93RD GENERAL ASSEMBLY
State of Illinois
2003 and 2004
HB4296


 
Introduced 1/30/2004, by William B. Black
 
SYNOPSIS AS INTRODUCED:
 		














35 ILCS 130/3-2 new





35 ILCS 135/3-2 new






35 ILCS 143/10-32 new










    Amends the Cigarette Tax Act, the Cigarette Use Tax Act, and the Tobacco
Products Tax Act of 1995. Provides that, beginning on January 1, 2005, a
distributor
may deduct the amount of bad debts from the tax imposed under these Acts.
Provides
that "bad debt" means the taxes attributable to any portion of a debt owed to
the
distributor that is related to a sale of cigarettes or tobacco products subject
to tax under these
Acts, that is not
otherwise deductible or excludable, that has become worthless or uncollectible,
and that
meets other criteria. Effective immediately.



















LRB093 19242 SJM 44977 b




















FISCAL NOTE ACT MAY APPLY
















 


 


A BILL FOR









 














HB4296

LRB093 19242 SJM 44977 b









1
    AN ACT concerning taxes. 

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


 
4
    Section 5. The Cigarette Tax Act is amended by adding 
5
Section 3-2 as follows:


 
6
    (35 ILCS 130/3-2 new)

7
    Sec. 3-2. Bad debts deductible.

8
    (a) Beginning on January 1, 2005, a distributor may deduct 
9
the amount of bad
debts from the tax imposed under Section 2. 
10
The amount deducted must be charged
off
as uncollectible on the 
11
books of the distributor. If a person pays all or part
of a bad 
12
debt
with respect to which a distributor claimed a deduction 
13
under this Section, the
distributor
shall be liable for the 
14
amount of taxes deducted in connection with that
portion of the

15
debt for which payment is received and shall remit these taxes 
16
in his or her
next payment
to the Department under Section 3.

17
    (b) Any claim for a bad debt deduction under this Section 
18
shall be supported
by all of the following:

19
        (1) A copy of the original invoice.

20
        (2) Evidence that the cigarettes described in the 
21
    invoice were delivered
to
the person who ordered them.

22
        (3) Evidence that the person who ordered and received 
23
    the cigarettes did
not pay the distributor for the 
24
    cigarettes and that the distributor used
reasonable

25
    collection practices in attempting to collect the debt.

26
        (4) As used in this Section, "bad debt" means the taxes 
27
    attributable to
any
portion of a debt that is related to a 
28
    sale of cigarettes subject to tax under
Section
2 that is 
29
    not otherwise deductible or excludable, that has become 
30
    worthless or
uncollectible in the time period between the 
31
    date when taxes accrue to the
State
for the distributor's 
32
    preceding tax return and the date when taxes accrue to
the

 


 









HB4296
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LRB093 19242 SJM 44977 b







1
    State for the present return, and that is eligible to be 
2
    claimed, or could be
eligible
to be claimed if the 
3
    distributor kept accounts on an accrual basis, as a

4
    deduction
pursuant to Section 166 of the Internal Revenue 
5
    Code. A bad debt shall not
include any interest on the 
6
    wholesale price of a cigarette, uncollectible
amounts
on 
7
    property that remains in the possession of the distributor 
8
    until the full
purchase
price is paid, expenses incurred in 
9
    attempting to collect any account
receivable or
any portion 
10
    of the debt recovered, any accounts receivable that have 
11
    been sold
to
a third party for collection, and repossessed 
12
    property.



 
13
    Section 10. The Cigarette Use Tax Act is amended  by adding 
14
Section 3-2 as follows:
 
15
    (35 ILCS 135/3-2 new)

16
    Sec. 3-2. Bad debts deductible.
17
    (a) Beginning on January 1, 2005, a distributor may deduct 
18
the amount of bad
debts from the tax imposed under Section 2.  
19
The amount deducted must be
charged off
as uncollectible on the 
20
books of the distributor.  If a person pays all or part
of a bad 
21
debt
with respect to which a distributor claimed a deduction 
22
under this Section, the
distributor
shall be liable for the 
23
amount of taxes deducted in connection with that
portion of the

24
debt for which payment is received and shall remit these taxes 
25
in his or her
next payment
to the Department under Section 3.
26
    (b) Any claim for a bad debt deduction under this Section 
27
shall be
supported by
all of the following:
28
        (1) A copy of the original invoice.
29
        (2) Evidence that the cigarettes described in the 
30
    invoice were delivered
to
the person who ordered them.
31
        (3) Evidence that the person who ordered and received 
32
    the cigarettes did
not pay the distributor for the 
33
    cigarettes and that the distributor used
reasonable

34
    collection practices in attempting to collect the debt.
 


