in items (1) through (5).
24    "Misallocation" means tax paid by the taxpayer and
25allocated to one unit of local government that should have
26been allocated to a different unit of local government. This

 

 

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1includes misallocations discovered by a unit of local
2government through the tax location verification process under
3Section 8-11-16 of the Illinois Municipal Code and
4misallocations discovered by the Department other than through
5an audit of the taxpayer. "Misallocation" does not, however,
6include any amount reported by a taxpayer in an amended return
7or any amount discovered in an audit of the taxpayer by the
8Department or discovered in an audit of the taxpayer by a
9qualified practitioner under Article 10 of this Act.
10"Misallocation" also does not include amounts overpaid by the
11taxpayer and therefore not owed to any unit of local
12government, nor amounts underpaid by the taxpayer and
13therefore not previously allocated to any unit of local
14government.
15    "Participating taxpayer" means any person subject to the
16revenue laws administered by the Department who is the subject
17of a tax compliance referral by a municipality, county, or
18third party, who enters into an engagement with a qualified
19practitioner for a limited-scope tax compliance review under
20this Act, and who is approved by the Department under the local
21government revenue recapture certified audit pilot project.
22    "Qualified practitioner" means a certified public
23accountant who is licensed or registered to perform
24accountancy activities in Illinois under Section 8.05 of the
25Illinois Public Accounting Act and who has met all
26requirements for the local government revenue recapture

 

 

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1certified audit training course, achieved the required score
2on the certification test as approved by the Department, and
3been certified by the Department. "Qualified practitioner"
4does not include a third party, as defined by Section 5-5 of
5this Act, or any employee, contractual employee, officer,
6manager, or director thereof, any person or persons owning in
7the aggregate more than 5% of such third party, or a person who
8is a family member of any person who is employed by or is an
9appointed or elected member of any corporate authorities, as
10defined in the Illinois Municipal Code.
11(Source: P.A. 101-628, eff. 6-1-20; revised 8-20-20.)
 
12    (50 ILCS 355/10-20)
13    Sec. 10-20. Local government revenue recapture certified
14audit project.
15    (a) The Department shall initiate a certified audit pilot
16project to further enhance tax compliance reviews performed by
17qualified practitioners and to encourage taxpayers to hire
18qualified practitioners at their own expense to review and
19report on certain aspects of their sales tax and use tax
20compliance in cases where the Department has notified the
21taxpayer that it has received a tax compliance referral from a
22municipality, county, or third party under this Act. The
23nature of the certified audit work performed by qualified
24practitioners shall be agreed-upon procedures of a Compliance
25Attestation in which the Department is the specified user of

 

 

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1the resulting report. Qualified practitioners are prohibited
2from using information obtained from audit manuals, training
3materials, or any other materials provided by the Department
4under this Act for any purpose other than to perform the tax
5compliance reviews under the certified audit pilot program
6under this Act.
7    The tax compliance reviews shall be limited in scope and
8may include only: (i) whether the taxpayer is reporting
9receipts in the proper jurisdiction; (ii) whether tangible
10personal property asset purchases that were used or consumed
11by the taxpayer were taxed properly; (iii) an evaluation of
12sales reported as exempt from tax; (iv) whether the proper tax
13rate was charged; (v) whether the tax was properly reported as
14retailers' occupation tax or use tax; and (vi) any other
15factor that impacts the Department's allocation of sales and
16use tax revenues to the jurisdiction in which the taxpayer
17reports sales or use tax.
18    (b) As an incentive for taxpayers to incur the costs of a
19certified audit, the Department shall abate penalties due on
20any tax liabilities revealed by a certified audit, except that
21this authority to abate penalties shall not apply to any
22liability for taxes that were collected by the participating
23taxpayer but not remitted to the Department, nor shall the
24Department have the authority to abate fraud penalties.
25    (c) The certified audit pilot project shall apply only to
26taxpayers who have been notified that an audit referral has

 

 

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1been received by the Department under this Act and only to
2occupation and use taxes administered and collected by the
3Department.
4    (c-5) The Department shall charge a fee of $2,500 to each
5participant in the certification program under this Article.
6    (d) The certified audit pilot project shall begin with
7audit referrals received on and after January 1, 2021. Upon
8obtaining proper certification, qualified practitioners may
9initiate certified audits beginning January 1, 2021.
10(Source: P.A. 101-628, eff. 6-1-20.)
 
