Public Act 101-0628
 
SB1881 EnrolledLRB101 10946 AWJ 56120 b


  
    AN ACT concerning local government.
  
 
    Be it enacted by the People of the State of Illinois,
 
represented in the General Assembly:
  


 
Article 1.  Short Title.

 
    Section 1-1. Short title. This Act may be cited as the 
Local Government Revenue Recapture Act.
 
Article 5.  Local Government Revenue Recapture.

 
    Section 5-5. Definitions.  As used in this Article:
    "Department" means the Department of Revenue.
    "Family member" means the following, whether by whole 
blood, half-blood, or adoption:
        (1) a parent or step-parent;
        (2) a child or step-child;
        (3) a grandparent or step-grandparent;
        (4) an aunt, uncle, great-aunt, or great-uncle;
        (5) a sibling;
        (6) a spouse or domestic partner; and
        (7) the spouse or domestic partner of any person 
    referenced in items (1) through (5).
    "Financial information" means the information provided to 
the municipality or county by the Department under Section 11 
of the Retailers' Occupation Tax Act that is reported to the 
Department by a business located in a given municipality or 
county. 
    "Person" means an individual, sole proprietorship, 
corporation, registered limited liability partnership, limited 
liability company, partnership, professional service 
corporation, or any other form of organization.
    "Misallocation" means tax paid by the taxpayer and 
allocated to one unit of local government that should have been 
allocated to a different unit of local government.  
"Misallocation" does not include amounts overpaid by the 
taxpayer and therefore not owed to any unit of local 
government, nor amounts underpaid by the taxpayer and therefore 
not previously allocated to any unit of local government.
    "Monitoring disbursements" means keeping track of payments 
from the Department by a municipality, county, or third party 
for the limited purpose of tracking previous misallocations.
    "Third party" means a person, partnership, corporation, or 
other entity or individual registered to do business in 
Illinois who contracts with a municipality or county to review 
financial information related to the disbursement of local 
taxes by the Department to the municipality or county.
 
    Section 5-10. Contracts with third parties.  A municipality 
or county that receives a disbursement of tax proceeds from the 
Department may contract with a third party for the purpose of 
ensuring that the municipality or county receives the correct 
disbursement from the Department and monitoring disbursements. 
The third party may not contact the Department on behalf of the 
municipality or county, but instead must work directly with the 
municipality or county to acquire financial information. To be 
eligible to receive financial information from the 
municipality or county, the third party must:
        (1) enter into a confidentiality agreement with the 
    municipality or county in the form and manner required by 
    the Department prior to receiving the financial 
    information; 
        (2) have an existing contract with the municipality or 
    county at the time the third party enters into the 
    confidentiality agreement with the municipality or county; 
    a copy of that existing contract must be on file with the 
    Department; 
        (3) abide by the same conditions as the municipality or 
    county with respect to the furnishing of financial 
    information under Section 11 of the Retailers' Occupation 
    Tax Act; and 
        (4) be registered with the Department as required by 
    Section 5-35 of this Act.
 
    Section 5-15. Financial information.  The third party may 
use the financial information it receives from the contracting 
municipality or county only for the purpose of providing 
services to the municipality or county as specified in  this Act 
and may not use the information for any other purpose.  
Electronic data submitted to third parties or by the 
contracting municipality or county must be accessible only to 
third parties who have entered into a confidentiality agreement 
with the municipality or county or who have an existing 
contract with the municipality or county.
 
    Section 5-20. Retention, collection, disclosure, and 
destruction of financial information.
    (a) A third party in possession of a taxpayer's financial 
information must permanently destroy that financial 
information pursuant to this Act. The financial information 
shall be destroyed upon the soonest of the following to occur:
        (1) if the taxpayer is not referred to the Department, 
    within 30 days after receipt of the taxpayer's financial 
    information from either the municipality or county, unless 
    the third party is monitoring disbursements from the 
    Department on an ongoing basis for a municipality or 
    county; or
        (2) within 30 days after the Department receives a 
    taxpayer audit referral from a third party referring the 
    taxpayer to the Department for additional review.
    (b) No third party in possession of financial information 
may sell, lease, trade, market, or otherwise utilize or profit 
from a taxpayer's financial information, except for a fee as 
negotiated by the municipality or county. The fee may be in the 
form of a contingency fee for a percentage of the amount of 
additional distributions the municipality or county receives 
for no more than 3 years following the first disbursement to 
the municipality or county as a result of the services of the 
third party under this Act. 
    (c) No third party may permanently or temporarily collect, 
capture, purchase, use, receive through trade, or otherwise 
retain a taxpayer's financial information beyond the scope of 
subsection (a) of this Section.
    (d) No third party in possession of confidential 
information may disclose, redisclose, share, or otherwise 
disseminate a taxpayer's financial information.
    (e) A third party must dispose of the materials containing 
financial information in a manner that renders the financial 
information unreadable, unusable, and undecipherable. Proper 
disposal methods include, but are not limited to, the 
following: 
        (1) in the case of paper documents, burning, 
    pulverizing, or shredding so that the information cannot 
    practicably be read or reconstructed; and
        (2) in the case of electronic media and other non-paper 
    media containing information, destroying or erasing so 
    that information cannot practicably be read, 
    reconstructed, or otherwise utilized by the third party or 
    others.
 
    Section 5-25. Notice of intent to contract; award of 
contracts. A municipality or county that chooses to contract 
with a third party pursuant to this Act shall follow all rules 
set forth in the Illinois Municipal Code or the Counties Code, 
as applicable, concerning those contracts.
 
