Final Order in the Cook County Non-Titled Personal Property Use Tax Litigation Spells Out Standards for County To Process Claims for Refund

On December 23, 2014, the Final Order was entered in Reed Smith LLP v. Zahra Ali, 2014 IL App (1st) 13246-U, Aug. 4, 2014. (See our prior Tax Alerts from September 17, 2014, August 5, 2014, October 8, 2013, July 24, 2013, June 24, 2013, and May 30, 2013.) Having previously ruled that the county cannot assert the “voluntary payment” defense against any claim for refund (i.e., it was not a requirement that the payments be made “under protest”), the Circuit Court approved an Order that directs the county to post refund forms, a copy of the appellate court decision invalidating the tax, and a copy of the Final Order on the Cook County Department of Revenue web page: The Final Order provides that all timely filed claims for refund properly filed under the Cook County Uniform Penalties, Interest and Procedures Ordinance (“UPIP”) be paid (and not by letter of credit or offset against other taxes), and it lists six grounds upon which a claim for refund may be denied: (i) untimely filing (more than four years from the date of payment); (ii) the identity of the claimant does not match the taxpayer; (iii) the wrong claim forms were used, after being provided the correct forms by the county; (iv) the amount of the claim exceeds the amount of the tax paid, but denying only the excess amount; (v) the original check payment of the tax was not honored by the financial institution upon which it was drawn; and (vi) the claim was previously paid. Even in such events, the Final Order places the burden of proof on the county in any claim denial proceeding, and the court that invalidated the tax retains jurisdiction over any claim denial appeals. In exchange for these concessions, Reed Smith withdrew a pending motion for sanctions or fees.

Although filing originally in its own right, and later on behalf of the Chicagoland Chamber of Commerce, Reed Smith was able to preliminarily enjoin the Cook County Non-Titled Personal Property Use Tax (the “Use Tax”) (projected to bring in at least $15 million to the county) from being collected from and enforced against all taxpayers, and then was able to permanently enjoin the enforcement of the Use Tax once it was declared invalid. This last Order assures that every taxpayer that filed returns and paid the Use Tax can file a claim for refund with confidence that a full refund will be paid without administrative resistance and expense.