11    (50 ILCS 355/10-30)
12    Sec. 10-30. Local government revenue recapture audit
13referral.
14    (a) A third party shall not refer a taxpayer to the
15Department for audit consideration unless the third party is
16registered with the Department pursuant to Section 5-35.
17    (b) If, based on a review of the financial information
18provided by the Department to a municipality or county, or
19provided by a municipality or county to a registered third
20party, the municipality or county discovers that a taxpayer
21may have underpaid local retailers' or service occupation
22taxes, then it may refer the matter to the Department for audit
23consideration. The tax compliance referral may be made only by
24the municipality, county, or third party and shall be made in
25the form and manner required by the Department, including any

 

 

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1requirement that the referral be submitted electronically. The
2tax compliance referral shall, at a minimum, include proof of
3registration as a third party, a copy of a contract between the
4third party and the county or municipality, the taxpayer's
5name, Department account identification number, mailing
6address, and business location, and the specific reason for
7the tax compliance referral, including as much detail as
8possible.
9    (c) The Department shall complete its evaluation of all
10audit referrals under this Act within 90 60 days after receipt
11of the referral and shall handle all audit referrals as
12follows:
13        (1) the Department shall evaluate the referral to
14    determine whether it is sufficient to warrant further
15    action based on the information provided in the referral,
16    any other information the Department possesses, and audit
17    selection procedures of the Department;
18        (2) if the Department determines that the referral is
19    not actionable, then the Department shall notify the local
20    government that it has evaluated the referral and has
21    determined that no action is deemed necessary and provide
22    the local government with an explanation for that
23    decision, including, but not limited to an explanation
24    that (i) the Department has previously conducted an audit;
25    (ii) the Department is in the process of conducting an
26    investigation or other examination of the taxpayer's

 

 

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1    records; (iii) the taxpayer has already been referred to
2    the Department and the Department determined an audit
3    referral is not actionable; (iv) the Department or a
4    qualified practitioner has previously conducted an audit
5    after referral under this Section 10-30; or (v) for just
6    cause;
7        (3) if the Department determines that the referral is
8    actionable, then it shall determine whether the taxpayer
9    is currently under audit or scheduled for audit by the
10    Department;
11            (A) if the taxpayer is not currently under audit
12        by the Department or scheduled for audit by the
13        Department, the Department shall determine whether it
14        will schedule the taxpayer for audit; and
15            (B) if the taxpayer is not under audit by the
16        Department or scheduled for audit by the Department
17        and the Department decides under subparagraph (A) not
18        to schedule the taxpayer for audit by the Department,
19        then the Department shall notify the taxpayer that the
20        Department has received an actionable audit referral
21        on the taxpayer and issue a notice to the taxpayer as
22        provided under subsection (d) of this Section.
23    (d) The notice to the taxpayer required by subparagraph
24(B) of paragraph (3) of subsection (c) shall include, but not
25be limited to, the following:
26        (1) that the taxpayer must either: (A) engage a

 

 

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1    qualified practitioner, at the taxpayer's expense, to
2    complete a certified audit, limited in scope to the
3    taxpayer's Retailers' Occupation Tax, Use Tax, Service
4    Occupation Tax, or Service Use Tax liability, and the
5    taxpayer's liability for any local retailers' or service
6    occupation tax administered by the Department; or (B) be
7    subject to audit by the Department;
8        (2) that, as an incentive, for taxpayers who agree to
9    the limited-scope certified audit, the Department shall
10    abate penalties as provided in Section 10-20; and
11        (3) A statement that reads: "[INSERT THE NAME OF THE
12    ELECTED CHIEF EXECUTIVE OF THE CORPORATE AUTHORITY] has
13    contracted with [INSERT THIRD PARTY] to review your
14    Retailers' Occupation Tax, Use Tax, Service Occupation
15    Tax, Service Use Tax, and any local retailers' or service
16    occupation taxes reported to the Illinois Department of
17    Revenue ("Department"). [INSERT THE NAME OF THE ELECTED
18    CHIEF EXECUTIVE OF THE CORPORATE AUTHORITY] and [INSERT
19    THE THIRD PARTY] have selected and referred your business
20    to the Department for a certified audit of your Retailers'
21    Occupation Tax, Use Tax, Service Occupation Tax, Service
22    Use Tax, and any local retailers' or service occupation
23    taxes reported to the Department pursuant to the Local
24    Government Revenue Recapture Act. The purpose of the audit
25    is to verify that your business reported and submitted the
26    proper Retailers' Occupation Tax, Use Tax, Service

