Opportunities and Confusion in Illinois Tax

Meredith: 00:00:34

Welcome to SALTovation.

The SALTovation show is a podcast series featuring the leading voices in SALT where we talk about the issues and strategies to help you make sense of state and local tax. Welcome back to Saltivation. We're continuing our conversation with Dave Kupiak and Natalie Martin. Diving deeper into Illinois tax complexities.

Today we'll tackle the elusive franchise tax, its hidden pitfalls, and what taxpayers need to know about navigating audits in Chicago and Cook County. From surprise liabilities to proactive tax strategies.

Natalie: 00:01:04

Let's dive in.

Meredith: 00:01:07

nchise tax, maybe Senate Bill: 2325

Natalie: 00:01:23

Sure. So the franchise tax is a very kind of esoteric tax in Illinois.

It's based on your paid in capital and it has an allocation factor which is unique and not like your Illinois sales factor. So if you think that it really leverages off the income tax, it does not. It's a for the ability to transact business in Illinois.

It is administered by the Illinois Secretary of State, not the Department of Revenue. They are completely separate entities. It has been repealed, brought back from the well, it's been, it's been scheduled to be repealed.

The repeal has been repealed. So it still exists. Long and short. I don't think it will ever die. Truly. The main crux of the franchise tax is to remain in good standing in Illinois.

This often comes up when you are having a merger, having, having a bond issuance, doing some stock issues and some bank or some entity said, can I have your Illinois good standing certificate? And you say what? And you say, oh, franchise tax, that's the main kind of club that they have over this.

Dave: 00:02:40

And licensing, too.

Natalie: 00:02:41

Licensing and licensing. If you want to have a state contract, they're going to look for your good standing certificate. That often happens as well.

As I said, it's administered by the Secretary of State. So they currently have a $10,000 exemption. So about, I think about 90% of the entities in Illinois now are not.

They have to file the return, but they avail themselves of the exemption and owe $75. Interestingly enough, LLCs, it's a flat rate. You're not subject to all the things that corps are subject to.

So it really, you know, skews towards LLC in Illinois if you have a choice of entity.

So now that we have 90% of the small entities, the LLC, things like that, exempt from it, you're really focused on large corporations that don't necessarily have a vote in Illinois for the politics of it. And you know, it still brings in a couple hundred million dollars. So it's not a. Something that they can get rid of easily.

And there's a little bit of a power struggle because the secretary of state does administer it. It's not just another tax administered by the Department of Revenue.

Dave: 00:03:57

There's less than 20 people in the department that handles over a hundred thousand corporations. So for those 20 people are generating a couple hundred million dollars of revenue. It's politically, they don't want to give it up. They really don't.

Natalie: 00:04:08

Yeah, right. Currently, the interest is the, one of the most onerous parts of this. It's 2% per month. 2%, 2%. 2% added up, put it all together.

We oftentimes see bills that the interest is two and three times the tax.

s,: 1950

we have ones that go back to: 2006

You know, they often, they just, their position is it's statutory interest. We can't, we have to. That's just how we have to compute it.

So this would change it, but it would only change it going forward in our minds, at least it's something. You know, half of something is better than zero of something. Would we like it to go back? Sure. But as written, it goes forward. The interests change.

Yeah.

Meredith: 00:05:34

We have a lot of cities in Colorado from a home world perspective that do one percent per month or one and a half percent per month. So like in the city and county of Denver, if you're doing like a three year VDA, right. You're looking at 36% interest on just a sales tax.

Maybe you've got a use tax that goes back seven years and it's a Friday afternoon and I don't feel like thinking hard to figure out to get seven times 12. Correct.

Meredith: 00:05:58

Right.

Meredith: 00:05:58

Like that's a lot. That's a big interest number.

Natalie: 00:06:01

Right, right. And oftentimes what happens in these mergers is that they're kind of compilation of paid in capital.

So you have your Paid in capital and then you merged someone in with their paid in capital. So unbeknownst to you, you have all of this outstanding liability. You know, and let's be realistic.