    Section 5-30. Posting results.  Annually, the third party 
shall provide the municipality or county with a final summary 
of the review for publication. It is the responsibility of the 
third party to ensure that this summary includes no personal or 
identifying information of taxpayers and that all such taxpayer 
information is kept confidential. If the summary includes any 
discussion of tax revenue, it shall include only aggregate 
amounts by tax type, and shall in no way include information 
about an individual return or an individual taxpayer, even with 
identifying information redacted. In addition, due to the 
preliminary nature of such a summary based only on unaudited 
financial information, no claim of specific tax savings or 
revenue generation may be made in the summary.
 
    Section 5-35. Third party registration.  
    (a) Beginning on January 1, 2021, no person shall engage in 
business as a third party pursuant to this Act in this State 
without first having registered with the Department. 
Application for registration or renewal of registration shall 
be made to the Department, by electronic means, in a form and 
at the time prescribed by the Department. Each applicant for 
registration or renewal of registration under this Section 
shall furnish to the Department, in an electronic format 
established by the Department, the following information:
        (1) the name and address of the applicant; 
        (2) the address of the location at which the applicant 
    proposes to engage in business as a third party in this 
    State; 
        (3) valid and updated contact information; 
        (4) attestation of good standing to do business in 
    Illinois; 
        (5)  a copy of each contract it has entered into with a 
    municipality or county; if an applicant has a contract with 
    a municipality or county prior to the effective date of 
    this Act, a copy of all existing contracts must be 
    provided;
        (6) an annual certification of process letter that:
            (A) is signed by an attorney or certified public 
        accountant licensed and authorized to practice in the 
        State of Illinois;
            (B) contains findings that, after due diligence, 
        the author is of the opinion that:
                (i) the third party's confidentiality 
            standards for storing encrypted data at rest, 
            using a cryptographic algorithm, conform to the 
            Federal Information Processing Standard (FIPS) 
            Publication 140-2;
                (ii) the third party uses multi-factor

            authentication;

                (iii) the third party uses HTTPS with at least 
            TLS 1.2 or its successor to protect the data files 
            while in transit between a browser and server;
                (iv) the third party adheres to best practices 
            as recommended by the Open Web Application 
            Security Project (OWASP);
                (v) the third party has a firewall which 
            protects against unauthorized use of the data; and
                (vi) the third party shall maintain a physical 
            location in this State at all times; if, at any 
            time, the third party fails to have a physical 
            location in this State, the third party's 
            registration shall be revoked; and
        (7) such other additional information as the 
    Department may require by rule. 
    The annual registration fee payable to the Department for 
each third party shall be $15,000. The fee shall be deposited 
into the Tax Compliance and Administration Fund and shall be 
used for the cost of administering the certified audit pilot 
project under Article 10. 
    Each applicant shall pay the fee to the Department at the 
time of submitting its application or renewal to the 
Department. The Department may require an applicant under this 
Section to electronically file and pay the fee. 
    (b) The following are ineligible to register as a third 
party under this Act: 
        (1) a person who has been convicted of a felony related 
    to financial crimes under any federal or State law, if the 
    Department, after investigation and a hearing if requested 
    by the applicant, determines that the person has not been 
    sufficiently rehabilitated to warrant the public trust, 
    including an individual or any employee, officer, manager, 
    member, partner, or director of an entity that has been 
    convicted as provided in this paragraph (1);
        (2) a person, if any employee, contractual employee, 
    officer, manager, or director thereof, or any person or 
    persons owning in the aggregate more than 5% thereof, is 
    employed by or appointed or elected to the corporate 
    authorities of any municipality or county in this State; 
        (3) a person, if any employee, contractual employee, 
    officer, manager, or director thereof, or any person or 
    persons owning in the aggregate more than 5% thereof, is 
    not or would not be eligible to receive a certificate of 
    registration under this Act or a license under the Illinois 
    Public Accounting Act for any reason;
        (4) a person who is a family member of any person who 
    is employed by or appointed or elected to the corporate 
    authorities of any municipality or county in the State;
        (5) a person who is a qualified practitioner, as 
    defined by Section 10-15 of this Act; 
        (6) a third party owned, in whole or in part, by any 
    entity that competes directly or indirectly with any 
    taxpayer whose financial information they are seeking or 
    receiving; and
        (7) a third party owning in whole or in part, directly 
    or indirectly, any entity that competes, directly or 
    indirectly, with any taxpayer whose financial information 
    they are seeking or receiving.
    (c) The Department shall begin accepting applications no 
later than January 1, 2021. Upon receipt of an application and 
registration fee in proper form from a person who is eligible 
to register as a third party under this Act, the Department 
shall issue, within 60 days after receipt of an application, a 
certificate of registration to such applicant in such form as 
prescribed by the Department. That certificate of registration 
shall permit the applicant to whom it is issued to engage in 
business as a third party under this Act. All certificates of 
registration issued by the Department under this Section shall 
be valid for a period not to exceed one year after issuance 
unless sooner revoked or suspended as provided in this Act. No 
certificate of registration issued under this Section is 
transferable or assignable.  A person who obtains a certificate 
of registration as a third party who ceases to do business as 
specified in the certificate of registration, or who never 
commenced business, or whose certificate of registration is 
suspended or revoked, shall immediately surrender the 
certificate of registration to the Department. 
    (d) Any person aggrieved by any decision of the Department 
under this Section may, within 60 days after notice of the 
decision, protest and request a hearing. Upon receiving a 
request for a hearing, the Department shall give written notice 
to the person requesting the hearing of the time and place 
fixed for the hearing and shall hold a hearing and then issue 
its final administrative decision in the matter to that person 
within 60 days after the date of the hearing. In the absence of 
a protest and request for a hearing within 60 days, the 
Department's decision shall become final without any further 
determination being made or notice given. 
    (e) All final decisions by the Department under this 
Section are subject to judicial review under the provisions of 
the Administrative Review Law.
 
