102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
SB2260

 

Introduced 2/26/2021, by Sen. Craig Wilcox

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 735/3-3  from Ch. 120, par. 2603-3
35 ILCS 735/3-9  from Ch. 120, par. 2603-9

    Amends the Uniform Penalty and Interest Act. Provides that the penalty for failure to pay the tax shown due or required to be shown due on a return shall be 15% (instead of 20%) of any amount that is paid after the date the Department of Revenue has initiated an audit or investigation of the taxpayer. Provides that the penalty shall be abated if the taxpayer paid to the Department at least 95% of the total tax liability (including any additional liability resulting from the audit or investigation) prior to the initiation of the audit or investigation. Effective January 1, 2022.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB2260LRB102 16470 HLH 21862 b

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 Uniform Penalty and Interest Act is amended
5by changing Sections 3-3 and 3-9 as follows:
 
6    (35 ILCS 735/3-3)  (from Ch. 120, par. 2603-3)
7    Sec. 3-3. Penalty for failure to file or pay.
8    (a) This subsection (a) is applicable before January 1,
91996. A penalty of 5% of the tax required to be shown due on a
10return shall be imposed for failure to file the tax return on
11or before the due date prescribed for filing determined with
12regard for any extension of time for filing (penalty for late
13filing or nonfiling). If any unprocessable return is corrected
14and filed within 21 days after notice by the Department, the
15late filing or nonfiling penalty shall not apply. If a penalty
16for late filing or nonfiling is imposed in addition to a
17penalty for late payment, the total penalty due shall be the
18sum of the late filing penalty and the applicable late payment
19penalty. Beginning on the effective date of this amendatory
20Act of 1995, in the case of any type of tax return required to
21be filed more frequently than annually, when the failure to
22file the tax return on or before the date prescribed for filing
23(including any extensions) is shown to be nonfraudulent and

 

 

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1has not occurred in the 2 years immediately preceding the
2failure to file on the prescribed due date, the penalty
3imposed by Section 3-3(a) shall be abated.
4    (a-5) This subsection (a-5) is applicable to returns due
5on and after January 1, 1996 and on or before December 31,
62000. A penalty equal to 2% of the tax required to be shown due
7on a return, up to a maximum amount of $250, determined without
8regard to any part of the tax that is paid on time or by any
9credit that was properly allowable on the date the return was
10required to be filed, shall be imposed for failure to file the
11tax return on or before the due date prescribed for filing
12determined with regard for any extension of time for filing.
13However, if any return is not filed within 30 days after notice
14of nonfiling mailed by the Department to the last known
15address of the taxpayer contained in Department records, an
16additional penalty amount shall be imposed equal to the
17greater of $250 or 2% of the tax shown on the return. However,
18the additional penalty amount may not exceed $5,000 and is
19determined without regard to any part of the tax that is paid
20on time or by any credit that was properly allowable on the
21date the return was required to be filed (penalty for late
22filing or nonfiling). If any unprocessable return is corrected
23and filed within 30 days after notice by the Department, the
24late filing or nonfiling penalty shall not apply. If a penalty
25for late filing or nonfiling is imposed in addition to a
26penalty for late payment, the total penalty due shall be the

 

 

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1sum of the late filing penalty and the applicable late payment
2penalty. In the case of any type of tax return required to be
3filed more frequently than annually, when the failure to file
4the tax return on or before the date prescribed for filing
5(including any extensions) is shown to be nonfraudulent and
6has not occurred in the 2 years immediately preceding the
7failure to file on the prescribed due date, the penalty
8imposed by Section 3-3(a-5) shall be abated.
9    (a-10) This subsection (a-10) is applicable to returns due
10on and after January 1, 2001. A penalty equal to 2% of the tax
11required to be shown due on a return, up to a maximum amount of
12$250, reduced by any tax that is paid on time or by any credit
13that was properly allowable on the date the return was
14required to be filed, shall be imposed for failure to file the
15tax return on or before the due date prescribed for filing
16determined with regard for any extension of time for filing.
17However, if any return is not filed within 30 days after notice
18of nonfiling mailed by the Department to the last known
19address of the taxpayer contained in Department records, an
20additional penalty amount shall be imposed equal to the
21greater of $250 or 2% of the tax shown on the return. However,
22the additional penalty amount may not exceed $5,000 and is
23determined without regard to any part of the tax that is paid
24on time or by any credit that was properly allowable on the
25date the return was required to be filed (penalty for late
26filing or nonfiling). If any unprocessable return is corrected

 

 

