Reed Smith’s State Tax Group has deep experience in Illinois tax matters in all arenas, whether legislative, administrative, or transactional, or in trial, appellate and supreme courts. We cover the gamut of Illinois taxes, including business income taxes, sales and use taxes, and telecommunications and other excise taxes, as well as other governmental agency charges and fees, real estate transfer taxes, local ad valorem property taxes, and unclaimed property examinations.
Our broad experience allows us to craft the right solution for our clients, whether through legislative, regulatory, or other administrative representation; in litigation in local and state administrative bodies; and in the state and federal courts. Our lawyers draft proposed legislation, comment on proposed regulations, obtain private letter rulings, and sometimes just know the right person to contact to address our clients’ concerns.
Our litigation inventory includes consumer class action defense, protest and refund litigation in state courts, actions in federal court to preempt state tax authorities, administrative protests, other refund litigation in state courts, and appellate representation in the state and federal courts of appeal. In addition, our Illinois lawyers have extensive experience in transactional matters, from consulting on operations-related transactions, to mergers and acquisitions, both in planning and due diligence. We also assist clients in the analysis and documentation required to account for uncertainty in income taxes pursuant to FIN 48.
Here is a brief summary of a few of the Illinois issues and opportunities we are working on for our clients:
Nexus for Income Taxes
- Our lawyers are challenging the assertion of nexus over companies whose sole contact with Illinois is the use of their specialized tooling by an in-state contract manufacturer.
- Our lawyers are challenging the assertion of nexus over financial organizations whose only contact with Illinois is the use of an in-state lock-box for processing customer payments.
Residency for Income Taxes
- Our lawyers are challenging the assertion of residency and taxation of 100 percent of an out-of-state client’s income, based on the maintenance of private investment activities and a second home in Illinois.
- Our lawyers are challenging the assertion of residency and taxation of 100 percent of a client’s income for periods during which the client was an expatriate, and objectively intended to reside overseas and not return to Illinois for other than transitory purposes.
- Our lawyers have challenged the constitutionality of resident status assigned by the Illinois Income Tax Act to trusts who lack any current contact with Illinois, including any contact by beneficiaries of the trust, but which became irrevocable at a time when the grantor or decedent was resident or died in Illinois.
Business vs. Non-business Income
- Our lawyers are challenging the state’s use of the “cessation of business” exception to the business income functional test, retroactively, to years when the state challenged the validity of that exception.
- Our lawyers are challenging the state’s characterization as business income of gain from a disposition of a business segment through an IRC Section 338(h)(10) election, arguing that the client, as a matter of law, triggered non-business income under the “cessation of business” exception to the business income functional test.
Defense of Class Action Refund Litigation
- Our lawyers are representing clients that are statutory collection agents of a state fee against claims by a putative class of indirect fee payers who are contesting the validity of the state’s fee, and are seeking refunds from our clients.
- Our lawyers have previously been involved in the defense of consumer class action refund cases regarding telecommunications taxes, sales taxes on medical appliances, and environmental solid-waste disposal fees.
- Our lawyers are representing clients in Illinois Whistleblower Protection Act litigation claiming that reverse false claims were made, and treble damages and fines were triggered, when not collecting Illinois use tax on Internet sales to Illinois purchasers.
- Our lawyers are representing clients pursuing an Illinois sales tax exemption as a cooperative hospital services organization formed by exempt hospitals, and providing clinical laboratory services to its members.
- Our lawyers are representing clients who are claimed to have over-collected taxes from finance leasing organizations in the sale of automobiles to organizations tendering advance trade-in credit certificates.
- Our lawyers are representing developers of military housing in the federal district and appeals courts, claiming that the federal Military Housing Privatization Initiative law preempts and defeats the efforts of a local tax authority to add the developed parcels to the tax rolls for ad valorem tax assessment.
- Our lawyers are representing medical care organizations in their efforts to obtain real estate tax exemptions.
- Our lawyers are representing commercial property owners in local ad valorem tax valuation protests and appeals.
Illinois State Tax Intelligence
As part of our full service for clients with Illinois tax, we have a unique, fully searchable database of unpublished authority, including administrative decisions, unpublished trial court decisions, and unpublished legal briefs. We also maintain regular and direct lines of communication with high-level state officials involved in all areas of Illinois taxation.