SALT Report 1673 – An Illinois court ruled that a Taxpayer who qualified for amnesty under the 2003 Tax Delinquency Amnesty Act had understated its taxable income and failed to pay all taxes due. In order to participate in the Amnesty Program the taxpayer must agree to pay the entire liability for the tax period, regardless of whether that liability is known to the Department or the Taxpayer, or whether the Department has assessed it.
Furthermore, amnesty is only granted if all conditions of the amnesty program are satisfied by the Taxpayer. The Department determined that because the Taxpayer failed to report all income and pay all taxes due the amnesty was invalidated and the Taxpayer was assessed a 200% penalty. The Taxpayer paid the penalty under protest and filed a complaint against the Department to recover the additional interest assessment.
In its argument, the Taxpayer stated that it had paid all known taxes and reported all known income on its tax returns. Further, the Taxpayer claimed that it was unaware of the additional income and unpaid taxes since they were discovered during an audit that was concluded after the amnesty period.
According to section 601(a) of the Illinois Income Tax Act, the fact that the Department did not issue a final assessment or make a demand for the Taxpayer’s tax liability until after the close of the amnesty period did not relieve the Taxpayer of its obligation to report its taxable income and pay all taxes due on its tax returns.
Therefore, the court ruled that because the Taxpayer did not properly report its taxable income according to the provisions of the Internal Revenue Code, and because the Taxpayer did not pay “all taxes due” during the amnesty period, the Taxpayer’s tax liability was subject to the 200% double interest provision set forth in section 3-2(f) of the Penalty Act.
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