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1and filed within 30 days after notice by the Department, the
2late filing or nonfiling penalty shall not apply. If a penalty
3for late filing or nonfiling is imposed in addition to a
4penalty for late payment, the total penalty due shall be the
5sum of the late filing penalty and the applicable late payment
6penalty. In the case of any type of tax return required to be
7filed more frequently than annually, when the failure to file
8the tax return on or before the date prescribed for filing
9(including any extensions) is shown to be nonfraudulent and
10has not occurred in the 2 years immediately preceding the
11failure to file on the prescribed due date, the penalty
12imposed by this subsection (a-10) shall be abated. This
13subsection (a-10) does not apply to transaction reporting
14returns required by Section 3 of the Retailers' Occupation Tax
15Act and Section 9 of the Use Tax Act that would not, when
16properly prepared and filed, result in the imposition of a
17tax; however, those returns are subject to the penalty set
18forth in subsection (a-15).
19    (a-15) A penalty of $100 shall be imposed for failure to
20file a transaction reporting return required by Section 3 of
21the Retailers' Occupation Tax Act and Section 9 of the Use Tax
22Act on or before the date a return is required to be filed;
23provided, however, that this penalty shall be imposed only if
24the return when properly prepared and filed would not result
25in the imposition of a tax. If such a transaction reporting
26return would result in the imposition of a tax when properly

 

 

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1prepared and filed, then that return is subject to the
2provisions of subsection (a-10).
3    (b) This subsection is applicable before January 1, 1998.
4A penalty of 15% of the tax shown on the return or the tax
5required to be shown due on the return shall be imposed for
6failure to pay:
7        (1) the tax shown due on the return on or before the
8    due date prescribed for payment of that tax, an amount of
9    underpayment of estimated tax, or an amount that is
10    reported in an amended return other than an amended return
11    timely filed as required by subsection (b) of Section 506
12    of the Illinois Income Tax Act (penalty for late payment
13    or nonpayment of admitted liability); or
14        (2) the full amount of any tax required to be shown due
15    on a return and which is not shown (penalty for late
16    payment or nonpayment of additional liability), within 30
17    days after a notice of arithmetic error, notice and
18    demand, or a final assessment is issued by the Department.
19    In the case of a final assessment arising following a
20    protest and hearing, the 30-day period shall not begin
21    until all proceedings in court for review of the final
22    assessment have terminated or the period for obtaining a
23    review has expired without proceedings for a review having
24    been instituted. In the case of a notice of tax liability
25    that becomes a final assessment without a protest and
26    hearing, the penalty provided in this paragraph (2) shall

 

 

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1    be imposed at the expiration of the period provided for
2    the filing of a protest.
3    (b-5) This subsection is applicable to returns due on and
4after January 1, 1998 and on or before December 31, 2000. A
5penalty of 20% of the tax shown on the return or the tax
6required to be shown due on the return shall be imposed for
7failure to pay:
8        (1) the tax shown due on the return on or before the
9    due date prescribed for payment of that tax, an amount of
10    underpayment of estimated tax, or an amount that is
11    reported in an amended return other than an amended return
12    timely filed as required by subsection (b) of Section 506
13    of the Illinois Income Tax Act (penalty for late payment
14    or nonpayment of admitted liability); or
15        (2) the full amount of any tax required to be shown due
16    on a return and which is not shown (penalty for late
17    payment or nonpayment of additional liability), within 30
18    days after a notice of arithmetic error, notice and
19    demand, or a final assessment is issued by the Department.
20    In the case of a final assessment arising following a
21    protest and hearing, the 30-day period shall not begin
22    until all proceedings in court for review of the final
23    assessment have terminated or the period for obtaining a
24    review has expired without proceedings for a review having
25    been instituted. In the case of a notice of tax liability
26    that becomes a final assessment without a protest and

 

 

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1    hearing, the penalty provided in this paragraph (2) shall
2    be imposed at the expiration of the period provided for
3    the filing of a protest.
4    (b-10) This subsection (b-10) is applicable to returns due
5on and after January 1, 2001 and on or before December 31,
62003. A penalty shall be imposed for failure to pay:
7        (1) the tax shown due on a return on or before the due
8    date prescribed for payment of that tax, an amount of
9    underpayment of estimated tax, or an amount that is
10    reported in an amended return other than an amended return
11    timely filed as required by subsection (b) of Section 506
12    of the Illinois Income Tax Act (penalty for late payment
13    or nonpayment of admitted liability). The amount of
14    penalty imposed under this subsection (b-10)(1) shall be
15    2% of any amount that is paid no later than 30 days after
16    the due date, 5% of any amount that is paid later than 30
17    days after the due date and not later than 90 days after
18    the due date, 10% of any amount that is paid later than 90
19    days after the due date and not later than 180 days after
20    the due date, and 15% of any amount that is paid later than
21    180 days after the due date. If notice and demand is made
22    for the payment of any amount of tax due and if the amount
23    due is paid within 30 days after the date of the notice and
24    demand, then the penalty for late payment or nonpayment of
25    admitted liability under this subsection (b-10)(1) on the
26    amount so paid shall not accrue for the period after the