    Section 5-37. Insurance policy requirement. A third party 
is required to file and maintain in force an insurance policy 
issued by an insurance company authorized to transact fidelity 
and surety business in the State of Illinois. The insurance 
policy shall be for coverage of potential legal claims, 
including, by not limited to, penalties set forth under Section 
5-60, embezzlement, dishonesty, fraud, omissions or errors, or 
other financial wrongdoing in the course of providing services. 
The policy shall be in the form prescribed by the Department in 
the sum of $500,000. The policy shall be continuous in form and 
run concurrently with the original and each renewal 
certification period unless terminated by the insurance 
company. An insurance company may terminate a policy and avoid 
further liability by filing a 60-day notice of termination with 
the Department and at the same time sending the same notice to 
the licensee. A license shall be canceled on the termination 
date of the policy unless a new policy is filed with the 
Department and becomes effective at the termination date of the 
prior policy. If a policy has been canceled under this Section, 
the third party must file a new application and will be 
considered a new applicant if it obtains a new policy.
 
    Section 5-40. Revocation or suspension of certification.
    (a) A contracting municipality or county shall refuse to 
provide any information, including financial information, to 
any third party who violates this Act or rules adopted pursuant 
to this Act or the Retailers' Occupation Tax Act or rules 
adopted pursuant to the Retailers' Occupation Tax Act. 
    (b) The Department may, after notice and a hearing, revoke 
or suspend the certificate of registration of any third party 
for a violation of any provision of this Act, for noncompliance 
with any provision contained in this Act, or because the 
Department determines that the third party  is ineligible for a 
certificate of registration for any one or more of the reasons 
provided for in Section 5-35 of this Act. The decision whether 
to suspend or revoke and, if a suspension is in order, the 
duration of the suspension shall be made by taking into account 
factors that include but are not limited to, the registrant's 
previous history of compliance with the Act as of its creation, 
the number,
seriousness, and duration of the violations, and 
the registrant's
cooperation in discontinuing and correcting 
violations.

 
    Section 5-50. Audit referrals; restrictions.  
    (a) Upon entering into a contract with a municipality or 
county, a third party shall be prohibited from communicating 
directly or indirectly in any manner with a taxpayer known or 
believed to be operating within that municipality or county 
about any matters directly or indirectly related to, or covered 
by, the contract.
    (b) If, based on a review of the financial information 
provided by the Department to a municipality or a county, or 
provided by a municipality or county to a registered third 
party, a municipality, county, or third party discovers that 
local retailers' or service occupation tax may have been 
underpaid, then it may refer the matter to the Department for a 
limited-scope audit in accordance with Article 10 of this Act. 
    (c) With respect to taxes administered by the Department, 
units of local government and third parties are not authorized 
to (i) access, review, or compel the production of taxpayers' 
actual tax returns or (ii) access, review, or compel the 
production of taxpayers' books and records. 
    (d) With respect to taxes administered by the Department, 
units of local government and third parties are prohibited from 
(i) engaging in an audit of any taxpayer, (ii) assessing tax 
against any taxpayer, (iii) engaging in collection actions 
against any taxpayer for the tax, or (iv) engaging in any other 
action related to such taxes that is assigned by law to the 
Department. 
    (e) A local government shall not share any financial 
information
received with another local government or another 
third party. Further, a local government may not share the 
findings
of a third party with another local government or 
another third party.
 
    Section 5-60. Penalties.
    (a) Any third party who violates any provision of this Act 
shall be subject to the penalties set forth in Section 11 of 
the Retailers' Occupation Tax Act. 
    (b) Any third party who violates Section 5-20 is subject to 
a civil penalty of not more than $10,000 for each taxpayer with 
respect to whom financial information is improperly disclosed, 
profited from, or disposed of in violation of that Section. The 
Attorney General may impose a civil penalty not to exceed 
$50,000 for each instance of improper disposal of materials 
containing financial information. The Attorney General may 
impose a civil penalty after notice to the person accused of 
violating Section 5-20 and an opportunity for that person to be 
heard in the matter. The Attorney General may file a civil 
action in the circuit court to recover any penalty imposed for 
a violation of Section 5-20. In addition to the authority to 
impose a civil penalty under this Section, the Attorney General 
may bring an action in the circuit court to remedy a violation 
of this Section, seeking any appropriate relief. 
    (c) Neither the State nor any municipality or county shall 
be held liable for the mishandling of information by a third 
party, including information from the Department or any other 
financial information of taxpayers. 
    (d) Any taxpayer aggrieved by a violation of this Act shall 
have a right of action in a State circuit court or as a 
supplemental claim in federal district court against a third 
party.  A taxpayer may recover for each violation: 
        (1) against a third party  that, by gross negligence, 
    violates a provision of this Act, liquidated damages of 
    $5,000 or actual damages, whichever is greater; 
        (2) against a third party  that intentionally or 
    recklessly violates a provision of this Act, liquidated 
    damages of $10,000 or actual damages, whichever is greater; 
        (3) reasonable attorney's fees and costs, including 
    expert witness fees and other litigation expenses; and 
        (4) other relief, including an injunction, as the State 
    or federal court may deem appropriate. 
 
Article 10.  Local Government Revenue Recapture Certified Audit 
Pilot Program.

