Illinois General Assembly - 35 ILCS 5/ Illinois Income Tax Act.

(35 ILCS 5/1003) (from Ch. 120, par. 10-1003)

Sec. 1003. Interest on Deficiencies.

(a) In general. If any amount of tax imposed by this Act, including tax withheld by an employer, is not paid on or before the date prescribed for payment of such tax (determined without regard to any extensions), interest on such amount shall be paid in the manner and at the rate prescribed in Section 3-2 of the Uniform Penalty and Interest Act for the period from such date to the date of payment of such amount, except that if a waiver of restrictions under Section 907 on the assessment and collection of such amount has been filed, and if notice and demand by the Director for the payment of such amount is not made within 30 days after the filing of such waiver, interest shall not be imposed on such amount for the period beginning immediately after such 30th day and ending with the date of notice and demand.

(b) Interest treated as tax. Interest prescribed under this Section on any tax, including tax withheld by an employer, or on any penalty, shall be deemed assessed upon the assessment of the tax or penalties to which such interest relates and shall be collected and paid on notice and demand in the same manner as tax. Any reference in this Act to the tax imposed by this Act shall be deemed also to refer to interest imposed by this Section on such tax.

(c) Exception as to estimated tax. This Section shall not apply to any failure to pay estimated tax required by Section 803.

(Source: P.A. 87-205.)

(35 ILCS 5/1004) (from Ch. 120, par. 10-1004)

Sec. 1004. Failure to file withholding returns or annual transmittal forms for wage and tax statements. In addition to any other penalties imposed by this Act, a taxpayer failing to file a quarterly return or the annual transmittal form for wage and tax statements required by Section 704 or regulations promulgated thereunder shall incur a penalty for each such failure as prescribed by Section 3-3 of the Uniform Penalty and Interest Act.

(Source: P.A. 87-205.)

(35 ILCS 5/1005) (from Ch. 120, par. 10-1005)

Sec. 1005. Penalty for Underpayment of Tax.

(a) In general. If any amount of tax required to be shown on a return prescribed by this Act is not paid on or before the date required for filing such return (determined without regard to any extension of time to file), a penalty shall be imposed in the manner and at the rate prescribed by the Uniform Penalty and Interest Act.

(b) Reportable transaction penalty. If a taxpayer has a reportable transaction understatement for any taxable year, there shall be added to the tax an amount equal to 20% of the amount of that understatement. This penalty shall be deemed assessed upon the assessment of the tax to which such penalty relates and shall be collected and paid on notice and demand in the same manner as the tax.

(1) Reportable transaction understatement. For purposes of this Section, the term "reportable transaction understatement" means the sum of subparagraphs (A) and (B):

(A) The product of (i) the amount of the increase (if any) in Illinois net income, as determined by reference to the amount of post-apportioned income that results from a difference between the proper tax treatment of an item to which this subsection applies and the taxpayer's treatment of that item (as shown on the taxpayer's return of tax), including an amended return filed prior to the date the taxpayer is first contacted by the Department regarding the examination of the return, and (ii) the applicable tax rates under Section 201 of this Act.

(B) Special rules in the case of carrybacks and carryovers. The penalty for an understatement of income attributable to a reportable transaction applies to any portion of an understatement for a year to which a loss, deduction, or credit is carried that is attributable to a reportable transaction for that year in which the carryback or carryover of the loss, deduction, or credit arises (the "loss or credit year").

(2) Items to which subsection applies. This subsection shall apply to any item which is attributable to either of the following: (i) any listed transaction as defined in Treasury Regulations Section 1.6011-4, and (ii) any reportable transaction as defined in Treasury Regulations Section 1.6011-4 (other than a listed transaction) if a significant purpose of the transaction is the avoidance or evasion of federal income tax.

(3) Subsection (b) shall be applied by substituting "30%" for "20%" with respect to the portion of any reportable transaction understatement with respect to which the requirements of (4)(B)(i) of this subsection are not met.

(4) Reasonable cause exception.

(A) In general. No penalty shall be imposed under this subsection with respect to any portion of a reportable transaction understatement if it is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion.

(B) Special rules. Subparagraph (A) does not apply to any reportable transaction (including listed transaction) unless all of the following requirements are met:

(i) The relevant facts affecting the tax treatment of the item are adequately disclosed in accordance with Section 501(b) of this Act. A taxpayer failing to adequately disclose in accordance with Section 501(b) shall be treated as meeting the requirements of this subparagraph (i) if the penalty for that failure was rescinded under Section 1001(b)(3) of this Act;

(ii) There is or was substantial authority for such treatment; and

(iii) The taxpayer reasonably believed that such treatment was more likely than not the proper treatment.

