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91_HB3240eng HB3240 Engrossed LRB9111372SMdv 1 AN ACT to amend the Uniform Penalty and Interest Act by 2 changing Sections 3-2, 3-3, and 3-8 and by adding Section 3 3-7.5. 4 Be it enacted by the People of the State of Illinois, 5 represented in the General Assembly: 6 Section 5. The Uniform Penalty and Interest Act is 7 amended by changing Sections 3-2, 3-3, and 3-8 and by adding 8 Section 3-7.5 as follows: 9 (35 ILCS 735/3-2) (from Ch. 120, par. 2603-2) 10 Sec. 3-2. Interest. 11 (a) Interest paid by the Department to taxpayers and 12 interest charged to taxpayers by the Department shall be paid 13 at the annual rate determined by the Department. That rate 14 shall be the underpayment rate established under Section 6621 15 of the Internal Revenue Code. 16 (b) The interest rate shall be adjusted on a semiannual 17 basis, on January 1 and July 1, based upon the underpayment 18 rate going into effect on that January 1 or July 1 under 19 Section 6621 of the Internal Revenue Code. 20 (c) This subsection (c) is applicable to returns due on 21 and before December 31, 2000. Interest shall be simple 22 interest calculated on a daily basis. Interest shall accrue 23 upon tax and penalty due. If notice and demand is made for 24 the payment of any amount of tax due and if the amount due is 25 paid within 30 days after the date of such notice and demand, 26 interest under this Section on the amount so paid shall not 27 be imposed for the period after the date of the notice and 28 demand. 29 (c-5) This subsection (c-5) is applicable to returns due 30 on and after January 1, 2001. Interest shall be simple 31 interest calculated on a daily basis. Interest shall accrue HB3240 Engrossed -2- LRB9111372SMdv 1 upon tax due. If notice and demand is made for the payment 2 of any amount of tax due and if the amount due is paid within 3 30 days after the date of the notice and demand, interest 4 under this Section on the amount so paid shall not be imposed 5 for the period after the date of the notice and demand. 6 (d) No interest shall be paid upon any overpayment of 7 tax if the overpayment is refunded or a credit approved 8 within 90 days after the last date prescribed for filing the 9 original return, or within 90 days of the receipt of the 10 processable return, or within 90 days after the date of 11 overpayment, whichever date is latest, as determined without 12 regard to processing time by the Comptroller or without 13 regard to the date on which the credit is applied to the 14 taxpayer's account. In order for an original return to be 15 processable for purposes of this Section, it must be in the 16 form prescribed or approved by the Department, signed by the 17 person authorized by law, and contain all information, 18 schedules, and support documents necessary to determine the 19 tax due and to make allocations of tax as prescribed by law. 20 For the purposes of computing interest, a return shall be 21 deemed to be processable unless the Department notifies the 22 taxpayer that the return is not processable within 90 days 23 after the receipt of the return; however, interest shall not 24 accumulate for the period following this date of notice. 25 Interest on amounts refunded or credited pursuant to the 26 filing of an amended return or claim for refund shall be 27 determined from the due date of the original return or the 28 date of overpayment, whichever is later, to the date of 29 payment by the Department without regard to processing time 30 by the Comptroller or the date of credit by the Department or 31 without regard to the date on which the credit is applied to 32 the taxpayer's account. If a claim for refund relates to an 33 overpayment attributable to a net loss carryback as provided 34 by Section 207 of the Illinois Income Tax Act, the date of HB3240 Engrossed -3- LRB9111372SMdv 1 overpayment shall be the last day of the taxable year in 2 which the loss was incurred. 3 (e) Interest on erroneous refunds. Any portion of the 4 tax imposed by an Act to which this Act is applicable or any 5 interest or penalty which has been erroneously refunded and 6 which is recoverable by the Department shall bear interest 7 from the date of payment of the refund. However, no interest 8 will be charged if the erroneous refund is for an amount less 9 than $500 and is due to a mistake of the Department. 10 (Source: P.A. 89-379, eff. 1-1-96.) 