The franchise tax doesn't often reside in the tax department. Sometimes it resides in the legal department. The legal department doesn't understand the nuances of what the base is.

They don't what's paid in capital. They oftentimes we see they take stock times par is $100. You know, that's, that's the information that they know.

They don't know that on a federal return you have $3 billion sitting in additional paid in capital. That that's what the Secretary of State considers it to be. So it's often a hot potato because it doesn't reside in a place in companies.

It's often or it should reside in multiple places and it's like not me. And it just resides nowhere.

Meredith: 00:07:04

Then is Illinois capped like Delaware is, or is it just like apic?

Natalie: 00:07:10

There is a cap on the annual, but there is not a cap on your additional. So when people talk about the $2 million cap, it's a $2 million cap on your annual tax.

've had the transactions from: 1950

But unbeknownst to you, you have $5 billion that you didn't add correctly. They're going to go back and there's no limit on that $5 billion on that.

It's the Form: 1430

Dave: 00:08:00

Yeah.

Meredith: 00:08:01

Well, that makes, you know, Delaware is what, 250. 250,000 look like, you know, sweet. I'll pay that.

Meredith: 00:08:08

We're just getting a potatoes.

Natalie: 00:08:10

Yeah.

Meredith: 00:08:11

A ton of common stock.

Natalie: 00:08:13

Just like so like, like I was alluding to earlier, we talk about the Department of Revenue. We also have to talk about this if you're.

And a lot of times sometimes the registration is done by someone in legal that says, oh yeah, we want to transact in business in Illinois.

Meredith: 00:08:29

Sure.

Natalie: 00:08:30

Check. Right. Unbeknownst to what the impact of it is.

Meredith: 00:08:33

Right, right. Because they don't understand what goes into any kind of computation.

Natalie: 00:08:40

Exactly.

Meredith: 00:08:41

On a state basis. Right, right. Because I mean, a lot of other states. Right. Are just like, hey, give us your 50 bucks per year or Whatever, Right.

And you know, you go, but there are the Illinois, the Delawares that, you know, some of these other states that know you have some financial information that you have to provide and there could be some additional tax involved.

Natalie: 00:09:01

Exactly. And from a legal perspective, one of the abilities is the ability to use the court system, meaning you become the plaintiff.

If you're not registered, then there is an argument that you are not able to avail yourselves of the court. So legal departments oftentimes will register everywhere, right. They say, we might, I might sneeze in Illinois someday.

I want to just be registered just in case. Right. And they don't understand the impact. And then they get it. And then they say, hey tax, can you give me these numbers to apportion this?

And it's like, holy cow, what is this? And then they wonder the minute that you file, they're like, where have you been all my life? Right. And they will, you know, well, and.

Meredith: 00:09:45

Then if you want to withdraw, good luck.

Natalie: 00:09:48

Good luck. You gotta get caught up. It's a very hard thing to say. I'm no longer transacting business in Illinois. Right.

Meredith: 00:09:56

Well, and then if you haven't been paying correctly.

Natalie: 00:09:59

Yes.

Meredith: 00:09:59

And you want to withdraw, you have to get caught up and you know.

Natalie: 00:10:03

Get yourself in good standing. Right. And like I said, there's a lot of these stock times, par value on my base is 100.

There's a, there's a check mark on the form that says I'm just gonna elect to pay on everything to make it easy. Then I don't have to fill out those numbers, I don't have to apportion it.

And if you do that, it is a world of hurt to try to go back then and say, whoops, I shouldn't have done that. So oftentimes we'll see a hundred dollars, check the box, go on my merry way.

Someone wants to merge and they say, let me see your franchise tax return. And it becomes part of the due diligence of a merger that you have been way under reporting for years.

Dave: 00:10:47

And what's really unfortunate is sometimes you have these self created problems where people will say, you know what, we have all these shell corporations or empty non doing business corporations, let's merge them together, clean them up. We've seen a situation where someone took a $100 filer that had zero factor in Illinois and put it with another entity that had 100% factor.