 

 

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1    Occupation Tax, Service Use Tax, and any local retailers'
2    or service occupation taxes administered by the
3    Department. The Department is required to disclose your
4    confidential financial information to [INSERT THE NAME OF
5    THE ELECTED CHIEF EXECUTIVE OF THE CORPORATE AUTHORITY]
6    and [INSERT THE THIRD PARTY]. Additional information can
7    be accessed from the Department's website and publications
8    for a basic overview of your rights as a Taxpayer. If you
9    have questions regarding your business's referral to the
10    Department for audit, please contact [CORPORATE
11    AUTHORITY'S] mayor, village president, or any other person
12    serving as [CORPORATE AUTHORITY'S] chief executive officer
13    or chief financial officer. [INSERT THIRD PARTY] is
14    prohibited from discussing this matter with you directly
15    or indirectly in any manner regardless of who initiates
16    the contact. If [INSERT THIRD PARTY] contacts you, please
17    contact the Department.".
18    (e) Within 90 days after notice by the Department, the
19taxpayer must respond by stating in writing whether it will or
20will not arrange for the performance of a certified audit
21under this Act. If the taxpayer states that it will arrange for
22the performance of a certified audit, then it must do so within
2360 days after responding to the Department or within 90 days
24after notice by the Department, whichever comes first. If the
25taxpayer states that it will not arrange for the performance
26of a certified audit or if the taxpayer does not arrange for

 

 

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1the performance of a certified audit within 180 days after
2notice by the Department, then the Department may schedule the
3taxpayer for audit by the Department.
4    (f) The certified audit must not be a contingent-fee
5engagement and must be completed in accordance with this
6Article 10.
7(Source: P.A. 101-628, eff. 6-1-20.)
 
8    (50 ILCS 355/10-35)
9    Sec. 10-35. Notification by qualified practitioner.
10    (a) A qualified practitioner hired by a taxpayer who
11elects to perform a certified audit under Section 10-30 shall
12notify the Department of an engagement to perform a certified
13audit and shall provide the Department with the information
14the Department deems necessary to identify the taxpayer, to
15confirm that the taxpayer is not already under audit by the
16Department, and to establish the basic nature of the
17taxpayer's business and the taxpayer's potential exposure to
18Illinois occupation and use tax laws. The information provided
19in the notification shall be submitted in the form and manner
20required by the Department and shall include the taxpayer's
21name, federal employer identification number or social
22security number, Department account identification number,
23mailing address, and business location, and the specific
24occupation and use taxes and period proposed to be covered by
25the engagement for the certified audit. In addition, the

 

 

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1notice shall include the name, address, identification number,
2contact person, and telephone number of the engaged firm. An
3engagement for a qualified practitioner to perform a certified
4audit under this Act shall not be authorized by the Department
5unless the taxpayer received notice from the Department under
6subparagraph (B) (b) of paragraph (3) of subsection (c) of
7Section 10-30.
8    (b) If the taxpayer has received notice of an audit
9referral from the Department and has not been issued a written
10notice of intent to conduct an audit, the taxpayer shall be a
11participating taxpayer and the Department shall so advise the
12qualified practitioner in writing within 10 days after receipt
13of the engagement notice. However, the Department may exclude
14a taxpayer from a certified audit or may limit the taxes or
15periods subject to the certified audit on the basis that: (i)
16the Department has previously conducted an audit; (ii) the
17Department is in the process of conducting an investigation or
18other examination of the taxpayer's records; (iii) the
19taxpayer has already been referred to the Department pursuant
20to Section 10-30 and the Department determined an audit
21referral is not actionable; (iv) the Department or a qualified
22practitioner has previously conducted an audit under Section
2310-30 of this Act; or (v) for just cause.
24    (c) Within 30 days after receipt of the notice of
25qualification from the Department under subsection (b), the
26qualified practitioner shall contact the Department and

