Tax Payer Bill of Rights, Public Act No. 91-920
Passage Date: 07/07/2000
Effective Date: 01/01/2001
MEMORANDUM To Local Government Clients
AUTHOR: Brian P. Crowley
FIRM: Law Offices Holland & Knight LLP
55 West Monroe Street Suite 800
Chicago Illinois 60603
ph# 312/263-3600
Governor Ryan signed the Local Government Taxpayers' Bill of Rights Act (the "Act") into law on July 7, 2000. Passed as Public Act No. 91-920, it will take effect on January 1, 2001. Prior to that time, our clients should plan to perform a review of all of their codes and ordinances establishing local taxes other than property taxes to ensure compliance with the Act's requirements. Examples of such taxes include utility taxes, amusement taxes, hotel taxes and infrastructure maintenance fees for telecommunications and electric service.
The Act applies to all municipalities and counties (excluding Chicago and Cook). Its stated purposes include clarifying tax laws at the local level, providing taxpayers with a level of consistency with regard to the assessment and collection of local taxes, and providing due process procedures. It appears to preempt home rule as well.
Some of the major areas in which municipalities and counties must take affirmative steps include the following:
1. Order of Tax Payments: Each municipality and county must provide, by ordinance, the order in which it applies tax payments. Payments may be made to tax liability or interest first, but payments for tax penalties must be made last. (Section 25)
2. Statute of Limitations: The Act limits the authority of municipalities and counties to collect back taxes and overpayments to four years in most instances. However, if a taxpayer has paid less than 75% of the tax liability, or the taxpayer has failed to file a tax return at all, then the municipality or county has a maximum of six years to collect the deficiency. If the return is fraudulent, there is no time limit. (Section 30)
Each municipality and county must give taxpayers at least four years to claim a refund or a credit; however, you may establish a shorter statute of limitations for refunds or credits of a particular tax. (Section 65)
3. Audits: Municipalities and counties must notify a taxpayer in writing of a proposed audit of its books and records. If an auditor finds an overpayment, he must notify the taxpayer. If the overpayment is the result of the application of some or all of the taxpayer's payment to an incorrect local government entity, then the auditor must notify the correct local government entity of the taxpayer's application error. (Section 35)
4. Tax Appeal Process: Each municipality and county must establish a tax appeal process by ordinance. (Section 40)
5. Interest Rates: Each municipality and county must establish, by ordinance, the amount of interest it will assess for late payments, underpayments, or the nonpayment of taxes. (Section 45)
6. Maximum Penalties: Late filing penalties and late payment penalties of tax liability may not exceed 5% of the tax due. However, if you impose a failure to file penalty, then these penalties may not be imposed. A failure to file penalty may not exceed 25% of the tax due. (Section 50, 55, and 60)
7. Credits and Refunds: Each municipality and county must provide a procedure for claiming a credit or refund of taxes, interest, or penalties paid in error and provide, by ordinance, the rate of interest it will pay to taxpayers for the overpayment of taxes. (Section 65)
8. Voluntary Disclosure: If the taxpayer is assessed a tax but does not receive a written notice of an audit, investigation, or assessment from the local tax administrator, then he may file an application with the local tax administrator for a voluntary disclosure of the tax due. This process provides some protection for a taxpayer who voluntarily makes payments through this process. (Section 75)
9. Review of Liens: The local tax administrator must establish an internal review process concerning liens against taxpayers. The tax administrator must remove improper liens at the municipality's or county's expense, correct the taxpayer's credit record, and correct any public disclosure of the improperly imposed lien. (Section 85)
10. Publication of Ordinances: Municipalities and counties must publish and make copies of their locally administered tax ordinances available to interested parties. Publication on the Internet qualifies under the Act. (Section 90)
Municipalities and counties must ensure that they refine their tax procedures to conform to the Act's specific requirements. If you have questions regarding the Act's applicability, or if you would like assistance in taking steps to comply with the Act, please feel free to contact us.