State’s new court for tax protests has Chicago office but none downstate — in violation of law

A new, independent court created by the state to resolve complaints from taxpayers refuses to open a downstate office, and it has poorly managed its expenses in its first year and a half, an audit has found.

The Illinois Independent Tax Tribunal was set up to mediate disputes between taxpayers and the Illinois Department of Revenue. It hears challenges for 22 different taxes, from income tax to the “coin-operated amusement device and redemption machine tax.”

The state’s auditor general has faulted the Tribunal for not establishing an office in Sangamon County, which it was required by law to do, as well as for refusing to hire a clerk or reporter, two positions it was supposed to fill.

In a response to the audit, the court said it couldn’t financially justify the purchases for space or personnel. The Auditor General recommended it seek a legal resolution if it didn’t want to fulfill its legal obligations.

Rep. Dwight Kay, R-Glen Carbon, one of the sponsors of the legislation that created the tax tribunal, said it should open a Springfield office.

“The intent of the legislation was to make this available not just to northern Illinois, not just to Cook County, but to (all of Illinois),” he said.

In nine different findings, seven of which constituted “material weakness,” the audit found the court was “noncompliant” with the law.

The audit traced the court’s bookkeeping problems to a lack of “adequate business rules, policies, and procedures for using moneys within the Illinois Independent Tax Tribunal Fund.”

Among the biggest errors, the Tribunal, which is run by two judges with deep experience in tax law, incorrectly billed the general fund instead of its own special fund, including nearly $50,000 for an online filing system and $109,000 of the $121,000 in its non-payroll expenditures.

The court, which had about $300,000 in total expenditures in 2014, and about $450,000 in 2015, declined to comment on the audit.

William Drennan, a tax-law professor at Southern Illinois University Carbondale who used to work for the IRS, said that it didn’t surprise him that the Tribunal had a few financial slip-ups, and he was in favor of the court.

Before it, he said, in order to fight outstanding bills from the state, taxpayers would first have to pay them and then challenge them. With the Tribunal, Illinois’s complaint system is similar to the IRS, which claims to resolve about 90 percent of issues through an appeals process, he said.

Still, “It would be nice to have an office (in Springfield). Honestly, book-keeping is hard,” he said, and sometimes it is just easier to talk to a person face-to-face.

Drennan also thought the barrier of entry to the court for regular people is high, as petitioners must have a minimum of $15,000 in either disputed taxes or penalties, and $500 for the application fee.

Kay said one of its intents was to deal with claims from businesses, whose taxes can reach into the millions. So far, he hasn’t heard from any small businesses in his constituency about wanting to access the Tribunal, but, if there were a need, he would consider proposing legislation to expand the focus of the court, he said.

The Tribunal heard a variety of petitions over the past two years, including one from Jimmy John’s sandwich mogul Jimmy John Liautaud, who disputed $1.4 million in unpaid taxes on two airplanes, according to the Bloomington Pantagraph.

This story was originally published July 17, 2016 at 7:23 AM with the headline "State’s new court for tax protests has Chicago office but none downstate — in violation of law."