 

 

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1submit, for review and agreement by the Department, a proposed
2audit plan and procedures. The Department may extend the time
3for submission of the plan and procedures for reasonable
4cause. The qualified practitioner shall initiate action to
5advise the Department that amendment or modification of the
6plan and procedures is necessary if the qualified
7practitioner's inspection reveals that the taxpayer's
8circumstances or exposure to the revenue laws is substantially
9different from those described in the engagement notice.
10(Source: P.A. 101-628, eff. 6-1-20.)
 
11    (50 ILCS 355/10-40)
12    Sec. 10-40. Audit performance and review.
13    (a) Upon the Department's designation of the agreed-upon
14procedures to be followed by a practitioner in a certified
15audit, the qualified practitioner shall perform the engagement
16and shall timely submit a completed report to the Department
17in the form and manner required by the Department and
18professional standards. The report shall affirm completion of
19the agreed-upon procedures and shall provide any required
20disclosures.
21    (b) The Department shall review the report of the
22certified audit and shall accept it when it is determined to be
23complete by the qualified practitioner. Once the report is
24accepted by the Department, the Department shall issue a
25notice of proposed assessment reflecting the determination of

 

 

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1any additional liability reflected in the report and shall
2provide the taxpayer with all the normal payment, protest, and
3appeal rights with respect to any the liability reflected in
4the report, including the right to a review by the Informal
5Conference Board. In cases in which the report indicates an
6overpayment has been made, the taxpayer shall submit a
7properly executed claim for credit or refund to the
8Department. Otherwise, the certified audit report is a final
9and conclusive determination with respect to the tax and
10period covered. No additional assessment may be made by the
11Department for the specific taxes and period referenced in the
12report, except upon a showing of fraud or material
13misrepresentation. This determination shall not prevent the
14Department from collecting liabilities not covered by the
15report or from conducting an audit or investigation and making
16an assessment for additional tax, penalty, or interest for any
17tax or period not covered by the report.
18    (c) Any A notice of proposed assessment issued by the
19Department under this Act is subject to the statute of
20limitations for assessments under the Retailers' Occupation
21Tax Act, the Use Tax Act, the Service Occupation Tax Act, the
22Service Use Tax Act, and any local retailers' or service
23occupation tax, as appropriate, and local taxes collected on
24assessments issued shall be allocated to units of local
25government for the full period of the statute of limitations
26in accordance with those Acts and any applicable local

 

 

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

 

 

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1tax Act.
2    With respect to misallocations discovered under this Act,
3the Department shall increase or decrease the amount allocated
4to a unit of local government by an amount necessary to offset
5any misallocation of previous disbursements. The offset amount
6shall be the amount erroneously disbursed within the previous
76 months from the time a misallocation is discovered.
8    (d) Under no circumstances may a person, including a
9municipality or county or third party, other than the person
10audited and his or her attorney, have any right to participate
11in an appeal or other proceeding regarding the audit,
12participate in settlement negotiations, challenge the validity
13of any settlement between the Department and any person, or
14review any materials, other than financial information as
15otherwise provided in this Act, that are subject to the
16confidentiality provisions of the underlying tax Act. In
17addition, the Department's determination of whether to audit a
18taxpayer or the result of the audit creates no justiciable
19cause of action, and any adjudication related to this program
20is limited to the taxpayer's rights in an administrative
21hearing held by the Department, an administrative hearing held
22by the Illinois Independent Tax Tribunal, or related to
23payments made under protest as provided in Section 2a.1 of the
24State Officers and Employees Money Disposition Act, as
25appropriate.
26(Source: P.A. 101-628, eff. 6-1-20.)
 

 

 

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1    Section 99. Effective date. This Act takes effect upon
2becoming law.