And by putting the two together, they created a $2 million liability. And all they were supposed to do was get rid of these Entities that were paying $75 a year.

Unfortunately, when we got involved, they had already dissolved the other company. If they hadn't dissolved the company, we could have done it. And what did the person at the Secretary of State say, Natalie?

Natalie: 00:11:27

Yeah, they said, oh, that's interesting. I'm saying interesting. I think they said, funny. I didn't find it funny. If you would have done it the other way, it would have still been $75.

Dave: 00:11:36

Yeah. So $2 million.

Can you imagine the person at the company who had to go and tell the CEO and CFO we have to pay $2 million because we merged this the wrong way?

Natalie: 00:11:46

Nope.

Meredith: 00:11:46

I would have quit. I would have quit first, found a new job.

Natalie: 00:11:49

Entities. Talk to your legal group.

If you're in the tax department, talk to your legal group and say, hey, on this entity, can you just give me an idea of where we are and where we're registered for your purposes? Because I want to pair it up with where I'm at. Do you what returns?

You know, we often tell our clients, you know, having a point person in other departments is really important, that you can just bounce something off and say, hey, tax person, you're not so scary. Let's go to lunch. And then I know now when I have a tax question, I have someone or, hey, legal person, I don't ever want to get in litigation. But.

But if I have a question about this, it's really imperative to talk amongst yourselves and share information. And it oftentimes prevents these things. Or if you get on the front end, we're buying someone. How is that structure going to happen?

Because we've seen it where we get involved and we say, okay, you've got it structured this way. I just want you to know it's going to cost $500,000 a bill on my franchise tax. If you guys need the structure, you just need to bake in this cost.

Because the last thing that a lot of our clients want are surprises if they're doing a major transaction that is important from the business operations perspective. I'm not going to. I'm not going to hold it up for franchise tax. I just want to include the cost so that they know. Right.

Because as tax people, you don't want to be the one that comes in and says, whoops.

Dave: 00:13:21

Right? Yeah.

And if you start a new job or in a position where you have just got there right after the merger, you want to make sure you look at the franchise tax. Because like Natalie's alluding to, there might be some reserve set aside for These tax issues that won't hit your budget.

So if you could get the franchise tax issue addressed with the reserve from the merger, all the better. And then you can claim responsibility going forward.

Meredith: 00:13:45

Man, a lot of cautionary tales here.

Meredith: 00:13:47

Right?

Natalie: 00:13:49

Afternoon. Afternoon. Sorry. But right.

Meredith: 00:13:53

If you wanted, let's say you didn't really, you know, under the, under the definitions of what it is with the Secretary of State transact business in Illinois.

But if, let's say you wanted to take something to court for whatever reason, could you then just go register with the Secretary of state and then kind of file within the court system? Or do you have.

Is there like a kind of a, a waiting period from, like the date of registration to, you know, when you could kind of utilize the court system?

Natalie: 00:14:23

Yeah, there's just a authority to transact business. It's just something you go to them with and you say you fill out a lot of information. There is a question on there.

When did you start transacting business in Illinois? So that's often a very kind of squishy answer from our perspective. But you could.

been in theory doing it since: 2020

And that establishes what's called your measurement date, which is also kind of a weird concept. Your filing date is based on when you first for that authority to transact business. So I'll send.

You could have a measurement date of 731 and then your return is due 60 days after that. So that's then due 10 1. That's why you. There's no rhyme or reason to your reporting period.

So mirror that up then with your federal return and everything else. It makes it really complicated. And the Secretary of State doesn't really understand the concept of.

I don't know what my pick is as of July 31, because that's not really a date in my world. Yeah. Reporting date. Right. So oftentimes we, we tell our clients, get as close as you can. Right.

I mean, if you don't have a magic 7:31, you, you have a second quarter if your, your calendar year. Yeah, yeah. But.

But that, that's kind of the nuance of how you get these strange reporting periods and how that complicates things as well because they don't line up nicely with the income tax. Yeah.

Dave: 00:16:03

And we've also helped a couple of corporations convert to LLCs if they have. To your point earlier about the cap, if you're paying Over a million dollars a year consistently.

