Businesses' Private Tax Data in Jeopardy

Date: May 06, 2016 Last Edit: May 18, 2016

The Illinois Senate is considering legislation that would allow local government units to give a businesses’ confidential tax information to a for-profit third-party company. 
SB 2933 seeks to require the Illinois Department of Revenue (IDOR) to disclose sales tax information of businesses located within municipalities directly to independent third-parties hired by such municipalities.

This would include third-parties hired on a contingency-fee basis to challenge tax allocation decisions made by Illinois Department of Revenue. 

Currently, home rule units of government and municipalities that impose their own sales tax, receive the following information from IDOR: business name, business address, the amount sales tax distributed to the municipality from sales at that business as part of the municipality’s 1% share of the 6.25% 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 the Department; and a listing of all registered businesses located within the municipality listed by account ID number and address. 
This information is protected by strict confidentiality requirements imposed by IDOR. This is necessary because tax information is highly sensitive. 
NFIB/Illinois is part of a coalition that opposes SB 2933 for the following reasons:
•    Fairness eliminated. Under the law, IDOR is the administrator of Illinois tax policy including the distribution of taxes earmarked by law for municipalities. These distributions are made pursuant to formulas established in law. Allowing municipalities to employ third-party contingent-fee consultants to challenge these determinations would thwart the ability of IDOR to carry out this responsibility efficiently. 
•    Protections eliminated. Taxpayers subject to audit by IDOR receive protections. Additionally, IDOR notifies taxpayers if they missed deductions, credits, refund claims, etc. Third-party contingency fee firms have no such incentive as that is counter to their business plan and how they get paid. 
•    Consistency eliminated. Having an impartial government agency uniformly enforcing tax law ensures consistency of interpretation and application. Enabling private firms or individuals motivated by profit will lead to self-serving interpretations and applications costing employers unnecessary legal and accounting expenses to correct the claims of the contingency-fee firms. 
•    Local tax revenues will not increase. If errors in allocating taxes are found outside the existing IDOR process, municipalities may sue each other for the misallocated tax revenue. This would be a zero-sum game, except for contingency fees paid, leading to an overall reduction in tax revenues. 
•    Tax professionals do not support. Contingency-fee audit arrangements are opposed by every reputable neutral policy entity including the American Institute of CPA’s, Council on State Taxation, Tax Executives Institute, National Conference of State Legislators, and the entities listed below. 
•    Simply not needed. There is no reason local governments need access to this type of information. IDOR provides assistance to local governments, free of charge, to help them ensure they are receiving the correct tax. 

Related Content: Small Business News | Illinois

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