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92_SB0055eng SB55 Engrossed LRB9203552SMdv 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 Use Tax Act is amended by adding Section 5 3-46 as follows: 6 (35 ILCS 105/3-46 new) 7 Sec. 3-46. Bad Debts. 8 (a) A retailer is relieved from liability for the tax 9 under this Act that became due and payable, insofar as the 10 measure of the tax is represented by accounts that have been 11 found to be worthless and charged off for income tax purposes 12 by the retailer or, if the retailer is not required to file 13 income tax returns, charged off in accordance with generally 14 accepted accounting principles. A retailer that has 15 previously paid the tax may, under rules adopted by the 16 Department, take as a deduction the amount found worthless 17 and charged off by the retailer. If these accounts are 18 thereafter in whole or in part collected by the retailer, the 19 amount collected shall be included in the first return filed 20 after the collection and the tax shall be paid with the 21 return. For purposes of this subdivision, the term 22 "retailer" includes any entity affiliated with the retailer 23 under Section 1504 of Title 26 of the United States Code. 24 (b) (1) In the case of accounts held by a lender, a 25 retailer or lender who makes a proper election under 26 subdivision (b)(4) shall be entitled to a deduction or 27 refund of the tax that the retailer has previously 28 reported and paid if all of the following conditions are 29 met: 30 (A) No deduction is claimed or allowed for any 31 portion of the account for which a previous SB55 Engrossed -2- LRB9203552SMdv 1 deduction was claimed or allowed. 2 (B) The accounts have been found worthless and 3 written off by the lender in accordance with the 4 requirements of subsection (a). 5 (C) The account was written off as a bad debt 6 on or after January 1, 2001. 7 (D) The party electing to claim the deduction 8 or refund under subdivision (b)(4) files a claim in 9 a manner prescribed by the Department. 10 (2) If the retailer or the lender thereafter 11 collects in whole or in part any accounts, one of the 12 following shall apply: 13 (A) If the retailer is entitled to the 14 deduction or refund under the election specified in 15 subdivision (b)(4), the retailer shall include the 16 amount collected in its first return filed after the 17 collection and pay tax on that amount with the 18 return. 19 (B) If the lender is entitled to the deduction 20 or refund under the election specified in 21 subdivision (b)(4), the lender shall pay the tax to 22 the Department. 23 (3) For purposes of this subsection (b), the term 24 "lender" means any of the following: 25 (A) Any person who holds a retail account 26 which that person purchased directly from a retailer 27 who reported the tax. 28 (B) Any person who holds a retail account 29 pursuant to that person's contract directly with the 30 retailer who reported the tax. 31 (C) Any person who is either an affiliated 32 entity, under Section 1504 of Title 26 of the United 33 States Code, of a person described in subdivision 34 (3)(A) or (3)(B), or an assignee of a person SB55 Engrossed -3- LRB9203552SMdv 1 described in subdivision (3)(A) or (3)(B). 2 (4) Prior to claiming any deduction or refund under 3 this subsection (b), the retailer who reported the tax 4 and the lender shall file an election with the 5 Department, signed by both parties, designating which 6 party is entitled to claim the deduction or refund. This 7 election may not be amended or revoked unless a new 8 election, signed by both parties, is filed with the 9 Department. 10 (5) A lender as defined above may have its 11 deduction or refund for bad debts claimed on a return 12 filed by an affiliated retailer. 13 Section 10. The Service Use Tax Act is amended by adding 14 Section 3-41 as follows: 15 (35 ILCS 110/3-41 new) 16 Sec. 3-41. Bad debts. 17 (a) A retailer is relieved from liability for the tax 18 under this Act that became due and payable, insofar as the 19 measure of the tax is represented by accounts that have been 20 found to be worthless and charged off for income tax purposes 21 by the retailer or, if the retailer is not required to file 22 income tax returns, charged off in accordance with generally 23 accepted accounting principles. A retailer that has 24 previously paid the tax may, under rules adopted by the 25 Department, take as a deduction the amount found worthless 26 and charged off by the retailer. If these accounts are 27 thereafter in whole or in part collected by the retailer, the 28 amount collected shall be included in the first return filed 29 after the collection and the tax shall be paid with the 30 return. For purposes of this subdivision, the term 31 "retailer" includes any entity affiliated with the retailer 32 under Section 1504 of Title 26 of the United States Code. SB55 Engrossed -4- LRB9203552SMdv 1 (b) (1) In the case of accounts held by a lender, a 2 retailer or lender who makes a proper election under 3 subdivision (b)(4) shall be entitled to a deduction or 4 refund of the tax that the retailer has previously 5 reported and paid if all of the following conditions are 6 met: 7 (A) No deduction is claimed or allowed for any 8 portion of the account for which a previous 9 deduction was claimed or allowed. 