 
    Section 10-5. Findings. The General Assembly finds that:
        (1) Voluntary compliance is the cornerstone of an 
    effective tax system. 
        (2) Despite attempts by the General Assembly, State 
    taxes are not simple. 
        (3) Even the most diligent taxpayers, through mistake 
    or inadvertence, may not pay all taxes due. 
        (4) The Department lacks the resources to audit the 
    compliance of all taxpayers. 
        (5) Illinois certified public accountants provide 
    valuable advice and assistance to Illinois taxpayers on 
    State tax issues. 
        (6) A pilot program establishing a partnership between 
    taxpayers, Illinois certified public accountants, and the 
    Department will provide guidance to taxpayers and enhance 
    voluntary compliance. 
        (7) A pilot project to establish a certified audit 
    program to address underpayment of local occupation and use 
    taxes would address concerns raised by units of local 
    government. 
 
    Section 10-10. Purpose. The purpose of this Article is to 
create a certified audit program under a 5-year pilot project 
that begins on January 1, 2021 and that is limited in scope to 
specifically address concerns related to the proper reporting 
and payment of local occupation and use taxes that are 
collected and distributed to municipalities and counties by the 
Department.
 
    Section 10-15. Definitions. As used in this Article:
    "Audit" means an agreed-upon procedures engagement in 
accordance with Statements on Standards for the Attestation 
Engagements (AICPA Professional Standards, AT-C Section 315 
(Compliance Attest)). 
    "Certification program" means an instructional curriculum, 
examination, and process for certification, recertification, 
and revocation of certification of certified public 
accountants that is administered by the Department with the 
assistance of the Illinois CPA Society and that is officially 
approved by the Department to ensure that a certified public 
accountant possesses the necessary skills and abilities to 
successfully perform an attestation engagement for a 
limited-scope tax compliance review in a certified audit 
project under this Act. 
    "Department" means the Department of Revenue. 
    "Family member" means the following, whether by whole 
blood, half-blood, or adoption:
        (1) a parent or step-parent;
        (2) a child or step-child;
        (3) a grandparent or step-grandparent;
        (4) an aunt, uncle, great-aunt, or great-uncle;
        (5) a sibling;
        (6) a spouse or domestic partner; and
        (7) the spouse or domestic partner of any person 
    referenced in items (1) through (5).
    "Misallocation" means tax paid by the taxpayer and 
allocated to one unit of local government that should have been 
allocated to a different unit of local government.  
"Misallocation" does not include amounts overpaid by the 
taxpayer and therefore not owed to any unit of local 
government, nor amounts underpaid by the taxpayer and therefore 
not previously allocated to any unit of local government.
    "Participating taxpayer" means any person subject to the 
revenue laws administered by the Department who is the subject 
of a tax compliance referral by a municipality, county, or 
third party, who enters into an engagement with a qualified 
practitioner for a limited-scope tax compliance review under 
this Act, and who is approved by the Department under the local 
government revenue recapture certified audit pilot project. 
    "Qualified practitioner" means a certified public 
accountant who is licensed or registered to perform accountancy 
activities in Illinois under Section 8.05 of the Illinois 
Public Accounting Act and who has met all requirements for the 
local government revenue recapture certified audit training 
course, achieved the required score on the certification test 
as approved by the Department, and been certified by the 
Department. "Qualified practitioner" does not include a third 
party, as defined by Section 5-5 of this Act, or any employee, 
contractual employee, officer, manager, or director thereof, 
any person or persons owning in the aggregate more than 5% of 
such third party, or a person who is a family member of any 
person who is employed by or is an appointed or elected member 
of any corporate authorities, as defined in the Illinois 
Municipal Code. 
 
    Section 10-20. Local government revenue recapture 
certified audit project.
    (a) The Department shall initiate a certified audit pilot 
project to further enhance tax compliance reviews performed by 
qualified practitioners and to encourage taxpayers to hire 
qualified practitioners at their own expense to review and 
report on certain aspects of their sales tax and use tax 
compliance in cases where the Department has notified the 
taxpayer that it has received a  tax compliance referral from a 
municipality, county, or third party under this Act. The nature 
of the certified audit work performed by qualified 
practitioners shall be agreed-upon procedures of a Compliance 
Attestation in which the Department is the specified user of 
the resulting report.  Qualified practitioners are prohibited 
from using information obtained from audit manuals, training 
materials, or any other materials provided by the Department 
under this Act for any purpose other than to perform the tax 
compliance reviews under the certified audit pilot program 
under this Act. 
    The tax compliance reviews shall be limited in scope and 
may include only: (i) whether the taxpayer is reporting 
receipts in the proper jurisdiction; (ii) whether asset 
purchases by the taxpayer were taxed properly; (iii) an 
evaluation of sales reported as exempt from tax; (iv) whether 
the proper tax rate was charged; (v) whether the tax was 
properly reported as retailers' occupation tax or use tax; and 
(vi) any other factor that impacts the Department's allocation 
of sales and use tax revenues to the jurisdiction in which the 
taxpayer reports sales or use tax. 
    (b) As an incentive for taxpayers to incur the costs of a 
certified audit, the Department shall abate penalties due on 
any tax liabilities revealed by a certified audit, except that 
this authority to abate penalties shall not apply to any 
liability for taxes that were collected by the participating 
taxpayer but not remitted to the Department, nor shall the 
Department have the authority to abate fraud penalties. 
    (c) The certified audit pilot project shall apply only to 
taxpayers who have been notified that an audit referral has 
been received by the Department under this Act and only to 
occupation and use taxes administered and collected by the 
Department. 
    (d) The certified audit pilot project shall begin with 
audit referrals received on and after January 1, 2021. Upon 
obtaining proper certification, qualified practitioners may 
initiate certified audits beginning January 1, 2021.
 