But you don't have to be a C corp, you know, you're not publicly traded or anything. Just convert to an llc. Then going forward, like Natalie said, you only have to pay the $200. You don't have to worry about any of this anymore.

Meredith: 00:16:20

Is that your legal status? So you could be an LLC from a corporate. From an incorporation standpoint, but with the irs, you could have checked the box.

Natalie: 00:16:28

And still we're talking about like a C corp that.

Dave: 00:16:32

Yeah, yeah.

Meredith: 00:16:34

Right. But let's say you were.

Meredith: 00:16:35

But like if you were an LLC and you wanted to.

Natalie: 00:16:38

Right. Be.

Dave: 00:16:39

If you checked. Yeah. If you're treated as the C corp with your nlc, it doesn't subject you to the.

Meredith: 00:16:45

So any kind of election that you've made with the IRS doesn't your.

Meredith: 00:16:49

Yeah. The legal form of the entity as opposed to how it's taxed. The irs state purpose.

Natalie: 00:16:54

Yep.

Dave: 00:16:55

Correct. Correct.

Meredith: 00:16:56

But Stace, I stand by her statement. And I'm even further in saying, hey, Secretary of State, we can kind of help you calculate it, but we're not going to advise you on that because.

Natalie: 00:17:05

That'S more of a legal issue. And that's, that's why we get.

Meredith: 00:17:08

Especially with Illinois, I'm gonna stand by that statement.

Natalie: 00:17:13

Most of anyone in Illinois, the franchise tax oftentimes because people don't really enjoy it. Not that you would enjoy tax all the time, but it's a very esoteric tax. So. And it does. It really lends itself to a lot of legal issues embedded.

It's really a legal filing in most cases. Yes. So we definitely work with accounting firms because they usually have the data. Right. But they don't necessarily want to get involved.

And oftentimes too, there's a legal group in the Secretary of State that is the only opportunity for any negotiation. And once you start talking to a lawyer there, you have to be a lawyer yourself or you're representing the client.

So oftentimes this is more of a legal type filing than a traditional income sales tax return.

Meredith: 00:18:06

Yeah. No, and I think, I mean those of us that are the due state tax. Right. I do think that, you know, we, we tend to get.

Our clients will be like, well, this is tax on it. So therefore here, tax person, you deal with it.

Natalie: 00:18:19

Right.

Meredith: 00:18:19

But I mean, but I think the kind of takeaway here is that this tax can be a gotcha.

Natalie: 00:18:29

That a.

Meredith: 00:18:30

Lot of taxpayers may fully appreciate that.

Natalie: 00:18:33

Exactly.

Dave: 00:18:34

We've had clients that were threatened to have to stop doing business in Illinois because their License was being held up because of this. We've had bond insurances that were held up. We've had lending.

Someone was actually going to lease a building in the city of Chicago and the landlord wouldn't grant them the lease until they got the letter of good standing. So we kind of act as intermediary saying, you know, we've done enough of these that we're working on it for our client.

You know, we could basically say that we know that they'll get back in good standing. Just the best practice would be don't give anything to the Secretary of State if you don't know what they're going to use it for.

Especially federal consolidated returns.

Natalie: 00:19:10

I mean, on that point, they'll ask for federal consolidated returns. They don't necessarily understand the concept of a federal consolidated return. This tax the owner franchise taxes entity by entity.

So they don't necessarily understand consolidation. Right. And our other takeaway from that is they don't have the same non disclosure that the Department of Revenue do with regards to confidentiality.

A FOIA request to the Secretary of State may allow them to give out your federal return. So we often tell our clients, just don't. They are not the Department of Revenue.

The confidentiality that you have with the IRS and Department of Revenue does not necessarily exist with them. They will put things into the legal group so that it becomes more privileged, but it's not the same.

So if you ever get in and they routinely do this, give us your federal consolidated return. First off, it's boxes. Right. This is not something I can just like send down to you, scan it and send it to you. It's boxes of material.

