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Interest and Penalties

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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.

The Illinois legislature recently passed several tax related bills along with a budget. The tax changes are primarily reflected in Senate Bills 689 and 690. Governor Pritzker signed S.B. 689 on June 5, 2019 and is expected to sign S.B. 690 shortly. The following is a summary of some of the more significant tax changes applicable to businesses.

The Texas Comptroller of Public Accounts (the “Comptroller”) will initiate the Texas Tax Amnesty Program (the “Program”) this week. The Program will run from May 1, 2018 to June 29, 2018 and covers all state and local taxes and fees administered by the Comptroller, including Texas franchise tax and sales/use taxes.  The Program applies to all tax reports originally due before January 1, 2018, and is designed to allow participants to “wipe the slate clean” by filing all past due reports or by amending reports that underreported taxes.  Program participants benefit from a 100% waiver of both penalties and interest.  This is the first Texas amnesty program since 2012, when an earlier amnesty program ran from June 12, 2012 through August 17, 2012.

Since the beginning of 2017, Delaware’s abandoned and unclaimed property law has undergone continuous statutory and regulatory changes, e.g., the enactment of SB 13 (Delaware’s new unclaimed property statute) and SB 79 (an amendment to SB 13), as well as the promulgation of final regulations from the Secretary of State (the “SOS”) regarding estimation practices in its voluntary disclosure agreement (“VDA”) program. To read our prior coverage relating to these unclaimed property developments in Delaware, see Delaware Issues New Abandoned and Unclaimed Property Regulations, Technical Correction to Delaware’s Unclaimed Property Overhaul Legislation Includes Extension of Time to Convert an Audit to a Voluntary Disclosure Agreement, and UPDATE: The Delaware Secretary of State Releases the Final Version of its Estimation Regulations With No Substantive Changes.