    Section 10-25. Practitioner responsibilities. Any 
practitioner responsible for planning, directing, or 
conducting a certified audit or reporting on a participating 
taxpayer's tax compliance shall be a qualified practitioner. 
For purposes of this Section, a qualified practitioner is 
responsible for:
        (1) planning a certified audit when performing work 
    that involves determining the objectives, scope, and 
    methodology of the certified audit, when establishing 
    criteria to evaluate matters subject to the review as part 
    of the certified audit, when gathering information used in 
    planning the certified audit, or when coordinating the 
    certified audit with the Department; 
        (2) directing a certified audit when the work involves 
    supervising the efforts or reviewing the work of others to 
    determine whether it is properly accomplished and 
    complete;
        (3) conducting a certified audit when performing tests 
    and procedures or field audit work necessary to accomplish 
    the audit objectives in accordance with applicable 
    professional standards;
        (4) reporting on a participating taxpayer's tax 
    compliance in a certified audit when determining report 
    contents and substance or reviewing reports for technical 
    content and substance prior to issuance; and
        (5) answering questions by Department review staff, 
    answering questions raised by the Informal Conference 
    Board, and testifying in any administrative or court 
    proceeding regarding the audit or report. 
 
    Section 10-30. Local government revenue recapture audit 
referral.
    (a) A third party shall not refer a taxpayer to the 
Department for audit consideration unless the third party is 
registered with the Department pursuant to Section 5-35. 
    (b) If, based on a review of the financial information 
provided by the Department to a municipality or county, or 
provided by a municipality or county to a registered third 
party, the municipality or county discovers that a taxpayer may 
have underpaid local retailers' or service occupation taxes, 
then it may refer the matter to the Department for audit 
consideration.  The tax compliance referral may be made only by 
the municipality, county, or third party and shall be made in 
the form and manner required by the Department, including any 
requirement that the referral be submitted electronically.  The  
tax compliance referral shall, at a minimum, include proof of 
registration as a third party, a copy of a contract between the 
third party and the county or municipality, the taxpayer's 
name, Department account identification number, mailing 
address, and business location, and the specific reason for the  
tax compliance referral, including as much detail as possible. 
    (c) The Department shall complete its evaluation of all 
audit referrals under this Act within 60 days after receipt of 
the referral and shall handle all audit referrals as follows: 
        (1) the Department shall evaluate the referral to 
    determine whether it is sufficient to warrant further 
    action based on the information provided in the referral, 
    any other information the Department possesses, and audit 
    selection procedures of the Department;
        (2) if the Department determines that the referral is 
    not actionable, then the Department shall notify the local 
    government that it has evaluated the referral and has 
    determined that no action
is deemed necessary and provide 
    the local government with an explanation for that decision;
        (3) if the Department determines that the referral is 
    actionable, then it shall determine whether the taxpayer is 
    currently under audit or scheduled for audit; 
            (A) if the taxpayer is not currently under audit or 
        scheduled for audit, the Department shall determine 
        whether it will schedule the taxpayer for audit; and 
            (B) if the taxpayer is not under audit by the 
        Department or scheduled for audit by the Department and 
        the Department decides to schedule the taxpayer for 
        audit, then the Department shall notify the taxpayer 
        that the Department has received an actionable audit 
        referral on the taxpayer and issue a notice to the 
        taxpayer as provided under subsection (d) of this 
        Section.
    (d) The notice to the taxpayer required by subparagraph (B) 
of paragraph (3) of subsection (c) shall include, but not be 
limited to, the following: 
        (1) that the taxpayer must either: (A) engage a 
    qualified practitioner, at

the taxpayer's expense, to 
    complete a certified audit, limited in scope to the 
    taxpayer's Retailers' Occupation Tax, Use Tax, Service 
    Occupation Tax, or Service Use Tax liability, and the 
    taxpayer's liability for any local retailers' or service 
    occupation tax administered by the Department; or (B) be 
    subject to audit by the Department;
        (2) that, as an incentive, for taxpayers who agree to 
    the limited-scope certified audit, the Department shall 
    abate penalties as provided in Section 10-20; and
        (3) A statement that reads: "[INSERT THE NAME OF THE 
    ELECTED CHIEF EXECUTIVE OF THE CORPORATE AUTHORITY] has 
    contracted with [INSERT THIRD PARTY] to review your 
    Retailers' Occupation Tax, Use Tax, Service Occupation 
    Tax, Service Use Tax, and any local retailers' or service 
    occupation taxes reported to the Illinois Department of 
    Revenue ("Department"). [INSERT THE NAME OF THE ELECTED 
    CHIEF EXECUTIVE OF THE CORPORATE AUTHORITY] and [INSERT THE 
    THIRD PARTY] have selected and referred your business to 
    the Department for a certified audit of your Retailers' 
    Occupation Tax, Use Tax, Service Occupation Tax, Service 
    Use Tax, and any local retailers' or service occupation 
    taxes reported to the Department pursuant to the Local 
    Government Revenue Recapture Act. The purpose of the audit 
    is to verify that your business
reported and submitted the 
    proper Retailers' Occupation Tax, Use Tax, Service 
    Occupation Tax, Service Use Tax, and any local retailers' 
    or service occupation taxes administered by the 
    Department.  The Department is required to disclose your 
    confidential financial information to [INSERT THE NAME OF 
    THE  ELECTED CHIEF EXECUTIVE OF THE CORPORATE AUTHORITY] and 
    [INSERT THE THIRD PARTY]. Additional information can be 
    accessed from the Department's website and publications 
    for a basic overview of your rights as a Taxpayer. If you 
    have questions regarding your business's referral to the 
    Department for audit, please contact [CORPORATE 
    AUTHORITY'S] mayor, village president, or any other person 
    serving as [CORPORATE AUTHORITY'S] chief executive officer 
    or chief financial officer. [INSERT THIRD PARTY] is 
    prohibited from discussing this matter with you directly or 
    indirectly in any manner regardless of who initiates the 
    contact. If [INSERT THIRD PARTY] contacts you, please 
    contact the Department.".


