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03/17/88 Figgie International, Inc. v. the Department of Revenue

March 17, 1988





521 N.E.2d 223, 167 Ill. App. 3d 196, 118 Ill. Dec. 155 1988.IL.383

Appeal from the Circuit Court of Sangamon County; the Hon. Simon L. Friedman, Judge, presiding.


PRESIDING JUSTICE GREEN delivered the opinion of the court. LUND and SPITZ, JJ., concur.


Following an administrative hearing, on March 19, 1986, a hearing officer recommended that notices of tax liability sent by defendant Illinois Department of Revenue (Department) to divisions of plaintiff Figgie International, Inc., not be reduced. The basis for his recommendation was that plaintiff had voluntarily participated in an amnesty program, which now precluded the officer from deciding the merits of plaintiff's protests with regard to those tax liabilities. Defendant then issued final tax assessments to plaintiff. Pursuant to the Administrative Review Law (Ill. Rev. Stat. 1985, ch. 110, par. 3 -101 et seq.), plaintiff sought judicial review of defendant's ruling, but the circuit court of Sangamon County affirmed that decision on July 2, 1987. Plaintiff has appealed. We affirm.

Plaintiff's contentions on appeal include the following: (1) its applications for amnesty were invalid under defendant's own administrative regulations (86 Ill. Adm. Code 520.105 et seq. (1985)) and should have been rejected; (2) the decision of the circuit court was improper, for it impermissibly deprived plaintiff, without a specific mandate from the Illinois Tax Delinquency Amnesty Act (Pub. Act 83-1428, eff. October 1, 1984; 1984 Ill. Laws 3012) (hereinafter Amnesty Act), of its right to a hearing on its protests granted to it pursuant to section 4 of the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1985, ch. 120, par. 443) (hereinafter ROTA); and (3) the decision of the circuit court was inequitable, since defendant's own letter and brochure did not advise plaintiff of the potential consequences of participating in the amnesty program, and the regulations themselves are ambiguous.

At all times pertinent, plaintiff was an Ohio corporation with its principal place of business located in Richmond, Virginia. Plaintiff conducted business in Illinois through a number of its corporate divisions. On October 11, 1984, and November 28, 1984, defendant notified plaintiff that plaintiff's divisions had not paid sufficient retailers' occupation taxes during the taxable period ending July 1, 1983. Plaintiff timely protested these tax deficiencies which defendant had alleged were due it. After acknowledging receipt of plaintiff's protests, defendant sent plaintiff a form letter notifying it of potential amnesty (waiver of all penalties and abatement of one-half of the interest) available to qualified taxpayers and inviting it to apply for such amnesty. The brochure enclosed with the letter indicated that "businesses who [had] appeals pending with the Department of Revenue [were] eligible for Amnesty, providing they [filed] an amnesty application and [paid] the basic tax and one-half of the applicable interest." At no point in either the letter or the brochure, however, did it state that those who applied for amnesty and paid the outstanding taxes waived any further right to protest those taxes for which amnesty was being sought.

Based upon the information contained in defendant's letter and accompanying brochure, plaintiff submitted amnesty applications and checks for the amounts defendant alleged it owed for retailers' occupation taxes. In its cover letter, plaintiff specifically stated as follows: "[as] described in the 'Amnesty Program' brochure, we remain protected for issues currently under protest." Defendant later acknowledged receipt of plaintiff's applications and payments.

Subsequently, a hearing was held on March 26 and 27, 1985, concerning plaintiff's protests. Although plaintiff's brief indicated the evidence presented at the hearing focused mainly on the merits of plaintiff's complaint, plaintiff noted in its brief that it informed the hearing officer of its applications for amnesty and received no comments or objections. The hearing officer issued his recommendation on March 19, 1986, that defendant not reduce plaintiff's tax liability. The hearing officer determined he was precluded from considering the merits of plaintiff's protests, as plaintiff voluntarily chose to participate in an amnesty program in which no refunds for payments are allowed. Defendant issued final assessments for the tax deficiencies and, on May 27, 1986, notified plaintiff that it had approved plaintiff's applications for amnesty.

Plaintiff filed a complaint for judicial review of the decision and proceedings which culminated in defendant's final assessment. On July 2, 1987, the circuit court of Sangamon County affirmed the decision of the Illinois Department of Revenue.

Plaintiff initially argues the applications for amnesty which it filed with defendant were invalid under defendant's own administrative regulations, and plaintiff claims defendant should have rejected them. In particular, plaintiff contends the money it submitted to defendant was not for "taxes due" within the meaning of the regulations. In addition, plaintiff maintains it did not attach any tax returns as required by the regulations. Thus, plaintiff argues the money it submitted with its applications for amnesty should either be refunded or applied to its existing liability. Defendant contends, on the other hand, that plaintiff's attempt to discredit its own applications for amnesty is unpersuasive and should be rejected by us on appeal.

Section 520.105 of the amnesty regulations (86 Ill. Adm. Code 520.105 (1984)) contains requirements with regard to applications for amnesty. According to those regulations, an applicant must submit the following items within the prescribed period: (1) its application for amnesty; (2) tax returns or amended tax returns or waivers of restrictions or assessments and collections (for nonreported or underreported tax liabilities); and (3) payment for all taxes due plus one-half of the applicable interest. The regulations warn the applicant that "' (f)ailure to pay all taxes due to the State shall invalidate any amnesty granted pursuant to this Act.'" (Emphasis in original.) 86 Ill. Adm. Code 520.105(b) (1985).

The regulation goes on to define the term "all taxes due" as follows: "all liability for the tax for which amnesty application is being made incurred during the taxable period for which amnesty application is being made." The regulation also states, however, that the term "does not include amounts which have not been determined by the Department." (Emphasis added.) (86 Ill. Adm. Code 520.105(b) (1985).) Section 520.105 contains several examples which further explain the meaning of the term. Plaintiff relies heavily upon example No. 3 in particular. It described the performance of an audit which revealed the taxpayer owed $10,000 in retailers' occupation taxes. Taxpayer conceded he owed $8,000 of the $10,000 allegedly due, but he disputed the remaining $2,000. Therefore, he signed an amended return, prepared an application for amnesty, and paid $8,000 plus the applicable interest owed on that amount. Since taxpayer did not include the $2,000 in the amended return, the Department then issued taxpayer a notice of tax liability for that amount. Taxpayer subsequently made a timely request for an administrative hearing. The example concluded by noting that, in the situation as described, amnesty could be approved for $8,000. ...

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