11 (35 ILCS 735/3-3) (from Ch. 120, par. 2603-3) 12 Sec. 3-3. Penalty for failure to file or pay. 13 (a) This subsection (a) is applicable before January 1, 14 1996. A penalty of 5% of the tax required to be shown due on 15 a return shall be imposed for failure to file the tax return 16 on or before the due date prescribed for filing determined 17 with regard for any extension of time for filing (penalty for 18 late filing or nonfiling). If any unprocessable return is 19 corrected and filed within 21 days after notice by the 20 Department, the late filing or nonfiling penalty shall not 21 apply. If a penalty for late filing or nonfiling is imposed 22 in addition to a penalty for late payment, the total penalty 23 due shall be the sum of the late filing penalty and the 24 applicable late payment penalty. Beginning on the effective 25 date of this amendatory Act of 1995, in the case of any type 26 of tax return required to be filed more frequently than 27 annually, when the failure to file the tax return on or 28 before the date prescribed for filing (including any 29 extensions) is shown to be nonfraudulent and has not occurred 30 in the 2 years immediately preceding the failure to file on 31 the prescribed due date, the penalty imposed by Section 32 3-3(a) shall be abated. 33 (a-5) This subsection (a-5) is applicable to returns due HB3240 Engrossed -4- LRB9111372SMdv 1 on and after January 1, 1996 and on or before December 31, 2 2000. A penalty equal to 2% of the tax required to be shown 3 due on a return, up to a maximum amount of $250, determined 4 without regard to any part of the tax that is paid on time or 5 by any credit that was properly allowable on the date the 6 return was required to be filed, shall be imposed for failure 7 to file the tax return on or before the due date prescribed 8 for filing determined with regard for any extension of time 9 for filing. However, if any return is not filed within 30 10 days after notice of nonfiling mailed by the Department to 11 the last known address of the taxpayer contained in 12 Department records, an additional penalty amount shall be 13 imposed equal to the greater of $250 or 2% of the tax shown 14 on the return. However, the additional penalty amount may 15 not exceed $5,000 and is determined without regard to any 16 part of the tax that is paid on time or by any credit that 17 was properly allowable on the date the return was required to 18 be filed (penalty for late filing or nonfiling). If any 19 unprocessable return is corrected and filed within 30 days 20 after notice by the Department, the late filing or nonfiling 21 penalty shall not apply. If a penalty for late filing or 22 nonfiling is imposed in addition to a penalty for late 23 payment, the total penalty due shall be the sum of the late 24 filing penalty and the applicable late payment penalty. In 25 the case of any type of tax return required to be filed more 26 frequently than annually, when the failure to file the tax 27 return on or before the date prescribed for filing (including 28 any extensions) is shown to be nonfraudulent and has not 29 occurred in the 2 years immediately preceding the failure to 30 file on the prescribed due date, the penalty imposed by 31 Section 3-3(a-5)3-3(a)shall be abated. 32 (a-10) This subsection (a-10) is applicable to returns 33 due on and after January 1, 2001. A penalty equal to 2% of 34 the tax required to be shown due on a return, up to a maximum HB3240 Engrossed -5- LRB9111372SMdv 1 amount of $250, reduced by any tax that is paid on time or by 2 any credit that was properly allowable on the date the return 3 was required to be filed, shall be imposed for failure to 4 file the tax return on or before the due date prescribed for 5 filing determined with regard for any extension of time for 6 filing. However, if any return is not filed within 30 days 7 after notice of nonfiling mailed by the Department to the 8 last known address of the taxpayer contained in Department 9 records, an additional penalty amount shall be imposed equal 10 to the greater of $250 or 2% of the tax shown on the return. 