    (e) Within 90 days after notice by the Department, the 
taxpayer must respond by stating in writing whether it will or 
will not arrange for the performance of a certified audit under 
this Act.  If the taxpayer states that it will arrange for the 
performance of a certified audit, then it must do so within 60 
days after responding to the Department or within 90 days after 
notice by the Department, whichever comes first. If the 
taxpayer states that it will not arrange for the performance of 
a certified audit or if the taxpayer does not arrange for the 
performance of a certified audit within 180 days after notice 
by the Department, then the Department may schedule the 
taxpayer for audit by the Department. 
    (f) The certified audit must not be a contingent-fee 
engagement and must be completed in accordance with this 
Article 10.
 
    Section 10-35. Notification by qualified practitioner.
    (a) A qualified practitioner hired by a taxpayer who elects 
to perform a certified audit under Section 10-30 shall notify 
the Department of an engagement to perform a certified audit 
and shall provide the Department with the information the 
Department deems necessary to identify the taxpayer, to confirm 
that the taxpayer is not already under audit by the Department, 
and to establish the basic nature of the taxpayer's business 
and the taxpayer's potential exposure to Illinois occupation 
and use tax laws. The information provided in the notification 
shall be submitted in the form and manner required by the 
Department and shall include the taxpayer's name, federal 
employer identification number or social security number, 
Department account identification number, mailing address, and 
business location, and the specific occupation and use taxes 
and period proposed to be covered by the engagement for the 
certified audit. In addition, the notice shall include the 
name, address, identification number, contact person, and 
telephone number of the engaged firm.  An engagement for a 
qualified practitioner to perform a certified audit under this 
Act shall not be authorized by the Department unless the 
taxpayer received notice from the Department under 
subparagraph (b) of paragraph (3) of subsection (c) of Section 
10-30. 
    (b) If the taxpayer has received notice of an audit 
referral from the Department and has not been issued a written 
notice of intent to conduct an audit, the taxpayer shall be a 
participating taxpayer and the Department shall so advise the 
qualified practitioner in writing within 10 days after receipt 
of the engagement notice. However, the Department may exclude a 
taxpayer from a certified audit or may limit the taxes or 
periods subject to the certified audit on the basis that: (i) 
the Department has previously conducted an audit; (ii) the 
Department is in the process of conducting an investigation or 
other examination of the taxpayer's records; (iii) the taxpayer 
has already been referred to the Department pursuant to Section 
10-30 and the Department determined an audit referral is not 
actionable; (iv) the Department or a qualified practitioner has 
previously conducted an audit under Section 10-30 of this Act; 
or (v) for just cause.
    (c) Within 30 days after receipt of the notice of 
qualification from the Department under subsection (b), the 
qualified practitioner shall contact the Department and 
submit, for review and agreement by the Department, a proposed 
audit plan and procedures. The Department may extend the time 
for submission of the plan and procedures for reasonable cause. 
The qualified practitioner shall initiate action to advise the 
Department that amendment or modification of the plan and 
procedures is necessary if the qualified practitioner's 
inspection reveals that the taxpayer's circumstances or 
exposure to the revenue laws is substantially different from 
those described in the engagement notice. 
 
    Section 10-40. Audit performance and review.
    (a) Upon the Department's designation of the agreed-upon 
procedures to be followed by a practitioner in a certified 
audit, the qualified practitioner shall perform the engagement 
and shall timely submit a completed report to the Department in 
the form and manner required by the Department and professional 
standards. The report shall affirm completion of the 
agreed-upon procedures and shall provide any required 
disclosures. 
    (b) The Department shall review the report of the certified 
audit and shall accept it when it is determined to be complete 
by the qualified practitioner. Once the report is accepted by 
the Department, the Department shall issue a notice of proposed 
assessment reflecting the determination of any additional 
liability reflected in the report and shall provide the 
taxpayer with all the normal payment, protest, and appeal 
rights with respect to the liability, including the right to a 
review by the Informal Conference Board. In cases in which the 
report indicates an overpayment has been made, the taxpayer 
shall submit a properly executed claim for credit or refund to 
the Department. Otherwise, the certified audit report is a 
final and conclusive determination with respect to the tax and 
period covered. No additional assessment may be made by the 
Department for the specific taxes and period referenced in the 
report, except upon a showing of fraud or material 
misrepresentation. This determination shall not prevent the 
Department from collecting liabilities not covered by the 
report or from conducting an audit or investigation and making 
an assessment for additional tax, penalty, or interest for any 
tax or period not covered by the report. 
    (c) A notice of proposed assessment issued by the 
Department under this Act is subject to the statute of 
limitations for assessments under the Retailers' Occupation 
Tax Act, the Use Tax Act, the Service Occupation Tax Act, the 
Service Use Tax Act, and any local retailers' or service 
occupation tax, as appropriate, and local taxes collected on 
assessments issued shall be allocated to units of local 
government for the full period of the statute of limitations in 
accordance with those Acts and any applicable local retailers' 
or service occupation tax Act. The Department shall provide 
notice in writing to the municipality or county and the third 
party, if applicable, of any audit findings, determinations, or 
collections once finalized. 
    Claims for credit or refund filed by taxpayers under this 
Act are subject to the statute of limitations under the 
Retailers' Occupation Tax Act, the Use Tax Act, the Service 
Occupation Tax Act, the Service Use Tax Act, and any local 
retailers' or service occupation tax Act, as appropriate, and 
any credit or refund of local taxes allowed to the taxpayer 
shall be de-allocated from units of local government for the 
full period of the statute of limitations in accordance with 
those Acts and any applicable local retailers' or service 
occupation tax Act. 
    With respect to misallocations discovered under this Act, 
the Department shall increase or decrease the amount allocated 
to a unit of local government by an amount necessary to offset 
any misallocation of previous disbursements. The offset amount 
shall be the amount erroneously disbursed within the previous 6 
months from the time a misallocation is discovered.
    (d) Under no circumstances may a person, including a 
municipality or county or third party, other than the person 
audited and his or her attorney, have any right to participate 
in an appeal or other proceeding regarding the audit, 
participate in settlement negotiations, challenge the validity 
of any settlement between the Department and any person, or 
review any materials, other than financial information as 
otherwise provided in this Act, that are subject to the 
confidentiality provisions of the underlying tax Act.  In 
addition, the Department's determination of whether to audit a 
taxpayer or the result of the audit creates no justiciable 
cause of action, and any adjudication related to this program 
is limited to the taxpayer's rights in an administrative 
hearing held by the Department, an administrative hearing held 
by the Illinois Independent Tax Tribunal, or related to 
payments made under protest as provided in Section 2a.1 of the 
State Officers and Employees Money Disposition Act, as 
appropriate. 
 