 

 

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1    date of the notice and demand.
2        (2) the full amount of any tax required to be shown due
3    on a return and that is not shown (penalty for late payment
4    or nonpayment of additional liability), within 30 days
5    after a notice of arithmetic error, notice and demand, or
6    a final assessment is issued by the Department. In the
7    case of a final assessment arising following a protest and
8    hearing, the 30-day period shall not begin until all
9    proceedings in court for review of the final assessment
10    have terminated or the period for obtaining a review has
11    expired without proceedings for a review having been
12    instituted. The amount of penalty imposed under this
13    subsection (b-10)(2) shall be 20% of any amount that is
14    not paid within the 30-day period. In the case of a notice
15    of tax liability that becomes a final assessment without a
16    protest and hearing, the penalty provided in this
17    subsection (b-10)(2) shall be imposed at the expiration of
18    the period provided for the filing of a protest.
19    (b-15) This subsection (b-15) is applicable to returns due
20on and after January 1, 2004 and on or before December 31,
212004. A penalty shall be imposed for failure to pay the tax
22shown due or required to be shown due on a return on or before
23the due date prescribed for payment of that tax, an amount of
24underpayment of estimated tax, or an amount that is reported
25in an amended return other than an amended return timely filed
26as required by subsection (b) of Section 506 of the Illinois

 

 

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1Income Tax Act (penalty for late payment or nonpayment of
2admitted liability). The amount of penalty imposed under this
3subsection (b-15)(1) shall be 2% of any amount that is paid no
4later than 30 days after the due date, 10% of any amount that
5is paid later than 30 days after the due date and not later
6than 90 days after the due date, 15% of any amount that is paid
7later than 90 days after the due date and not later than 180
8days after the due date, and 20% of any amount that is paid
9later than 180 days after the due date. If notice and demand is
10made for the payment of any amount of tax due and if the amount
11due is paid within 30 days after the date of this notice and
12demand, then the penalty for late payment or nonpayment of
13admitted liability under this subsection (b-15)(1) on the
14amount so paid shall not accrue for the period after the date
15of the notice and demand.
16    (b-20) This subsection (b-20) is applicable to returns due
17on and after January 1, 2005.
18        (1) A penalty shall be imposed for failure to pay,
19    prior to the due date for payment, any amount of tax the
20    payment of which is required to be made prior to the filing
21    of a return or without a return (penalty for late payment
22    or nonpayment of estimated or accelerated tax). The amount
23    of penalty imposed under this paragraph (1) shall be 2% of
24    any amount that is paid no later than 30 days after the due
25    date and 10% of any amount that is paid later than 30 days
26    after the due date.

 

 

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1        (2) A penalty shall be imposed for failure to pay the
2    tax shown due or required to be shown due on a return on or
3    before the due date prescribed for payment of that tax or
4    an amount that is reported in an amended return other than
5    an amended return timely filed as required by subsection
6    (b) of Section 506 of the Illinois Income Tax Act (penalty
7    for late payment or nonpayment of tax). The amount of
8    penalty imposed under this paragraph (2) shall be 2% of
9    any amount that is paid no later than 30 days after the due
10    date, 10% of any amount that is paid later than 30 days
11    after the due date and prior to the date the Department has
12    initiated an audit or investigation of the taxpayer, and
13    15% 20% of any amount that is paid after the date the
14    Department has initiated an audit or investigation of the
15    taxpayer; provided that the 15% penalty under this
16    paragraph (2) shall be abated reduced to 15% if, prior to
17    the initiation of the audit or investigation, the taxpayer
18    paid to the Department at least 95% of the total tax
19    liability for the filing period, which includes any
20    additional liability resulting from the audit or
21    investigation. The changes made by this amendatory Act of
22    the 102nd General Assembly do not apply for the purposes
23    of determining the amount of penalty assessed under this
24    subsection prior to the effective date of this amendatory
25    Act of the 102nd General Assembly. the entire amount due
26    is paid not later than 30 days after the Department has

 

 