11 However, the additional penalty amount may not exceed $5,000 12 and is determined without regard to any part of the tax that 13 is paid on time or by any credit that was properly allowable 14 on the date the return was required to be filed (penalty for 15 late filing or nonfiling). If any unprocessable return is 16 corrected and filed within 30 days after notice by the 17 Department, the late filing or nonfiling penalty shall not 18 apply. If a penalty for late filing or nonfiling is imposed 19 in addition to a penalty for late payment, the total penalty 20 due shall be the sum of the late filing penalty and the 21 applicable late payment penalty. In the case of any type of 22 tax return required to be filed more frequently than 23 annually, when the failure to file the tax return on or 24 before the date prescribed for filing (including any 25 extensions) is shown to be nonfraudulent and has not occurred 26 in the 2 years immediately preceding the failure to file on 27 the prescribed due date, the penalty imposed by Section 28 3-3(a-10) shall be abated. 29 (b) This subsection is applicable before January 1, 30 1998. A penalty of 15% of the tax shown on the return or the 31 tax required to be shown due on the return shall be imposed 32 for failure to pay: 33 (1) the tax shown due on the return on or before 34 the due date prescribed for payment of that tax, an HB3240 Engrossed -6- LRB9111372SMdv 1 amount of underpayment of estimated tax, or an amount 2 that is reported in an amended return other than an 3 amended return timely filed as required by subsection (b) 4 of Section 506 of the Illinois Income Tax Act (penalty 5 for late payment or nonpayment of admitted liability); or 6 (2) the full amount of any tax required to be shown 7 due on a return and which is not shown (penalty for late 8 payment or nonpayment of additional liability), within 30 9 days after a notice of arithmetic error, notice and 10 demand, or a final assessment is issued by the 11 Department. In the case of a final assessment arising 12 following a protest and hearing, the 30-day period shall 13 not begin until all proceedings in court for review of 14 the final assessment have terminated or the period for 15 obtaining a review has expired without proceedings for a 16 review having been instituted. In the case of a notice 17 of tax liability that becomes a final assessment without 18 a protest and hearing, the penalty provided in this 19 paragraph (2) shall be imposed at the expiration of the 20 period provided for the filing of a protest. 21 (b-5) This subsection is applicable to returns due on 22 and after January 1, 1998 and on or before December 31, 2000. 23 A penalty of 20% of the tax shown on the return or the tax 24 required to be shown due on the return shall be imposed for 25 failure to pay: 26 (1) the tax shown due on the return on or before 27 the due date prescribed for payment of that tax, an 28 amount of underpayment of estimated tax, or an amount 29 that is reported in an amended return other than an 30 amended return timely filed as required by subsection (b) 31 of Section 506 of the Illinois Income Tax Act (penalty 32 for late payment or nonpayment of admitted liability); or 33 (2) the full amount of any tax required to be shown 34 due on a return and which is not shown (penalty for late HB3240 Engrossed -7- LRB9111372SMdv 1 payment or nonpayment of additional liability), within 30 2 days after a notice of arithmetic error, notice and 3 demand, or a final assessment is issued by the 4 Department. In the case of a final assessment arising 5 following a protest and hearing, the 30-day period shall 6 not begin until all proceedings in court for review of 7 the final assessment have terminated or the period for 8 obtaining a review has expired without proceedings for a 9 review having been instituted. In the case of a notice 10 of tax liability that becomes a final assessment without 11 a protest and hearing, the penalty provided in this 12 paragraph (2) shall be imposed at the expiration of the 13 period provided for the filing of a protest. 14 (b-10) This subsection (b-10) is applicable to returns 15 due on and after January 1, 2001. A penalty shall be imposed 16 for failure to pay: 17 (1) the tax shown due on a return on or before the 18 due date prescribed for payment of that tax, an amount of 19 underpayment of estimated tax, or an amount that is 20 reported in an amended return other than an amended 21 return timely filed as required by subsection (b) of 22 Section 506 of the Illinois Income Tax Act (penalty for 23 late payment or nonpayment of admitted liability). The 24 amount of penalty imposed under this subsection (b-10)(1) 25 shall be 2% of any amount that is paid no later than 30 26 days after the due date, 5% of any amount that is paid 27 later than 30 days after the due