(C) Rules relating to reasonable belief. For purposes of subparagraph (B), a taxpayer shall be treated as having a reasonable belief with respect to the tax treatment of an item only if such belief meets the requirements of this subparagraph (C):

(i) Such belief must be based on the facts and law that exist at the time the return of tax that includes that tax treatment is filed;

(ii) Such belief must relate solely to the taxpayer's chances of success on the merits of that treatment and does not take into account the possibility that the return will not be audited, that the treatment will not be raised on audit, or that the treatment will be resolved through settlement if it is raised; and

(iii) Such belief is not solely based on the opinion of a disqualified tax advisor or on a disqualified opinion.

(5) Definitions.

(A) Disqualified tax advisor. The term "disqualified tax advisor" is a tax advisor that meets any of the following conditions:

(I) Is a material advisor who participates in the organization, management, promotion, or sale of the transaction or who is related (within the meaning of Sections 267(b) or 707(b)(1) of the Internal Revenue Code) to any person who so participates;

(II) Is compensated directly or indirectly by a material advisor with respect to the transaction;

(III) Has a fee arrangement with respect to the transaction that is contingent on all or part of the intended tax benefits from the transaction being sustained; or

(IV) As determined under regulations prescribed by either the Secretary of the Treasury for federal income tax purposes or the Department, has a continuing financial interest with respect to the transaction.

(B) Disqualified opinion. The term "disqualified opinion" means an opinion that meets any of the following conditions:

(I) Is based on unreasonable factual or legal assumptions (including assumptions as to future events);

(II) Unreasonably relies on representations, statements, findings, or agreements of the taxpayer or any other person;

(III) Does not identify and consider all relevant facts; or

(IV) Fails to meet any other requirement as either the Secretary of the Treasury for federal income tax purposes or the Department may prescribe.

(C) Material Advisor. The term "material advisor" shall have substantially the same meaning as the same term is defined under Treasury Regulations Section 301.6112-1, (26 CFR 301.6112-1) and shall include any person that is a material advisor for federal income tax purposes under such regulation.

(6) Effective date. This subsection shall apply to taxable years ending on and after December 31, 2004, except that a reportable transaction understatement shall include an understatement (as determined under paragraph (1)) with respect to any taxable year for which the limitations period on assessment has not expired as of January 1, 2005 that is attributable to a transaction which the taxpayer has entered into after February 28, 2000 and before December 31, 2004 that becomes a listed transaction (as defined in Treasury Regulations Section 1.6011-4(b)(2) at any time.

(c) 100% interest penalty. If a taxpayer has been contacted by the Internal Revenue Service or the Department regarding the use of a potential tax avoidance transaction with respect to a taxable year and has a deficiency with respect to such taxable year or years, there shall be added to the tax attributable to the potential tax avoidance transaction (determined as described in subsection (b)(1) of Section 1005) an amount equal to 100% of the interest assessed under the Uniform Penalty and Interest Act (determined without regard to subsection (f) of Section 3-2 of such Act) for the period beginning on the last date prescribed by law for the payment of such tax and ending on the date of the notice of deficiency. Such penalty shall be deemed assessed upon the assessment of the interest to which such penalty relates and shall be collected and paid in the same manner as such interest. The penalty imposed by this subsection is in addition to any penalty imposed by this Act or the Uniform Penalty and Interest Act. For purposes of this subsection and subsection (d) of this Section, the term "potential tax avoidance transaction" means any tax shelter as defined in Section 6111 of the Internal Revenue Code. This subsection shall apply to taxable years ending on and after December 31, 2004, except that the penalty may also be imposed with respect to any taxable year for which the limitations period on assessment has not expired as of January 1, 2005 that is attributable to a transaction in which the taxpayer has entered into after February 28, 2000 and before December 31, 2004, which transaction becomes a listed transaction (as defined in Treasury Regulations Section 1.6011-4(b)(2)) at any time.

(d) 150% interest rate. For taxable years ending on and after July 1, 2002, for any notice of deficiency issued before the taxpayer is contacted by the Internal Revenue Service or the Department regarding a potential tax avoidance transaction, the taxpayer is subject to interest as provided under Section 3-2 of the Uniform Penalty and Interest Act, but with respect to any deficiency attributable to a potential tax avoidance transaction, the taxpayer is subject to interest at a rate of 150% of the otherwise applicable rate.

