The City of Chicago Department of Finance has extended the voluntary disclosure deadline for nonpossessory computer leases subject to the city’s lease transaction tax to July 1, 2016. Taxpayers who qualify for the program may not incur liabilities on taxes, penalties, or interest on unpaid lease transaction taxes for these lease transactions.
The city issued Personal Property Lease Transaction Tax Ruling Number 12 on June 9, 2015, with an original effective date of July 1, 2015. The ruling was immediately challenged by business and taxpayer organizations, which had concerns regarding compliance with the ruling. The city met with these organizations and discussed the implications of Ruling #12. As a result, the City Council enacted certain amendments to the Lease Tax Ordinance on October 28, 2015, thereby creating a small business exemption and instituting a reduced rate of tax of 5.25% for certain cloud transactions.
The City Department of Finance issued an Information Bulletin for nonpossessory computer leases in November of 2015. The bulletin provides clarifications of certain provisions of the amended ordinance, an explanation of the city’s new interpretation of transactions previously covered by Exemption 11, and frequently asked questions and answers. The bulletin also specifically mentions that certain “cloud” products such as PaaS, IaaS, and SaaS will be subject to the new reduced rate of 5.25%.
In addition, the bulletin provides different voluntary disclosure offers as follows:
- As to charges for nonpossessory computer leases that previously qualified for Exemption 11 prior to Ruling #12, no liability for tax, interest, or penalties for periods ending prior to January 1, 2106.
- As to charges for “other” nonpossessory computer leases, payment of tax is due for the calendar year 2015; however, there is no liability for interest and penalties.
- As to any other lease taxes owed, the standard voluntary disclosure program will apply, which means that a four-year look-back period will be applied for taxes and interest; however, all penalties will be waived.
This is a very specific Chicago tax, so if you think you may be affected, please contact one of our technical contacts based in Chicago.
TECHNICAL INFORMATION CONTACT: