35 ILCS 735/3-7

Current through Public Act 103-1052

Section 35 ILCS 735/3-7 - Personal Liability Penalty

(a) Any officer or employee of any taxpayer subject to the provisions of a tax Act administered by the Department who has the control, supervision or responsibility of filing returns and making payment of the amount of any trust tax imposed in accordance with that Act and who wilfully fails to file the return or make the payment to the Department or wilfully attempts in any other manner to evade or defeat the tax shall be personally liable for a penalty equal to the total amount of tax unpaid by the taxpayer including interest and penalties thereon. The Department shall determine a penalty due under this Section according to its best judgment and information, and that determination shall be prima facie correct and shall be prima facie evidence of a penalty due under this Section. Proof of that determination by the Department shall be made at any hearing before it or in any legal proceeding by reproduced copy or computer printout of the Department's record relating thereto in the name of the Department under the certificate of the Director of Revenue. If reproduced copies of the Department's records are offered as proof of that determination, the Director must certify that those copies are true and exact copies of records on file with the Department. If computer print-outs of the Department's records are offered as proof of such determination, the Director must certify that those computer print-outs are true and exact representations of records properly entered into standard electronic computing equipment, in the regular course of the Department's business, at or reasonably near the time of the occurrence of the facts recorded, from trustworthy and reliable information. That certified reproduced copy or certified computer print-out shall without further proof, be admitted into evidence before the Department or in any legal proceeding and shall be prima facie proof of the correctness of the amount of tax or penalty due.

(b) The Department shall issue a notice of penalty liability for the amount claimed by the Department pursuant to this Section. Procedures for protest and review of a notice of penalty liability issued pursuant to this Section and assessment of the penalty due hereunder shall be the same as those prescribed for protest and review of a notice of tax liability or a notice of deficiency, as the case may be, and the assessment of tax liability under the Act imposing that liability.

(b-5) Any person filing an action under the Administrative Review Law to review a final assessment or revised final assessment (except a final assessment or revised final assessment relating to any trust tax imposed in accordance with the Illinois Income Tax Act) issued by the Department under this Section shall, within 20 days after filing the complaint, file a bond with good and sufficient surety or sureties residing in this State or licensed to do business in this State, or instead of bond, obtain an order from the court imposing a lien upon the plaintiff's property as hereinafter provided. If the person filing the complaint fails to comply with this bonding requirement within 20 days after filing the complaint, the Department shall file a motion to dismiss and the court shall dismiss the action unless the person filing the action complies with the bonding requirements set out with this provision within 30 days after the filing of the Department's motion to dismiss.

Upon dismissal of a complaint for failure to comply with this subsection, the court shall enter judgment against the taxpayer and in favor of the Department in the amount of the final assessment or revised final assessment, together with any interest that has accrued since the Department issued the final assessment or revised final assessment, and for costs. The judgment is enforceable as other judgments for the payment of money.

The amount of the bond shall be fixed and approved by the court, but shall not be less than the amount of the tax and penalty claimed to be due by the Department in its final assessment or revised final assessment to the person filing the bond, plus the amount of interest due from that person to the Department at the time when the Department issued its final assessment or revised final assessment to that person. The bond must be executed in favor of the Department and conditioned on the taxpayer's payment within 30 days after termination of the proceedings for judicial review of the amount of tax, penalty, and interest found by the court to be due in those proceedings. The bond, when filed and approved, is, from that time until 2 years after termination of the proceedings for judicial review in which the bond is filed, a lien against the real estate situated in the county in which the bond is filed of the person filing the bond and of the surety or sureties on the bond, until the condition of the bond is complied with or until the bond is canceled as provided in this subsection. The lien does not apply, however, to the real property of a corporate surety duly licensed to do business in this State. If the person filing the bond fails to keep its condition, the bond is forfeited, and the Department may institute an action upon the bond in its own name for the entire amount of the bond and costs. An action upon the bond is in addition to any other remedy provided by law. If the person filing the bond complies with its condition or if, in the proceedings for judicial review in which the bond is filed, the court determines that no tax, penalty, or interest is due, the bond shall be canceled by the issuer of the bond.

