Prairie State Wire

The Local Government Revenue Recapture Act has been enacted to ensure that local governments in Illinois, including municipalities and counties, receive accurate tax disbursements from the Illinois Department of Revenue (IDOR). The Act allows these local entities to contract with registered third parties to verify the accuracy of their tax receipts from IDOR. Additionally, it mandates IDOR to create the Local Government Revenue Recapture Certified Audit Program, addressing concerns about proper reporting and payment of local occupation and use taxes.

Under this Act, municipalities and counties can share confidential taxpayer information with a registered third party solely for verifying correct tax proceeds from IDOR. To access this financial information, the third party must meet several criteria: they must enter into a confidentiality agreement with the municipality or county as required by IDOR; have an existing contract with the municipality or county at the time of agreement; comply with conditions under Section 11 of the Retailers' Occupation Tax Act; and be registered with IDOR according to the Local Government Revenue Recapture Act. A copy of this contract must be filed with IDOR.

If a review by either a local government or a registered third party reveals potential underpayment of local retailers' or service occupation taxes by a taxpayer, they may refer the case to IDOR for audit consideration. However, there are specific situations where IDOR might exclude a taxpayer from such audits. These include cases where an audit has already been conducted or is underway, when previous referrals were deemed non-actionable by IDOR, or if just cause exists for exclusion.

When an actionable referral is submitted by a local government or third party, IDOR will check if the taxpayer is currently under audit. If not, they will notify the taxpayer about receiving an actionable audit referral. The taxpayer then has two options: engage a qualified practitioner at their own expense for a certified audit focused on specific tax liabilities or undergo an audit by IDOR.

Taxpayers must respond within 90 days in writing regarding their decision on arranging for a certified audit under this Act. If opting for such an audit, it should be completed within 60 days after responding to IDOR or within 90 days after notification by IDOR—whichever comes first. This certified audit cannot be contingent-fee based and must adhere strictly to guidelines set forth in the Local Government Revenue Recapture Act.

For taxpayers choosing to hire a qualified practitioner for completing a certified audit, penalties on any revealed tax liabilities will be abated except fraud penalties and those due on amounts collected but not remitted to IDOR.

Information about qualified practitioners and third parties involved in this process is available under provisions related to this Act.