Businesses' Private Tax Data Safe--For Now

Here’s a look at 6 key issues with this NFIB-opposed bill.

Businesses’ Private Tax Data Safe—For Now

Legislation that would have put businesses’ confidential tax information in jeopardy failed in the Illinois Senate last month, but the issue could resurface. The measure, Senate Bill 2933, fell two votes short of the 30 it needed to pass, and the sponsor could call it for a vote one more time under a parliamentary procedure called “postponed consideration.”

SB
2933 would allow the Illinois Department of Revenue to disclose businesses’
confidential sales tax information to independent, for-profit third parties
hired by municipalities, including firms hired on a contingency-fee basis to
challenge tax allocation decisions made by IDOR.

 The
information at stake:

• Business
  name
• Business
  address
• The
  amount of sales tax distributed to the municipality from sales at that
  business as part of the municipality’s 1 percent share of the 6.25 percent
  state sales tax
• The
  amount of sales tax distributed to the municipality from sales at that
  business as the result of any locally imposed sales tax administered by
  IDOR
• Listing
  of all registered businesses located within the municipality, by account
  ID number and address

IDOR
currently provides this information to home rule units of government and
municipalities that impose their own sales tax, and the data is protected by
strict confidentiality requirements due to its highly sensitive nature.

 NFIB
Illinois is part of a coalition opposing SB 2933. Here’s a look at the key
problems with the legislation:

1. It’s unfair. IDOR, by law, distributes the taxes earmarked for municipalities
   according to established formulas. Allowing third-party consultants to
   challenge these determinations would interfere with IDOR’s lawful
   responsibility.
2. It eliminates taxpayer protections. IDOR notifies taxpayers about
   any missed deductions, credits, and refund claims, but third-party firms
   have no incentive to do so because it would be counterproductive to how
   they get paid.
3. It would be inconsistent. Having IDOR, as an impartial government agency, enforce
   tax law ensures consistency in interpretation and application. Getting
   private, for-profit firms involved would mean inconsistent and
   self-serving interpretations and applications, which would cost employers
   unnecessary legal and accounting expenses to correct the claims of
   contingency-fee firms.
4. It would not increase local tax revenue. If tax allocation errors are
   found outside the existing IDOR process, municipalities could sue each
   other for the misallocated revenue. This would be a zero-sum game, except
   for contingency fees paid, leading to an overall tax revenue reduction.
5. It’s not supported by tax professionals. Every reputable neutral policy
   entity—including the American Institute of CPAs, Council on State
   Taxation, Tax Executives Institute, and National Conference of State
   Legislators—opposes contingency fee audit arrangements.
6. It’s unnecessary. IDOR already provides free assistance to local
   governments to ensure they are receiving the correct tax revenue, so
   there’s no reason third-party firms need access to businesses’ private tax
   data.