10 (B) The accounts have been found worthless and 11 written off by the lender in accordance with the 12 requirements of subsection (a). 13 (C) The account was written off as a bad debt 14 on or after January 1, 2001. 15 (D) The party electing to claim the deduction 16 or refund under subdivision (b)(4) files a claim in 17 a manner prescribed by the Department. 18 (2) If the retailer or the lender thereafter 19 collects in whole or in part any accounts, one of the 20 following shall apply: 21 (A) If the retailer is entitled to the 22 deduction or refund under the election specified in 23 subdivision (b)(4), the retailer shall include the 24 amount collected in its first return filed after the 25 collection and pay tax on that amount with the 26 return. 27 (B) If the lender is entitled to the deduction 28 or refund under the election specified in 29 subdivision (b)(4), the lender shall pay the tax to 30 the Department. 31 (3) For purposes of this subsection (b), the term 32 "lender" means any of the following: 33 (A) Any person who holds a retail account 34 which that person purchased directly from a retailer SB55 Engrossed -5- LRB9203552SMdv 1 who reported the tax. 2 (B) Any person who holds a retail account 3 pursuant to that person's contract directly with the 4 retailer who reported the tax. 5 (C) Any person who is either an affiliated 6 entity, under Section 1504 of Title 26 of the United 7 States Code, of a person described in subdivision 8 (3)(A) or (3)(B), or an assignee of a person 9 described in subdivision (3)(A) or (3)(B). 10 (4) Prior to claiming any deduction or refund under 11 this subsection (b), the retailer who reported the tax 12 and the lender shall file an election with the 13 Department, signed by both parties, designating which 14 party is entitled to claim the deduction or refund. This 15 election may not be amended or revoked unless a new 16 election, signed by both parties, is filed with the 17 Department. 18 (5) A lender as defined above may have its 19 deduction or refund for bad debts claimed on a return 20 filed by an affiliated retailer. 21 Section 15. The Service Occupation Tax Act is amended by 22 adding Section 3-41 as follows: 23 (35 ILCS 115/3-41 new) 24 Sec. 3-41. Bad debts. 25 (a) A retailer is relieved from liability for the tax 26 under this Act that became due and payable, insofar as the 27 measure of the tax is represented by accounts that have been 28 found to be worthless and charged off for income tax purposes 29 by the retailer or, if the retailer is not required to file 30 income tax returns, charged off in accordance with generally 31 accepted accounting principles. A retailer that has 32 previously paid the tax may, under rules adopted by the SB55 Engrossed -6- LRB9203552SMdv 1 Department, take as a deduction the amount found worthless 2 and charged off by the retailer. If these accounts are 3 thereafter in whole or in part collected by the retailer, the 4 amount collected shall be included in the first return filed 5 after the collection and the tax shall be paid with the 6 return. For purposes of this subdivision, the term 7 "retailer" includes any entity affiliated with the retailer 8 under Section 1504 of Title 26 of the United States Code. 9 (b) (1) In the case of accounts held by a lender, a 10 retailer or lender who makes a proper election under 11 subdivision (b)(4) shall be entitled to a deduction or 12 refund of the tax that the retailer has previously 13 reported and paid if all of the following conditions are 14 met: 15 (A) No deduction is claimed or allowed for any 16 portion of the account for which a previous 17 deduction was claimed or allowed. 18 (B) The accounts have been found worthless and 19 written off by the lender in accordance with the 20 requirements of subsection (a). 21 (C) The account was written off as a bad debt 22 on or after January 1, 2001. 23 (D) The party electing to claim the deduction 24 or refund under subdivision (b)(4) files a claim in 25 a manner prescribed by the Department. 26 (2) If the retailer or the lender thereafter 27 collects in whole or in part any accounts, one of the 28 following shall apply: 29 (A) If the retailer is entitled to the 30 deduction or refund under the election specified in 31 subdivision (b)(4), the retailer shall include the 32 amount collected in its first return filed after the 33 collection and pay tax on that amount with the 34 return. SB55 Engrossed -7- LRB9203552SMdv 1 (B) If the lender is entitled to the deduction 2 or refund under the election specified in 3 subdivision (b)(4), the lender shall pay the tax to 4 the Department. 