 









HB4296
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1
        (4) As used in this Section, "bad debt" means the taxes 
2
    attributable to
any
portion of a debt that is related to a 
3
    sale of tobacco products subject to tax
under
Section 10-10 
4
    that is not otherwise deductible or excludable, that has 
5
    become
worthless or uncollectible in the time period 
6
    between the date when taxes
accrue
to the State for the 
7
    distributor's preceding tax return and the date when taxes

8
    accrue to the State for the present return, and that is 
9
    eligible to be claimed,
or
could be eligible to be claimed 
10
    if the distributor kept accounts on an accrual
basis,
as a 
11
    deduction pursuant to Section 166 of the Internal Revenue 
12
    Code. A bad debt
shall not include any interest on the 
13
    wholesale price of a tobacco product,
uncollectible 
14
    amounts on property that remains in the possession of the

15
    distributor
until the full purchase price is paid, expenses 
16
    incurred in attempting to
collect any
account receivable or 
17
    any portion of the debt recovered, any accounts
receivable

18
    that have been sold to a third party for collection, and 
19
    repossessed
property.

 
20
    Section 15. The Tobacco Products Tax Act of 1995 is amended  
21
by adding Section 10-32 as follows:
 
22
    (35 ILCS 143/10-32 new)

23
    Sec. 10-32. Bad debts deductible.


24
    (a)  Beginning on January 1, 2005, a distributor may deduct 
25
the amount of
bad
debts from the tax imposed under Section 
26
10-10. The amount deducted must be
charged
off as uncollectible 
27
on the books of the distributor. If a person pays all or
part 
28
of a bad
debt with respect to which a distributor claimed a 
29
deduction under this
Section, the
distributor shall be liable 
30
for the amount of taxes deducted in connection with
that 
31
portion
of the debt for which payment is received and shall 
32
remit these taxes in his or
her next
payment to the Department 
33
under Section 10-30.

34
    (b) Any claim for a bad debt deduction under this Section 
 


 









HB4296
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1
shall be supported
by
all of the following:

2
        (1) A copy of the original invoice.

3
        (2) Evidence that the tobacco products described in the 
4
    invoice were
delivered to the person who ordered them.

5
        (3) Evidence that the person who ordered and received 
6
    the tobacco
products did not pay the distributor for the 
7
    tobacco products and that the
distributor used reasonable 
8
    collection practices in attempting to collect the
debt.

9
        (4) As used in this Section, "bad debt" means the taxes 
10
    attributable to
any
portion of a debt that is related to a 
11
    sale of tobacco products subject to tax
under
Section 10-10 
12
    that is not otherwise deductible or excludable, that has 
13
    become
worthless or uncollectible in the time period 
14
    between the date when taxes
accrue
to the State for the 
15
    distributor's preceding tax return and the date when taxes

16
    accrue to the State for the present return, and that is 
17
    eligible to be claimed,
or
could be eligible to be claimed 
18
    if the distributor kept accounts on an accrual
basis,
as a 
19
    deduction pursuant to Section 166 of the Internal Revenue 
20
    Code. A bad debt
shall not include any interest on the 
21
    wholesale price of a tobacco product,
uncollectible 
22
    amounts on property that remains in the possession of the

23
    distributor
until the full purchase price is paid, expenses 
24
    incurred in attempting to
collect any
account receivable or 
25
    any portion of the debt recovered, any accounts
receivable

26
    that have been sold to a third party for collection, and 
27
    repossessed
property.



 
28
    Section 99. Effective date. This Act takes effect upon 
29
becoming law.