And there's a whole bunch of entities in there that you're not privy to because I'm talking about A, not A, B, C, and what have you. So if you get one of those requests, take a pause and talk to someone before you do.

Dave: 00:20:34

Yeah. Don't give it to them.

Natalie: 00:20:35

Yeah, yeah.

Meredith: 00:20:37

Speaking to the third bucket of kind of jurisdictions talked about the state and we kind of Secretary of State is kind of the offshoot. But then, you know, we brought up Chicago and Cook County. So any. What's going on in Chicago? Anything. Anything fun happening?

Natalie: 00:20:59

What's not going on in Chicago other.

Meredith: 00:21:01

Than Cubs opening season?

Dave: 00:21:03

Yeah.

Meredith: 00:21:07

It's opening day here for the Rockies. Yeah.

Natalie: 00:21:13

It's, you know.

Dave: 00:21:15

Is that what you're wearing your blue jacket, Natalie?

Natalie: 00:21:17

I was just. Yes.

Dave: 00:21:18

Yeah.

Meredith: 00:21:18

Thinking the same thing.

Natalie: 00:21:19

You're supporting your cups.

Meredith: 00:21:21

Yes.

Natalie: 00:21:21

Right.

Meredith: 00:21:22

I mean, my mom grew up south side, so that's why maybe I'm wearing the gray.

Natalie: 00:21:26

Okay, well, Dave and I. And I'm a Cubs fan and he's a Sox fan, so it can't happen.

Dave: 00:21:33

It was very tough last year, right?

Meredith: 00:21:36

Yeah. Yeah, it was not so good last year.

Meredith: 00:21:39

It's generally not easy to be a Chicago sports fan.

Natalie: 00:21:42

Yeah.

Meredith: 00:21:44

It doesn't matter which team. Yeah.

Dave: 00:21:46

It's just. I don't know why. It's just. Yeah, we're jealous to.

Natalie: 00:21:49

It's not easy to be a Chicago taxpayer either. So there you go.

Meredith: 00:21:53

Let's bring it all back.

Dave: 00:21:55

Yeah.

Meredith: 00:21:55

So what do we got going on in the city?

Dave: 00:21:58

So in the city, they're looking for a billion dollars. That's their budget shortfall for this year. They did some borrowing, but it still didn't get them there.

So they're being a little more aggressive in their audits. And what's amazing is a lot of the clients we talk to have been audited multiple times by the city over the last 10, 20 years.

And this most recent audit, the auditors are bringing up new things, so especially on the lease tax side. And it just. We feel bad for them because usually if you have an audit history, there's some kind of understanding.

If you didn't bring it up the last audit, you know, you're going to be. And the old person, who. I shouldn't say old. The prior person in charge of the city finance department was a very good prospective person.

He's like, okay, if we missed something last time and you missed it, we're going to do a perspective only. And everybody was happy with that because, you know, like, you. It gives you some education and allows it.

But now it seems like they're going back, that person retired. And now they're dealing with this on a. You know, we got you. And we're seeing mostly on the lease tax side.

Natalie: 00:22:54

Yeah. So a lot of Chicago has this, like, personal property lease transaction tax.

It's a nice way of saying, like, cloud computing and anything you use on your laptop. Right. I mean, let's not talk about a personal property lease transaction.

re. They were clarifying from: 1980

Illinois might give you the five prong or the mic, do this, and you're on your way. Chicago is going to tax like your SAP, your Alexis, your Bloomberg, your. Any Type of service, any type of those computer services that you're using.

10.25%, right. This is not like low numbers.

Dave: 00:23:41

Yeah. And they just raised it to 11% this January. And there used to be a differential between data storage and used to be at a lower 5%. Not anymore.

It's all 11%. So it's really a very aggressive tax.

And when people, if you think about it, especially on the IT side, some of these contracts you're signing are pretty large contracts.

And so when you get hit with 11% tax on something you didn't know about, the one nice thing about the city is they say, we'll collect it from either the supplier or the taxpayer. So if your supplier has been charging you, that's a good thing. A lot of times the suppliers don't charge it.