(e) Coordination with other penalties. Except as provided in regulations, the penalties imposed by this Section are in addition to any other penalty imposed by this Act or the Uniform Penalty and Interest Act. The doubling of penalties and interest authorized by the Illinois Tax Delinquency Amnesty Act (P.A. 93-26), are not applicable to the reportable transaction penalties and interest under subsections (b), (c), and (d).

(Source: P.A. 93-840, eff. 7-30-04.)

(35 ILCS 5/1006) (from Ch. 120, par. 10-1006)

Sec. 1006. Frivolous Returns. In addition to any other penalty provided by this Act there is imposed a penalty of $500 upon any individual who files a purported return that does not contain information from which the substantial correctness of the stated tax liability can be determined or contains information indicating that the stated tax liability is substantially incorrect and such conduct is due to a desire to delay or impede the administration of this Act or is due to a position that is frivolous. This Section is applicable to returns filed for taxable years ending on or after December 31, 1987.

(Source: P.A. 85-299.)

(35 ILCS 5/1007)

Sec. 1007. Failure to register tax shelter or maintain list.

(a) Penalty Imposed. Any person that fails to comply with the requirements of Section 1405.5 shall incur a penalty as provided in subsection (b). A person shall not be in compliance with the requirements of Section 1405.5 unless and until the required return has been filed and that return contains all of the information required to be included by the Secretary under federal law.

(b) Amount of Penalty. The following penalties apply:

(1) Except as provided in paragraph (2), the penalty imposed under subsection (a) with respect to any failure is $15,000.

(2) If the failure is with respect to a listed transaction under subsection (c) of Section 1405.5, the penalty shall be $100,000.

(3) In the case of each failure to comply with the requirements of subsection (a) or subsection (b) of Section 1405.6, the penalty shall be $15,000.

(4) If the failure is with respect to a listed transaction under subsection (c) of Section 1405.6, the penalty shall be $100,000.

(c) Authority to rescind penalty. The Department may rescind all or any portion of any penalty imposed by this subsection with respect to any violation, if

(1) the violation is with respect to a reportable transaction other than a listed transaction, and

(2) rescinding the penalty would promote compliance with the requirements of this Act and effective tax administration.

(d) Coordination with other penalties. The penalty imposed by this Section is in addition to any penalty imposed by this Act or the Uniform Penalty and Interest Act.

(Source: P.A. 95-707, eff. 1-11-08.)

(35 ILCS 5/1008)

Sec. 1008. Promoting tax shelters. Except as herein provided, the provisions of Section 6700 of the Internal Revenue Code shall apply for purposes of this Act as if such Section applied to an Illinois deduction, credit, exclusion from income, allocation or apportionment rule, or other Illinois tax benefit. Notwithstanding Section 6700(a) of the Internal Revenue Code, if an activity with respect to which a penalty imposed under Section 6700(a) of the Internal Revenue Code, as applied for purposes of this Act, involves a statement described in Section 6700(a)(2)(A) of the Internal Revenue Code, as applied for purposes of this Act, the amount of the penalty imposed under this Section shall be the greater of $10,000 or 50% of the gross income received (or to be received) from any person to whom such statement is furnished that is required to file a return under Section 502 of this Act.

(Source: P.A. 93-840, eff. 7-30-04.)

(35 ILCS 5/Art. 11 heading) ARTICLE 11. LIENS AND JEOPARDY ASSESSMENT.

(35 ILCS 5/1101) (from Ch. 120, par. 11-1101)

Sec. 1101. Lien for Tax.

(a) If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the State of Illinois upon all property and rights to property, whether real or personal, belonging to such person.

(b) Unless another date is specifically fixed by law, the lien imposed by subsection (a) of this Section shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time.

(c) Deficiency procedure. If the lien arises from an assessment pursuant to a notice of deficiency, such lien shall not attach and the notice referred to in this Section shall not be filed until all proceedings in court for review of such assessment have terminated or the time for the taking thereof has expired without such proceedings being instituted.

(d) Notice of lien. The lien created by assessment shall terminate unless a notice of lien is filed, as provided in Section 1103 hereof, within 3 years from the date all proceedings in court for the review of such assessment have terminated or the time for the taking thereof has expired without such proceedings being instituted. Where the lien results from the filing of a return without payment of the tax or penalty shown therein to be due, the lien shall terminate unless a notice of lien is filed within 3 years from the date such return was filed with the Department. For the purposes of this subsection (d), a tax return filed before the last day prescribed by law, including any extension thereof, shall be deemed to have been filed on such last day. The time limitation period on the Department's right to file a notice of lien shall not run (1) during any period of time in which the order of any court has the effect of enjoining or restraining the Department from filing such notice of lien, or (2) during the term of a repayment plan that taxpayer has entered into with the Department, as long as taxpayer remains in compliance with the terms of the repayment plan.

