Numerous state and local jurisdictions have responded to the COVID-19 (“coronavirus”) outbreak by providing relief to taxpayers, primarily through extended filing and payment deadlines. We expect that many more jurisdictions will issue guidance in the coming weeks, particularly because the federal government recently announced its 90-day income tax payment extension plan.
The World Health Organization has officially declared the coronavirus outbreak to be a pandemic. In addition to the cost on human life, the rapid spread of COVID-19 has left a trail of economic damage affecting business revenues. COVID-19 has caused complete or partial shutdown of factories, supply chain disruptions, and labor shortages, and has impacted demand in certain industries. This impact will also be felt by U.S. state, and local governments.
Over the years, too many corporations doing business in Illinois have had the unfortunate experience of receiving a notice of delinquency from the Office of the Secretary of State of Illinois (the “Secretary of State”) demanding immediate payment of additional franchise tax, penalties, and interest. Not to be confused with the Illinois corporate income tax, which is administered by the Illinois Department of Revenue, the Illinois franchise tax is codified in the Business Corporate Act of 1983, 805 ILCS 5/1.01, et seq. (the “BCA”), and is administered by the Secretary of State. The franchise tax is considered a fee for the privilege and protections of “incorporation”, and therefore only applies to “corporations” and not other business entities (e.g., LLCs, LLP, GPs, etc.). The Illinois franchise tax base is measured by a corporation’s Illinois “paid-in capital” — meaning, funds generated by corporations by issuing stock, plus additional cash/equity contributed by shareholders.
On June 5, 2019, the Illinois legislature enacted Public Act 101-0009 which includes comprehensive amnesty programs covering taxes administered by both the Illinois Department of Revenue (the “Department”) and the Office of the Secretary of State of Illinois (the “Secretary of State”). Taxes covered by these programs include the corporate and individual income taxes, the Retailers’ Occupation Tax, the Use Tax, and the Illinois franchise tax. The amnesty programs run for the period October 1, 2019 through November 15, 2019, and, under both programs, 100% of penalties and interest will be waived in exchange for payment of any outstanding tax liability due. Unlike previous amnesty programs, taxpayers will not be punished for not participating — that is, Illinois will not impose double penalties and double interest on tax assessments issued after the amnesty period closes.