There was even a situation where a lot of suppliers entered into an agreement where they weren't collecting it, but then on a going forward basis, they stopped collecting it. So a lot of the clients thought they were paying it and they're not.

There's also one nice thing about the city is they say, we're going to apportion or allocate it. So they're only going to collect it based on your usage in the city of Chicago.

So this is great during COVID because a lot of the employees weren't in the city, so a lot of people were able to reduce their exposure here. But now that that's over, you have to kind of do this on an annual basis, figure out how many of your employees are actually using this in Chicago.

And if they use it in Chicago more than they don't, then that employee is counted as a Chicago user.

Natalie: 00:24:59

And we see it a lot where the entity will say, I'm not going to necessarily only tax you on 25%. I'm going to either zero tax you and you have to assess your own use tax, or I'm going to 100% tax, like you mentioned earlier.

And then you're going to provide the affidavit and I'm going to ask you to claim a refund from the city. So it really is messy. You know, it's kind of what you prefer. If you can self assess and you set up a direct pay, that's probably the easiest way.

But some companies don't like that. They feel like, I don't know if I'm going to trust you, but then they'll say, I'm only going to assess you 100%.

And you're like, well, wait a minute, it's 25. So I'm now going to go through, give you my affidavit of apportionment. You have to claim the refund because you're the payer, not me.

And it's a whole issue. Yep.

Meredith: 00:25:55

And you know, logistically speaking. Right.

A multiple points of use is great in theory, but in order to actually get that, to show up on an invoice and to like, implement the ability to do that is not easy.

Meredith: 00:26:09

Right.

Meredith: 00:26:10

Because we've had this conversation. Stacy might be thinking of the same client because we are actually doing a. They're a SaaS company. A refund claim for.

It was actually an insurance company that was like, hey, I know I paid this, you know, ppl, the lease transaction tax years and years and years ago, but here's my exemption certificate. Go back, get me, you know, my money back. It's for like 10 grand.

So they've probably paid us more money to actually get the refund because now we're going through like a mini audit for that return period. And it's like, okay, well, I need to see all of your transactions. I need to see all of your exemption certificates.

I need to see all of this and all of this. And it's just, it's, it's very cumbersome. And, you know, the contrary is too. If you're going to take.

And we kind of talk with our clients about this from an NPU perspective. Okay.

If we're, if you're going to apportion things out of the city, what about the other clients you have that you probably need to be putting into the city from a usage perspective? So where do you want to go with that? Because this, the same client was like, hey, we only have like four users in New York.

Everyone else is, you know, Washington, Texas. It's like, okay, cool, we're licensed there too. But now I got, I got to charge you sales tax in Texas and Washington and all the other places.

So you're not really getting the arbitrage you want.

Natalie: 00:27:34

Yes, right.

Dave: 00:27:37

And we had a client who, we jumped on this one a little later. They're not located in Chicago, but they had customers in Chicago.

And this is, and I'll just say this because you guys have probably seen it both on the lawyer side, the CPA side, the consultant side. People hire people who don't know state tax.

And the first attorney they hired basically litigated that they were trying to apply the Hertz case when this client had customers in the city and had equipment in the city. And we're like the Hertz case doesn't apply.

And unfortunately, by the time we got involved, the city was really angry at them because they spent a lot of time in litigation over something that shouldn't have been in litigation.

And so we kind of had to first calm the city down on behalf of our client and just kind of explain that, you know, we see this all the time, and that's what we try to explain to people, is, you know, you don't hire, you know, a general practitioner to do brain surgery. You need to have someone who's familiar with the different areas just to get the best answers.

And a lot of times when we get involved on the second or third time, our clients are really frustrated that they've already paid so much fees to get nowhere.

And it kind of puts all of us at a disadvantage because we're trying to help them, but they're angry because they've already paid all this money and fees to get nowhere.

So we just strongly recommend whoever people use that they try and find someone who's familiar with the issue that's before them because it just makes it worse or even yet. We've seen so many situations where they give the wrong information to the jurisdiction. And now all of a sudden you were dealing with one issue.