(Source: P.A. 97-507, eff. 8-23-11; 98-446, eff. 8-16-13.)

(35 ILCS 5/1102) (from Ch. 120, par. 11-1102)

Sec. 1102. Jeopardy assessments.

(a) Jeopardy assessment and lien.

(1) Assessment. If the Department finds that a taxpayer is about to depart from the State, or to conceal himself or his property, or to do any other act tending to prejudice or to render wholly or partly ineffectual proceedings to collect any amount of tax or penalties imposed under this Act unless court proceedings are brought without delay, or if the Department finds that the collection of such amount will be jeopardized by delay, the Department shall give the taxpayer notice of such findings and shall make demand for immediate return and payment of such amount, whereupon such amount shall be deemed assessed and shall become immediately due and payable.

(2) Filing of lien. If the taxpayer, within 5 days after such notice (or within such extension of time as the Department may grant), does not comply with such notice or show to the Department that the findings in such notice are erroneous, the Department may file a notice of jeopardy assessment lien in the State Tax Lien Registry and shall notify the taxpayer of such filing. Such jeopardy assessment lien shall have the same scope and effect as a statutory lien under this Act. The taxpayer is liable for any administrative fee imposed by the Department by rule in connection with the State Tax Lien Registry. The filing fees shall be paid to the Department in addition to payment of the tax, penalty, and interest included in the amount of the lien.

(b) Termination of taxable year. In the case of a tax for a current taxable year, the Director shall declare the taxable period of the taxpayer immediately terminated and his notice and demand for a return and immediate payment of the tax shall relate to the period declared terminated, including therein income accrued and deductions incurred up to the date of termination if not otherwise properly includible or deductible in respect of such taxable year.

(c) Protest. If the taxpayer believes that he does not owe some or all of the amount for which the jeopardy assessment lien against him has been filed, or that no jeopardy to the revenue in fact exists, he may protest within 20 days after being notified by the Department of the filing of such jeopardy assessment lien and request a hearing, whereupon the Department shall hold a hearing in conformity with the provisions of Section 908 and, pursuant thereto, shall notify the taxpayer of its decision as to whether or not such jeopardy assessment lien will be released.

(Source: P.A. 100-22, eff. 1-1-18.)

(35 ILCS 5/1103) (from Ch. 120, par. 11-1103)

Sec. 1103. Filing and priority of liens.

(a) Filing in the State Tax Lien Registry. Nothing in this Article shall be construed to give the Department a preference over the rights of any bona fide purchaser, holder of a security interest, mechanics lienor, mortgagee, or judgment lien creditor arising prior to the filing of a regular notice of lien or a notice of jeopardy assessment lien in the State Tax Lien Registry. For purposes of this Section, the term "bona fide," shall not include any mortgage of real or personal property or any other credit transaction that results in the mortgagee or the holder of the security acting as trustee for unsecured creditors of the taxpayer mentioned in the notice of lien who executed such chattel or real property mortgage or the document evidencing such credit transaction. Such lien shall be inferior to the lien of general taxes, special assessments and special taxes heretofore or hereafter levied by any political subdivision of this State.

(b) Filing in the State Tax Lien Registry. In case title to land to be affected by the notice of lien or notice of jeopardy assessment lien is registered under the provisions of "An Act concerning land titles," approved May 1, 1897, as amended, such notice shall also be filed in the State Tax Lien Registry, and the Department shall not have a preference over the rights of any bona fide purchaser, mortgagee, judgment creditor or other lien holder arising prior to the registration of such notice.

(c) Index. The Department of Revenue shall maintain a State Tax Lien Index of all tax liens filed in the State Tax Lien Registry as provided for by the State Tax Lien Registration Act.

(d) (Blank).

(e) The taxpayer is liable for any filing fees imposed by the Department for filing the lien in the State Tax Lien Registry and any filing fees imposed by the Department for the release of that lien. The filing fees shall be paid to the Department in addition to payment of the tax, penalty, and interest included in the amount of the lien.

(Source: P.A. 100-22, eff. 1-1-18.)

(35 ILCS 5/1104) (from Ch. 120, par. 11-1104)

Sec. 1104. Duration of Lien. The lien provided herein shall continue for 20 years from the date of filing the notice of lien under the provisions of section 1103 unless sooner released, or otherwise discharged. The provisions of this amendatory Act of 1984 shall apply to any lien which has not expired on or before the effective date of this amendatory Act of 1984.

(Source: P.A. 83-1416.)