If the court finds in a particular case that the plaintiff cannot furnish a satisfactory surety or sureties for the kind of bond required in this subsection, the court may relieve the plaintiff of the obligation of filing a bond if, upon the timely application of the plaintiff for a lien in place of a bond and accompanying proof, the court is satisfied that a lien would secure the assessment as well as would a bond. Upon that finding, the court shall enter an order subjecting the plaintiff's real and personal property (including subsequently acquired property) situated in the county in which the order is entered to a lien in favor of the Department. The lien shall be for the amount of the tax and penalty claimed to be due by the Department in its final assessment or revised final assessment, plus the amount of interest due from that person to the Department at the time when the Department issued its final assessment or revised final assessment to that person. The lien shall continue until the court determines in the proceedings for judicial review that no tax, penalty, or interest is due, or until the plaintiff pays to the Department the tax, penalty, and interest secured by the lien. In its discretion, the court may impose a lien regardless of the ratio of the taxpayer's assets to the final assessment or revised final assessment plus the amount of the interest and penalty. This subsection does not give the Department a preference over the rights of a bona fide purchaser, mortgagee, judgment creditor, or other lien holder arising before the entry of the order creating the lien in favor of the Department. "Bona fide", as used in this subsection, does not include a mortgage of real or personal property or other credit transaction that results in the mortgagee or the holder of the security acting as trustee for unsecured creditors of the taxpayer who executed the chattel or real property mortgage or the document evidencing the credit transaction. The lien is inferior to the lien of general taxes, special assessments, and special taxes levied by a political subdivision of this State. The lien is not effective against a purchaser with respect to an item in a retailer's stock in trade purchased from the retailer in the usual course of the retailer's business. The lien may not be enforced against the household effects, wearing apparel, books, or tools or implements of a trade or profession kept for use by any person. The lien is not effective against real property unless and until a certified copy or memorandum of such order is recorded in the Office of the Recorder of Deeds for the county or counties in which the property is located. The lien is not effective against real property whose title is registered under the provisions of the Registered Titles (Torrens) Act until the provisions of Section 85 of that Act are complied with.

Service upon the Director of Revenue or the Assistant Director of Revenue of summons issued in an action to review a final administrative decision of the Department is service upon the Department. The Department shall certify the record of its proceedings if the taxpayer pays to it 75 per page of testimony taken before the Department and 25 per page of all other matters contained in the record, except that these charges may be waived when the Department is satisfied that the aggrieved party is a poor person who cannot afford to pay the charges. If payment for the record is not made by the taxpayer within 30 days after notice from the Department or the Attorney General of the cost, the court in which the proceeding is pending, on motion of the Department, shall dismiss the complaint and (when the administrative decision as to which the action for judicial review was filed is a final assessment or revised final assessment) shall enter judgment against the taxpayer and in favor of the Department for the amount of tax and penalty shown by the Department's final assessment or revised final assessment to be due, plus interest as provided for in this Act from the date when the liability upon which the interest accrued became delinquent until the entry of the judgment in the action for judicial review under the Administrative Review Law, and also for costs.

(c) The personal liability imposed by this Section shall survive the dissolution of a partnership, limited liability company, or corporation. No notice of penalty liability shall be issued after the expiration of 3 years after the date all proceedings in court for the review of any final or revised final assessments issued against a taxpayer which constitute the basis of such penalty liability have terminated or the time for the taking thereof has expired without such proceedings being instituted or after the expiration of 3 years after the date a return is filed with the Department by a taxpayer in cases where the return constitutes the basis of such liability. Interest shall continue to accrue on that portion of the penalty imposed by this Section which represents the tax unpaid by the taxpayer at the same rate and in the same amount as interest accrues on the tax unpaid by the taxpayer.

(d) In addition to any other remedy provided for by the laws of this State, and provided that no hearing or proceeding for review is pending, any Section of a tax Act which provides a means for collection of taxes shall in the same manner and to the same extent provide a means for the collection of the penalty imposed by this Section. The procedures for the filing of an action for collection of the penalty imposed by this Section shall be the same as those prescribed by a tax Act for the filing of an action for collection of the tax assessed under that Act. The time limitation period on the Department's right to bring suit to recover the amount of such tax, or portion thereof, or penalty or interest from such person, or if deceased or incompetent to file a claim thereof against his estate, shall not run during: (1) any period of time in which the order of any Court has the effect of enjoining or restraining the Department from bringing such suit or claim against such person, or (2) any period of time in which the order of the Court has the effect of enjoining or restraining the Department from bringing suit or initiating other proper proceedings for the collection of such amounts from the taxpayer, or (3) any period of time the person departs from and remains out of the State; but the foregoing provisions concerning absence from the State shall not apply to any case in which, at the time when a tax or penalty becomes due under this Act, the person allegedly liable therefor is not a resident of this State.

(e) For the purposes of this Section, "officer or employee of any taxpayer" includes a partner of a partnership, a manager or member of a limited liability corporation, and a member of a registered limited liability partnership.

(f) A trust tax is any tax for which an amount is collected or withheld by a taxpayer from another person, and any tax for which an amount is required to be collected or withheld by a taxpayer from another person, regardless of whether it is in fact collected or withheld.

(g) The personal liability imposed by this Section is in addition to liability incurred by a partner of a partnership or limited liability partnership resulting from the issuance of a notice of tax liability issued to the partnership or limited liability partnership.

(h) In addition to any other basis for imposition of liability under this Act including under subsection (a) of this Section, any person who collects, withholds, or receives a tax, or any amount represented to be a tax, from another person holds the amount so collected or withheld in special trust for the benefit of the Department and is liable to the Department for the amount so withheld or collected plus accrued interest and penalty on that amount. For purposes of this subsection, "person" shall have the same definition as provided in Section 1 of the Retailers' Occupation Tax Act.

35 ILCS 735/3-7

P.A. 90-458, eff. 8/17/1997; 91-203, eff. 7/20/1999.