Jurisdictions across the country typically offer Voluntary Disclosure Agreements to taxpayers with outstanding liabilities. They are essentially compromises between the Departments of Revenue and the taxpayer in which each side gives some and gets some. Taxpayers are allowed to pay their existing liabilites at somewhat favorable terms, including a limitied look back period (three to four years depending on the jurisdiction) and abatement of penalties. In exchange, taxing authorities get money they didn't know they were missing, and a new taxpayer contributing to their revenue.
The City of Chicago is starting to crack down on certain unpaid taxes, and under their current VDA offering, taxpayers considering disclosing unpaid lease tax liability should do so quickly. Chicago is offering a limited amnesty for taxpayers who file a lease tax VDA application by January 1, 2016. This program includes special benefits not normally available through a typical City of Chicago VDA. The program is particulalry appealing for lessors and lessees that earn or spend a lot on remotely accessed software in Chicago. The benefits include:
- No liability for tax, interest, or penalties related to charges for nonpossessory computer leases that qualified for Exemption 11 prior to the Department’s issuance of Ruling #12. Specifically, this relates to remotely-accessed software where charges are predominantly for information transferred.
- A limited one-year lookback period for taxable cloud software (e.g., “nonpossessory computer leases”) and complete abatement of penalty and interest charges for this period.
- The terms of the City’s standard voluntary disclosure program will apply for all other leases (e.g., possessory leases). In other words, for standard VDAs, up to a four-year lookback period for tax and interest liability and waiver of penalty applies.
The program is open to any provider or customer who is eligible for participation in the city’s standard VDA program. This excludes any taxpayer who is either currently under audit or has received a written notice of tax audit or investigation.
Other recent “Illinois (IL)” posts by William Seitz, ESQ:
- Business Use Tax in Illinois and Other States: Part 1 - The Basics
- IL Software Taxability Rules Complex - But Can Provide Refund Opportunities
- Chicago Lease Tax Amnesty Option: Deadline Approaches!
- Illinois Clarifies Tax on Shipping: You Can Save if Pick-up Option Offered
- The “411” on the “LTT”: Chicago’s Expanded Lease Transaction Tax