Now you have three or four issues because this information is confusing everybody. So anything you could do to basically make it easier.

And one thing we that Chicago also, Chicago is a home rule unit, so they can basically create any tax they want in Illinois. You have to have above a certain number of people in it. They have an amusement tax as well.

And within the last couple years, they've gotten a lot of attention nationally because of their streaming and gaming electronic, you know, streaming audio services. But a lot of the other smaller villages and communities have started to impose these amusement tax.

And Natalie and I were asked by one client who received a notice from the city of Evanston who just enacted it.

And we basically, on behalf of the client, worked with the city of Evanston to make sure that their tax was constitutional, to fix it, because our client didn't want to pay an unconstitutional tax and then have a claim tax.

Natalie: 00:29:55

I know what I'm trying to get at, but this isn't doing it correctly. Right?

And once again, like, I don't want to go through protracted litigation for them to say, oh, I'm going to amend ordinance now 10 years later and go through all these court things because I have an obligation to charge my clients correctly. I don't think this. I don't think this currently enacted ordinance works, but I know how it could work or I know how it doesn't work.

And you know, that's the thing too, like cut and paste. They'll say, oh, well, we took it from Chicago and we took this little piece or this little piece.

And then you have like large multi state organizations that have their own type of legislation that they want to see enacted. And they'll be like, oh, well, I took a piece there and I took a piece here. So long and short.

Chicago Amusement Tax, too, is another kind of a little bit of a trap. Cook county, then they're their own fiefdom as well. So they'll say, I have parking issues. I have, you know, my own taxes in Cook County.

So, you know, we once had someone that was interested. They were a company from Italy and they were interested in coming over and they had picked Chicago. And we're like, we love it, it's our home.

But it's incredibly difficult. You have a VAT over there, right? And that's all you do. Right.

And then you come here and you're like, wait a minute, I have the irs, I have the Department of Revenue, I have Cook County, I have the city and I have the Secretary of State. Like, can't they just fill out one form and can't they share it? You know, no such luck. So.

And under, you know, and that's like a best practice also, like understand your footprint. Right? You think you're only in Chicago or you think only someone visits there, or I don't have nexus or what creates nexus anymore.

Just kind of segue into it like a larger discussion on state tax. You know, you really have to keep up to date with where you are now, where you're availing yourself of.

You don't even have to be there anymore, necessarily where your customers are. It's just, it's just much more complicated.

Dave: 00:32:07

Yeah. And our frustration is when the city will issue, the state does this too, a nine figure assessment.

Now, I don't care how big you are, a nine figure assessment is a big assessment. And we just had one from Chicago a couple years ago. It went from nine figures to a no change letter.

Can you imagine the CFO telling the CEO and the, you know, during your quarterly reports, we might owe $100 million, but we might not. And for it to go from $100 million to zero, it makes us look good.

But at the same time, you don't want to be in that situation because it should have never been $100 million. So you're having a lot of people are feeling that if they don't give anything to the auditor the whole way. Well, no, they're not going to.

They're just going to issue these big assessments.

Natalie: 00:32:45

And the last point on that, Illinois is notorious for responsible officers. So sometimes the responsible officers will get the million dollar assessment when they're on their vacation and then you really get a call. How. What.

How does this me? Or you'll leave a company and you'll still be listed in Illinois as the responsible officer.

So lo and behold, something gets assessed and it comes to you. So, yep, check those our favorite officers are. And check, you know, if you're leaving a company that you leave being an officer as well.

Dave: 00:33:21

When we were in industry, there was a Chicago police officer who showed up on the ground floor and says, I've been instructed by the finance department to either collect all the unpaid parking tickets or come back with the officer of the company. It's amazing how quickly.

Natalie: 00:33:38

I'm sure.

Dave: 00:33:41

Yeah, so it was very.

Natalie: 00:33:44

Sometimes our tax is not personal, but when it gets to the personal level, that's when it gets really important, right?