5 (3) For purposes of this subsection (b), the term 6 "lender" means any of the following: 7 (A) Any person who holds a retail account 8 which that person purchased directly from a retailer 9 who reported the tax. 10 (B) Any person who holds a retail account 11 pursuant to that person's contract directly with the 12 retailer who reported the tax. 13 (C) Any person who is either an affiliated 14 entity, under Section 1504 of Title 26 of the United 15 States Code, of a person described in subdivision 16 (3)(A) or (3)(B), or an assignee of a person 17 described in subdivision (3)(A) or (3)(B). 18 (4) Prior to claiming any deduction or refund under 19 this subsection (b), the retailer who reported the tax 20 and the lender shall file an election with the 21 Department, signed by both parties, designating which 22 party is entitled to claim the deduction or refund. This 23 election may not be amended or revoked unless a new 24 election, signed by both parties, is filed with the 25 Department. 26 (5) A lender as defined above may have its 27 deduction or refund for bad debts claimed on a return 28 filed by an affiliated retailer. 29 Section 20. The Retailers' Occupation Tax Act is amended 30 by adding Section 3a as follows: 31 (35 ILCS 120/3a new) 32 Sec. 3a. Bad debts. SB55 Engrossed -8- LRB9203552SMdv 1 (a) A retailer is relieved from liability for the tax 2 under this Act that became due and payable, insofar as the 3 measure of the tax is represented by accounts that have been 4 found to be worthless and charged off for income tax purposes 5 by the retailer or, if the retailer is not required to file 6 income tax returns, charged off in accordance with generally 7 accepted accounting principles. A retailer that has 8 previously paid the tax may, under rules adopted by the 9 Department, take as a deduction the amount found worthless 10 and charged off by the retailer. If these accounts are 11 thereafter in whole or in part collected by the retailer, the 12 amount collected shall be included in the first return filed 13 after the collection and the tax shall be paid with the 14 return. For purposes of this subdivision, the term 15 "retailer" includes any entity affiliated with the retailer 16 under Section 1504 of Title 26 of the United States Code. 17 (b) (1) In the case of accounts held by a lender, a 18 retailer or lender who makes a proper election under 19 subdivision (b)(4) shall be entitled to a deduction or 20 refund of the tax that the retailer has previously 21 reported and paid if all of the following conditions are 22 met: 23 (A) No deduction is claimed or allowed for any 24 portion of the account for which a previous 25 deduction was claimed or allowed. 26 (B) The accounts have been found worthless and 27 written off by the lender in accordance with the 28 requirements of subsection (a). 29 (C) The account was written off as a bad debt 30 on or after January 1, 2001. 31 (D) The party electing to claim the deduction 32 or refund under subdivision (b)(4) files a claim in 33 a manner prescribed by the Department. 34 (2) If the retailer or the lender thereafter SB55 Engrossed -9- LRB9203552SMdv 1 collects in whole or in part any accounts, one of the 2 following shall apply: 3 (A) If the retailer is entitled to the 4 deduction or refund under the election specified in 5 subdivision (b)(4), the retailer shall include the 6 amount collected in its first return filed after the 7 collection and pay tax on that amount with the 8 return. 9 (B) If the lender is entitled to the deduction 10 or refund under the election specified in 11 subdivision (b)(4), the lender shall pay the tax to 12 the Department. 13 (3) For purposes of this subsection (b), the term 14 "lender" means any of the following: 15 (A) Any person who holds a retail account 16 which that person purchased directly from a retailer 17 who reported the tax. 18 (B) Any person who holds a retail account 19 pursuant to that person's contract directly with the 20 retailer who reported the tax. 21 (C) Any person who is either an affiliated 22 entity, under Section 1504 of Title 26 of the United 23 States Code, of a person described in subdivision 24 (3)(A) or (3)(B), or an assignee of a person 25 described in subdivision (3)(A) or (3)(B). 26 (4) Prior to claiming any deduction or refund under 27 this subsection (b), the retailer who reported the tax 28 and the lender shall file an election with the 29 Department, signed by both parties, designating which 30 party is entitled to claim the deduction or refund. This 31 election may not be amended or revoked unless a new 32 election, signed by both parties, is filed with the 33 Department. 34 (5) A lender as defined above may have its SB55 Engrossed -10- LRB9203552SMdv 1 deduction or refund for bad debts claimed on a return 2 filed by an affiliated retailer. 3 Section 99. Effective date. This Act takes effect on 4 January 1, 2002.