    Section 10-45. Rules. To implement the certified audit 
project, the Department shall have authority to adopt rules, 
including, but not limited to:
        (1) rules concerning the availability of the 
    certification program required for participation in the 
    project; 
        (2) rules concerning the requirements and basis for 
    establishing just cause for approval or rejection of 
    participation by taxpayers; 
        (3) rules setting forth procedures for assessment, 
    collection, and payment of liabilities or refund of 
    overpayments and provisions for taxpayers to obtain 
    informal and formal review of certified audit results; 
        (4) rules concerning the nature, frequency, and basis 
    for the Department's review of certified audits conducted 
    by qualified practitioners, including the requirements for 
    documentation, work-paper retention and access, and 
    reporting; and 
        (5) rules setting forth requirements for conducting 
    certified audits and for review of agreed-upon procedures. 
 
Article 900.  Amendatory Provisions.

 
    Section 900-5. The Retailers' Occupation Tax Act is amended 
by changing Section 11 as follows:
 


    (35 ILCS 120/11)  (from Ch. 120, par. 450)




    Sec. 11. All information received by the Department from 
returns filed
under this Act, or from any investigation 
conducted under this Act, shall
be confidential, except for 
official purposes, and any person, including a third party as 
defined in the Local Government Revenue Recapture Act, who 
divulges
any such information in any manner, except in 
accordance with a proper
judicial order or as otherwise 
provided by law, including the Local Government Revenue 
Recapture Act, shall be guilty of a Class
B misdemeanor with a 
fine not to exceed $7,500.

    Nothing in this Act prevents the Director of Revenue from 
publishing or
making available to the public the names and 
addresses of persons filing
returns under this Act, or 
reasonable statistics concerning the operation
of the tax by 
grouping the contents of returns so the information in any

individual return is not disclosed.

    Nothing in this Act prevents the Director of Revenue from 
divulging to
the United States Government or the government of 
any other state, or any
officer or agency thereof, for 
exclusively official purposes, information
received by the 
Department in administering this Act, provided that such
other 
governmental agency agrees to divulge requested tax 
information to
the Department.

    The Department's furnishing of information derived from a 
taxpayer's
return or from an investigation conducted under this 
Act to the surety on a
taxpayer's bond that has been furnished 
to the Department under this Act,
either to provide notice to 
such surety of its potential liability under
the bond or, in 
order to support the Department's demand for payment from
such 
surety under the bond, is an official purpose within the 
meaning of
this Section.

    The furnishing upon request of information obtained by the 
Department
from returns filed under this Act or investigations 
conducted under this
Act to the Illinois Liquor Control 
Commission for official use is deemed to
be an official purpose 
within the meaning of this Section.

    Notice to a surety of potential liability shall not be 
given unless the
taxpayer has first been notified, not less 
than 10 days prior thereto, of
the Department's intent to so 
notify the surety.

    The furnishing upon request of the Auditor General, or his 
authorized agents,
for official use, of returns filed and 
information related thereto under
this Act is deemed to be an 
official purpose within the meaning of this
Section.

    Where an appeal or a protest has been filed on behalf of a 
taxpayer, the
furnishing upon request of the attorney for the 
taxpayer of returns filed
by the taxpayer and information 
related thereto under this Act is deemed
to be an official 
purpose within the meaning of this Section.

    The furnishing of financial information to a municipality 
or county, upon request of the chief executive officer thereof, 
is an official purpose within the meaning of this Section,

provided the municipality or county agrees in
writing to the 
requirements of this Section. Information provided to 
municipalities and counties under this paragraph shall be 
limited to: (1)  the business name; (2) the business address; 
(3) the standard classification number assigned to the 
business; (4) net revenue distributed to the requesting 
municipality or county that is directly related to the  
requesting municipality's or county's local share of the 
proceeds under the Use Tax Act, the Service Use Tax Act, the 
Service Occupation Tax Act, and the Retailers' Occupation Tax 
Act distributed from the Local Government Tax Fund, and, if 
applicable, any locally imposed retailers' occupation tax or 
service occupation tax; and (5) a listing of all businesses 
within the requesting municipality or county by account 
identification number and address.  On and after July 1, 2015, 
the furnishing of financial information to municipalities and 
counties under this paragraph may be by electronic means. If 
the Department may furnish financial information to a 
municipality or county under this paragraph, then the chief 
executive officer of the municipality or county may, in turn, 
provide that financial information to a third party pursuant to 
the Local Government Revenue Recapture Act.  However, the third 
party shall agree in writing to the requirements of this 
Section and meet the requirements of the Local Government 
Revenue Recapture Act. 