Meredith: 00:33:51

Oh, absolutely, absolutely. Like, if you're in the tax department of a company and you don't want one of those corporate officers showing up at your doorstep saying, I got this.

Natalie: 00:34:01

Right in the mail. What is this? Yeah, exactly. So as we wrap up, is there.

Meredith: 00:34:08

Anything that you think our listeners should know or pay attention to or keep their ear to the ground on when it comes to Illinois?

Dave: 00:34:15

Yeah, and I apologize.

e department will acknowledge: 8020

Because if you put the required substance now, it's going to take a lot of time and you have to find business entities and stuff like that that goes in it. But if you do it right, they've accepted them under audit.

y some of the benefits of the: 8020

But hopefully there's some pushback on that because it is. It's good tax policy. We're not worldwide. You know, we're unitary, but we're not worldwide.

So, you know, I think the: 8020

Natalie: 00:34:59

And just from a big perspective, our Budget is due by the end of May. It currently so it's our legislative session.

We've been told and it's been talked that there isn't going to be a lot of tax things going on this, this time we have a pretty, I wouldn't say balanced budget, but with how they move things around, it can appear balanced. So we're not looking for anything.

But Illinois oftentimes floats all of these thousands of bills and then you know, the 29th of May, it's an omnibus bill that's thousands of pages that oh my gosh has like tax provision in it. We're not currently like really looking at anything. But that doesn't mean it can't happen. But that's the time to be looking at is kind of the May.

They like to get out of out of Dodge by the end of May. Sometimes it goes if it goes over. They also need more votes so they need a super majority.

Although Illinois is run by mostly Democrats, so the governor is Democrat and Senate and the Houses. But it still just adds hads an added burden that they don't like to get to. So just keep your keep listening. Things come out.

Like Dave said, Chicago has its own separate budget. They moved some things around and did some borrowing.

So it's not immediate, but they are, they have a kind of a strategic outlook that they are under. So they're going to be looking at things as well.

So just keep your ear out and you know, Department of Revenue is always coming up with kind of their new issues and what they're looking at so.

Meredith: 00:36:42

Can jump on the retail delivery fee bandwagon.

Natalie: 00:36:45

You're welcome. Right.

Dave: 00:36:46

There you go. Yeah, that's. Yeah. Yeah. I think the one area that they're going to do they will look for for revenue is the amnesty program.

,: 2018

And that would probably be this year. So it usually like August, September, like.

Natalie: 00:37:14

Something like that period or usually try to maybe do it after the filing season. So you know, kind of sales and income. Yeah, it'll be not secretary of state, so not franchise tax. They have their own separate amnesty. They have.

Yeah, they're due for one too, but we haven't heard anything about it. So.

Meredith: 00:37:35

Okay, excellent. Well, Dave, Natalie, thank you so much for your time and your expertise and.

Natalie: 00:37:45

Maybe you like it or not, but.

Meredith: 00:37:46

I'm sure your phone will ring for something. Maybe a bunch of franchise tax that our listeners are now like, this might.

Natalie: 00:37:54

Be eye opening to a bunch of taxpayers out there. Oftentimes we like that. We just like to bring up things like we started it with. We're not experts on everything at all times. Not every one of us is.

But just to give you like thoughts, it's if you're going through a transaction. Oh gosh, I think there might be something with that awful franchise tax just to get enough knowledge to like. Right. Think about things.

Dave: 00:38:17

Yeah.

Meredith: 00:38:17

Oh, absolutely.

Natalie: 00:38:18

Awareness.

Meredith: 00:38:19

Awareness. Awareness.

Natalie: 00:38:20

Exactly. Well, great.

Dave: 00:38:22

Thank you for having us. Yeah, it was a lot of fun. Thank you.

Natalie: 00:38:26

Enjoyed it.

Meredith: 00:38:27

Thank you so much. This is another episode of Saltivation. Till next time.

This podcast is for educational purposes only and is not intended, nor should it be relied upon as legal tax, accounting or investment advice. You should consult with a competent professional to discuss specifics of your situation and the applicability of the information presented.