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Metropolitan Life Insurance Company and Unitary Subsidiaries v. Brian Hamer

March 5, 2012

METROPOLITAN LIFE INSURANCE COMPANY AND UNITARY SUBSIDIARIES,
PLAINTIFFS-APPELLEES,
v.
BRIAN HAMER, AS DIRECTOR OF THE ILLINOIS DEPARTMENT OF REVENUE, ALEXI GIANNOULIAS, AS TREASURER OF THE STATE OF ILLINOIS, AND THE DEPARTMENT OF REVENUE,
DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County No. 08 L 50788 Honorable James C. Murray, Jr., Judge Presiding.

The opinion of the court was delivered by: Justice Karnezis

JUSTICE KARNEZIS delivered the judgment of the court, with opinion. Justice Hall concurred in the judgment and opinion.

Presiding Justice Hoffman dissented, with opinion.

OPINION

¶ 1 Appellants Brian Hamer, as Director of the Illinois Department of Revenue, Alexi Giannoulias, as Treasurer of the State of Illinois, and the Illinois Department of Revenue, appeal the trial court's order granting summary judgment in favor of appellees Metropolitan Life Insurance Company and Unitary Subsidiaries (collectively Met Life).*fn1

On appeal, appellants contend that the trial court erred in granting summary judgment because Met Life's failure to pay all of its taxes due during the 2003 amnesty period subjected Met Life to a double interest penalty, and that the double interest penalty did not violate substantive due process. For the following reasons, we affirm the judgment of the trial court.

¶ 2 Background

¶ 3 In this case, we interpret the meaning of the phrase "all taxes due" in section 10 of the Tax Delinquency Amnesty Act (Amnesty Act) (35 ILCS 745/10 (West 2008)). In 2003, in an effort to raise revenue for the State of Illinois, the Illinois legislature passed the Amnesty Act, which provided amnesty to taxpayers who paid any tax owed for any taxable period after June 30, 1983, and prior to July 1, 2002. To participate in the amnesty program, taxpayers had to make their full payment during the amnesty period from October 1, 2003, through November 15, 2003.

¶ 4 Specifically, section 10 of the Amnesty Act provided:

"[U]pon payment by a taxpayer of all taxes due from that taxpayer to the State of Illinois for any taxable period ending after June 30, 1983 and prior to July 1, 2002, the Department [of Revenue] shall abate and not seek to collect any interest or penalties that may be applicable and the Department shall not seek civil or criminal prosecution for any taxpayer for the period of time for which amnesty has been granted to the taxpayer." (Emphasis Added.) 35 ILCS 745/10 (West 2008).

¶ 5 The legislature additionally amended section 3-2 of the Uniform Penalty and Interest Act (35 ILCS 735/3-2(f) (West 2008)) to provide a double interest penalty for those taxpayers that had a tax liability eligible for amnesty but did not pay the liability during the amnesty period. Specifically, section 3-2(f) provided:

"If a taxpayer has a tax liability that is eligible for amnesty under the [Amnesty Act] and the taxpayer fails to satisfy the tax liability during the amnesty period provided for in that Act, then the interest charged by the Department under this Section shall be imposed at a rate that is 200% of the rate that would otherwise be imposed under this Section." 35 ILCS 735/3-2(f) (West 2008).

¶ 6 The parties stipulated to the following facts. Met Life timely filed its Illinois income tax returns for tax years 1998 and 1999, paying the income tax reported on the returns. In December 2000, the Internal Revenue Service (IRS) began its audit of Met Life for tax years 1997, 1998 and 1999. The audit was finally completed in August 2004 and concluded that Met Life's federal taxable income for tax years 1998 and 1999 was more than what Met Life had indicated on its tax returns.

¶ 7 In May 2002, the Illinois Department of Revenue (Department) began its audit of Met Life for tax years 1998 and 1999. The Department's audit continued for several years as well, and Met Life provided the Department with the IRS' finalized federal adjustments. In 2004, the Department's auditor determined that Met Life owed additional state income tax for tax years 1998 and 1999, and Met Life made a payment of $678,191 in February 2005. The auditor later determined that Met Life owed an additional $270,085, which Met Life paid in January 2006. Subsequently, the audit was reopened and Met Life made a final payment of $705,879 in May 2007. In May 2008, the Department notified Met Life that it was assessing Met Life a double interest penalty in the amount of $2,211,824 (later reduced to $2,207,456). Met Life paid the penalty under protest, alleging that it was not subject to the double interest provision in section 3-2(f) of the Uniform Penalty and Interest Act.

¶ 8 In July 2008, Met Life filed a verified complaint against appellants for an injunction and declaratory judgment under the State Officers and Employee Money Disposition Act (Protest Monies Act) (30 ILCS 230/1 et seq. (West 2008)) in the circuit court of Cook County. Met Life sought to recover half of the penalty it had paid under the double interest provision. Met Life alleged that because the Department's audit was not completed until long after the amnesty period had passed, it could not have participated in the amnesty program and the double interest penalty should not apply.

¶ 9 Met Life subsequently filed a motion for summary judgment pursuant to section 2-1005 of the Code of Civil Procedure (735 ILCS 5/2-1005) (West 2010)). In the motion, Met Life argued that the phrase "all taxes due" in section 10 of the Amnesty Act included those taxes assessed and due, not an undeterminable amount that was later assessed and due as a result of a federal or state audit. Met Life further argued that the double interest penalty violated its right to due process because the provision was arbitrary and unreasonable.

¶ 10 The trial court granted Met Life's motion for summary judgment, finding that Met Life was not subject to the double interest penalty. In construing the phrase "all taxes due" in the Amnesty Act, the trial court determined that it applied to those taxpayers who "knew by way of assessment or otherwise that taxes were due and owing" to the state. The court found that Met Life's obligation for taxes due for the tax years in question was not determined until August 2004, well beyond the expiration of the amnesty period. Therefore, the court granted the motion for summary judgment and ordered a refund to Met Life of half the penalty amount, plus interest. The court also stayed its order pending appeal. Appellants now appeal from the court's order.

¶ 11 Analysis

ΒΆ 12 On appeal, appellants contend that the trial court erred in granting summary judgment because Met Life's failure to pay all of its taxes due during the 2003 amnesty period subjected Met Life to a double interest penalty, and that the ...


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