    Information so provided shall be subject to all 
confidentiality provisions
of this Section.  The written 
agreement shall provide for reciprocity,
limitations on 
access, disclosure, and procedures for requesting information. 
For the purposes of furnishing financial information to a 
municipality or county under this Section, "chief executive 
officer" means the mayor of a city, the village board president 
of a village, the mayor or president of an incorporated town, 
the county executive of a county that has adopted the county 
executive form of government, the president of the board of 
commissioners of Cook County, or the chairperson of the county 
board or board of county commissioners of any other county. 

    The Department may make available to the Board of Trustees 
of any Metro
East Mass Transit District information contained 
on transaction reporting
returns required to be filed under 
Section 3 of this Act that report sales made
within the 
boundary of the taxing authority of that Metro East Mass 
Transit
District, as provided in Section 5.01 of the Local Mass 
Transit District Act.
The disclosure shall be made pursuant to 
a written agreement between the
Department and the Board of 
Trustees of a Metro East Mass Transit District,
which is an 
official purpose within the meaning of this Section.  The 
written
agreement between the Department and the Board of 
Trustees of a Metro East
Mass Transit District shall provide 
for reciprocity, limitations on access,
disclosure, and 
procedures for requesting information.  Information so provided

shall be subject to all confidentiality provisions of this 
Section.

    The Director may make available to any State agency, 
including the
Illinois Supreme Court, which licenses persons to 
engage in any occupation,
information that a person licensed by 
such agency has failed to file
returns under this Act or pay 
the tax, penalty and interest shown therein,
or has failed to 
pay any final assessment of tax, penalty or interest due
under 
this Act.
The Director may make available to any State agency, 
including the Illinois
Supreme
Court, information regarding 
whether a bidder, contractor, or an affiliate of a
bidder or

contractor has failed to collect and remit Illinois Use tax on 
sales into
Illinois, or any tax
under this Act or pay the tax, 
penalty, and interest shown therein, or has
failed to pay any

final assessment of tax, penalty, or interest due under this 
Act, for the
limited purpose of
enforcing bidder and contractor 
certifications. The Director may make available
to units
of 
local government and school districts that require bidder and 
contractor
certifications,
as set forth in Sections 50-11 and 
50-12 of the Illinois Procurement Code,
information
regarding 
whether a bidder, contractor, or an affiliate of a bidder or

contractor has failed
to collect and remit Illinois Use tax on 
sales into Illinois, file returns under
this Act, or
pay the 
tax, penalty, and interest shown therein, or has failed to pay 
any final
assessment
of tax, penalty, or interest due under 
this Act, for the limited purpose of
enforcing bidder
and 
contractor certifications. For purposes of this Section, the 
term
"affiliate" means any
entity that (1) directly, 
indirectly, or constructively controls another
entity,
(2) is 
directly,
indirectly, or constructively controlled by another 
entity, or (3) is subject
to
the control of
a common entity. 
For purposes of this Section, an entity controls another
entity

if it owns,
directly or individually, more than 10% of the 
voting securities of that
entity.
As used in
this Section, the 
term "voting security" means a security that (1) confers upon

the holder
the right to vote for the election of members of the 
board of directors or
similar governing
body of the business or 
(2) is convertible into, or entitles the holder to
receive upon 
its
exercise, a security that confers such a right to vote. A 
general partnership
interest is a
voting security.

    The Director may make available to any State agency, 
including the
Illinois
Supreme Court, units of local 
government, and school districts, information
regarding

whether a bidder or contractor is an affiliate of a person who 
is not
collecting
and
remitting Illinois Use taxes for the 
limited purpose of enforcing bidder and
contractor

certifications.

    The Director may also make available to the Secretary of 
State
information that a limited liability company, which has 
filed articles of
organization with the Secretary of State, or 
corporation which has been
issued a certificate of 
incorporation by the Secretary of State has failed to
file 
returns under this Act or pay the tax, penalty and interest 
shown therein,
or has failed to pay any final assessment of 
tax, penalty or interest due under
this Act.  An assessment is 
final when all proceedings in court for review of
such 
assessment have terminated or the time for the taking thereof 
has expired
without such proceedings being instituted.

    The Director shall make available for public inspection in 
the Department's
principal office and for publication, at cost, 
administrative decisions issued
on or after January 1, 1995.  
These decisions are to be made available in a
manner so that 
the following taxpayer information is not disclosed:

        (1) The names, addresses, and identification numbers 
    of the taxpayer,
related entities, and employees.

        (2) At the sole discretion of the Director, trade 
    secrets
or other confidential information identified as 
    such by the taxpayer, no later
than 30 days after receipt 
    of an administrative decision, by such means as the

    Department shall provide by rule.

    The Director shall determine the appropriate extent of the 
deletions allowed
in paragraph (2). In the event the taxpayer 
does not submit deletions, the
Director shall make only the 
deletions specified in paragraph (1).

    The Director shall make available for public inspection and 
publication an
administrative decision within 180 days after 
the issuance of the
administrative decision. The term 
"administrative decision" has the same
meaning as defined in 
Section 3-101 of Article III of the Code of Civil
Procedure. 
Costs collected under this Section shall be paid into the Tax

Compliance and Administration Fund.

    Nothing contained in this Act shall prevent the Director 
from divulging
information to any person pursuant to a request 
or authorization made by the
taxpayer or by an authorized 
representative of the taxpayer.

(Source: P.A. 98-1058, eff. 1-1-15; 99-517, eff. 6-30-16.)