Illinois Lawmakers Approve 2010 Tax Amnesty

On May 27, 2010, both houses of the Illinois Legislature passed Senate Bill 377 (“SB 377”), which provides for a tax amnesty program (“Program”). The Program is designed for all taxpayers who owe any Illinois state tax collected by the Department of Revenue (“Department”). Illinois tax amnesty begins October 1, 2010 and ends November 8, 2010. During the amnesty period, the Department will abate penalties and interest on taxes that were due after June 30, 2002 and before July 1, 2009 and paid during the period.

To qualify, a taxpayer must pay all taxes due during a taxable period. And amnesty is not available to a taxpayer who is a party to any criminal investigation or pending litigation of tax liabilities. The bill provides that amnesty payments can be made by cash, check, guaranteed remittance, or automated clearinghouse debit.

Taxpayers who do not take advantage of Illinois’ Program will owe increased penalties and interest on unpaid taxes for periods after June 30, 2002 and before July 1, 2009. The bill provides that penalty and interest imposed on unpaid taxes will be 200% of the penalty and interest that would have been imposed. Illinois’ interest rate is variable, and penalty on unpaid taxes can be imposed up to 20% before the 200% increase.

Participation in the Program does not prevent a taxpayer from claiming a refund for an overpayment of tax based on other issues. In addition, a taxpayer may claim a refund of an overpayment of estimated income tax. The state will not pay interest on any amnesty payments later refunded.

The Governor has not yet signed the bill.