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1    provided the taxpayer with an amended return (following
2    completion of an occupation, use, or excise tax audit) or
3    a form for waiver of restrictions on assessment (following
4    completion of an income tax audit); provided further that
5    the reduction to 15% shall be rescinded if the taxpayer
6    makes any claim for refund or credit of the tax,
7    penalties, or interest determined to be due upon audit,
8    except in the case of a claim filed pursuant to subsection
9    (b) of Section 506 of the Illinois Income Tax Act or to
10    claim a carryover of a loss or credit, the availability of
11    which was not determined in the audit. For purposes of
12    this paragraph (2), any overpayment reported on an
13    original return that has been allowed as a refund or
14    credit to the taxpayer shall be deemed to have not been
15    paid on or before the due date for payment and any amount
16    paid under protest pursuant to the provisions of the State
17    Officers and Employees Money Disposition Act shall be
18    deemed to have been paid after the Department has
19    initiated an audit. and more than 30 days after the
20    Department has provided the taxpayer with an amended
21    return (following completion of an occupation, use, or
22    excise tax audit) or a form for waiver of restrictions on
23    assessment (following completion of an income tax audit).
24        (3) The penalty imposed under this subsection (b-20)
25    shall be deemed assessed at the time the tax upon which the
26    penalty is computed is assessed, except that, if the

 

 

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1    reduction of the penalty imposed under paragraph (2) of
2    this subsection (b-20) to 15% is rescinded because a claim
3    for refund or credit has been filed, the increase in
4    penalty shall be deemed assessed at the time the claim for
5    refund or credit is filed.
6    (c) For purposes of the late payment penalties, the basis
7of the penalty shall be the tax shown or required to be shown
8on a return, whichever is applicable, reduced by any part of
9the tax which is paid on time and by any credit which was
10properly allowable on the date the return was required to be
11filed.
12    (d) A penalty shall be applied to the tax required to be
13shown even if that amount is less than the tax shown on the
14return.
15    (e) This subsection (e) is applicable to returns due
16before January 1, 2001. If both a subsection (b)(1) or
17(b-5)(1) penalty and a subsection (b)(2) or (b-5)(2) penalty
18are assessed against the same return, the subsection (b)(2) or
19(b-5)(2) penalty shall be assessed against only the additional
20tax found to be due.
21    (e-5) This subsection (e-5) is applicable to returns due
22on and after January 1, 2001. If both a subsection (b-10)(1)
23penalty and a subsection (b-10)(2) penalty are assessed
24against the same return, the subsection (b-10)(2) penalty
25shall be assessed against only the additional tax found to be
26due.

 

 

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1    (f) If the taxpayer has failed to file the return, the
2Department shall determine the correct tax according to its
3best judgment and information, which amount shall be prima
4facie evidence of the correctness of the tax due.
5    (g) The time within which to file a return or pay an amount
6of tax due without imposition of a penalty does not extend the
7time within which to file a protest to a notice of tax
8liability or a notice of deficiency.
9    (h) No return shall be determined to be unprocessable
10because of the omission of any information requested on the
11return pursuant to Section 2505-575 of the Department of
12Revenue Law (20 ILCS 2505/2505-575).
13    (i) If a taxpayer has a tax liability for the taxable
14period ending after June 30, 1983 and prior to July 1, 2002
15that is eligible for amnesty under the Tax Delinquency Amnesty
16Act and the taxpayer fails to satisfy the tax liability during
17the amnesty period provided for in that Act for that taxable
18period, then the penalty imposed by the Department under this
19Section shall be imposed in an amount that is 200% of the
20amount that would otherwise be imposed under this Section.
21    (j) If a taxpayer has a tax liability for the taxable
22period ending after June 30, 2002 and prior to July 1, 2009
23that is eligible for amnesty under the Tax Delinquency Amnesty
24Act, except for any tax liability reported pursuant to Section
25506(b) of the Illinois Income Tax Act (35 ILCS 5/506(b)) that
26is not final, and the taxpayer fails to satisfy the tax

 

 

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1liability during the amnesty period provided for in that Act
2for that taxable period, then the penalty imposed by the
3Department under this Section shall be imposed in an amount
4that is 200% of the amount that would otherwise be imposed
5under this Section.
6(Source: P.A. 98-425, eff. 8-16-13; 99-335, eff. 8-10-15.)
 
7    (35 ILCS 735/3-9)  (from Ch. 120, par. 2603-9)
8    Sec. 3-9. Application of provisions.
9    (a) The provisions of this Act shall apply to the rates of
10interest for periods on and after the effective date of this
11Act. Interest for periods prior to the effective date of this
12Act shall be computed at the rates in effect prior to that
13date.
14    (b) Except as otherwise provided in subsection (b-20) of
15Section 3-3, penalties Penalties shall be imposed at the rate
16and in the manner in effect at the time the tax liability
17became due.
18    (c) Interest shall not be paid on claims filed after the
19effective date of this Act except such interest which is paid
20in accordance with this Act.
21    (d) Payments received from a taxpayer shall be applied
22against the outstanding liability of the taxpayer, or to an
23agreed portion of the outstanding liability, in the following
24order: the principal amount of the tax, then penalty, and then
25interest.

 

 

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1(Source: P.A. 87-205.)
 
2    Section 99. Effective date. This Act takes effect January
31, 2022.