date and not later than 28 90 days after the due date, 10% of any amount that is 29 paid later than 90 days after the due date and not later 30 than 180 days after the due date, and 15% of any amount 31 that is paid later than 180 days after the due date. 32 (2) the full amount of any tax required to be shown 33 due on a return and that is not shown (penalty for late 34 payment or nonpayment of additional liability), within 30 HB3240 Engrossed -8- LRB9111372SMdv 1 days after a notice of arithmetic error, notice and 2 demand, or a final assessment is issued by the 3 Department. In the case of a final assessment arising 4 following a protest and hearing, the 30-day period shall 5 not begin until all proceedings in court for review of 6 the final assessment have terminated or the period for 7 obtaining a review has expired without proceedings for a 8 review having been instituted. The amount of penalty 9 imposed under this subsection (b-10)(2) shall be 20% of 10 any amount that is not paid within the 30-day period. In 11 the case of a notice of tax liability that becomes a 12 final assessment without a protest and hearing, the 13 penalty provided in this subsection (b-10)(2) shall be 14 imposed at the expiration of the period provided for the 15 filing of a protest. 16 (c) For purposes of the late payment penalties, the 17 basis of the penalty shall be the tax shown or required to be 18 shown on a return, whichever is applicable, reduced by any 19 part of the tax which is paid on time and by any credit which 20 was properly allowable on the date the return was required to 21 be filed. 22 (d) A penalty shall be applied to the tax required to be 23 shown even if that amount is less than the tax shown on the 24 return. 25 (e) This subsection (e) is applicable to returns due 26 before January 1, 2001. If both a subsection (b)(1) or 27 (b-5)(1) penalty and a subsection (b)(2) or (b-5)(2) penalty 28 are assessed against the same return, the subsection (b)(2) 29 or (b-5)(2) penalty shall be assessed against only the 30 additional tax found to be due. 31 (e-5) This subsection (e-5) is applicable to returns due 32 on and after January 1, 2001. If both a subsection (b-10)(1) 33 penalty and a subsection (b-10)(2) penalty are assessed 34 against the same return, the subsection (b-10)(2) penalty HB3240 Engrossed -9- LRB9111372SMdv 1 shall be assessed against only the additional tax found to be 2 due. 3 (f) If the taxpayer has failed to file the return, the 4 Department shall determine the correct tax according to its 5 best judgment and information, which amount shall be prima 6 facie evidence of the correctness of the tax due. 7 (g) The time within which to file a return or pay an 8 amount of tax due without imposition of a penalty does not 9 extend the time within which to file a protest to a notice of 10 tax liability or a notice of deficiency. 11 (h) No return shall be determined to be unprocessable 12 because of the omission of any information requested on the 13 return pursuant to Section 2505-575 of the Department of 14 Revenue Law (20 ILCS 2505/2505-575). 15 (Source: P.A. 90-491, eff. 1-1-98; 90-548, eff. 12-4-97; 16 91-239, eff. 1-1-00.) 17 (35 ILCS 735/3-7.5 new) 18 Sec. 3-7.5. Bad check penalty. In addition to any other 19 penalty provided in this Act, a penalty of $25 shall be 20 imposed on any person who issues a check or other draft to 21 the Department that is not honored upon presentment. The 22 penalty imposed under this Section shall be deemed assessed 23 at the time of presentment of the check or other draft and 24 shall be treated for all purposes, including collection and 25 allocation, as part of the tax or other liability for which 26 the check or other draft represented payment. 27 (35 ILCS 735/3-8) (from Ch. 120, par. 2603-8) 28 Sec. 3-8. No penalties if reasonable cause exists. The 29 penalties imposed under the provisions of Sections 3-3, 3-4, 30and3-5, and 3-7.5 of this Act shall not apply if the 31 taxpayer shows that his failure to file a return or pay tax 32 at the required time was due to reasonable cause. Reasonable HB3240 Engrossed -10- LRB9111372SMdv 1 cause shall be determined in each situation in accordance 2 with the rules and regulations promulgated by the Department. 3 A taxpayer may protest the imposition of a penalty under 4 Section 3-3, 3-4,or3-5, or 3-7.5 on the basis of reasonable 5 cause without protesting the underlying tax liability. 6 (Source: P.A. 87-205; 87-1189.)