Illinois Governor Signs into Law Revisions to the Uniform Penalty and Interest Act.

On January 15, 2005, Illinois Governor Rod Blagojevich signed into law P.A. 93-1068, amending the late payment penalties imposed under the Uniform Penalty and Interest Act (UPIA).

As stated in the act for returns due on and after January 1, 2005, a penalty shall be imposed for late payment or underpayment at the same 2% and 10% rules applicable for the tax period 2004, however, the 10% penalty is applicable for a period of 30 days after the due date of the return and prior to the date the Department has initiated an audit. Once the Department has initiated an audit, the penalty will be imposed at 20%, providing that the penalty shall be reduced to 15% if the entire amount due is paid not later than 30 days after the Department has provided the taxpayer with an amended return. The Department has the authority to rescind the 15% reduction if the taxpayer makes a claim for refund or credit of the tax, penalties, or interest determined to be due upon audit, unless the claim is filed pursuant to Section 506 of the Illinois Income Tax Act or to claim a carryover of a loss or credit.

The State of Illinois’ ability to rescind the discounted penalty also could reach to the taxpayer’s ability to make an appeal to the Board of Appeals. Essentially, a taxpayer may compromise the 5% reduction in penalties if appealing an audit determination. (Illinois Department of Revenue, 35 ILCS 735/3-3 as amended by P.A. 93-1068, amended January 15, 2005)

Posted on February 14, 2005