Tax Decoded | Summer 2020
Understanding Your Influence on Illinois Tax Law
For CPAs wanting to provide input into Illinois tax rules, start by understanding how they are adopted.
Keith Staats, JD
Executive Director, Illinois Chamber Tax Institute
Deciphering Today's State & Federal Tax Law
When we try to decode an Illinois income, sales, or excise tax issue, we review the law. But a
critical step in gaining a complete understanding of a tax issue and why it exists is reviewing
the administrative rules promulgated by the Illinois Department of Revenue (IDOR).
The Illinois General Assembly routinely enacts statutes that set forth the broad parameters
of a tax, exemption, or credit, and grants IDOR authority to provide guidance on the tax
issues through rulemaking. You won’t necessarily be able to stop there, though, because
depending on the issue, the Illinois Department of Commerce and Economic Opportunity
(IDCEO) also has rules on the various tax credits and incentives programs that it administers.
Further, local taxing authorities—such as the City of Chicago and Cook County—have their
own versions of “rules” for taxes that they administer and collect. However, units of local
government are not subject to the Illinois Administrative Procedure Act (IAPA), and decoding
the rule-like policies and procedures of local governmental units is a topic for another column.
Practitioners need to understand the procedures for rulemaking mandated by the IAPA.
Important parts of this knowledge are the ways in which practitioners and members of the
public, and their representatives, have input into the rulemaking process and can influence
the substance of rules adopted by state agencies.
Just as the public can lobby the Illinois General Assembly to shape law, the public can lobby
the agencies that promulgate tax rules and comment on rulemaking proposals. IDOR also
provides additional informal access to practitioners and other taxpayer representatives
outside of the formal requirements of the IAPA in the form of advance access to draft
versions of rules to members of the Director’s Advisory Group.
The IAPA defines the term “rule” as “each agency statement of general applicability that
implements, applies, interprets, or prescribes law or policy.” IDOR rulemaking is subject to
oversight, both by members of the public and a bipartisan, bicameral committee of the
Illinois General Assembly, the Joint Committee on Administrative Rules (JCAR).
The IAPA requires all proposed and adopted rules to be published in the Illinois Register,
which is published in print and online each Friday morning by the Illinois secretary of state.
The secretary of state is also charged with maintaining the official database of administrative
rules. A version of this database is maintained online by the Illinois General Assembly, and
the IDOR also maintains copies of the tax rules that it administers and enforces on its
website (although I caution in my experience the IDOR site is not updated as quickly).
Here are the three ways in which an agency, such as the IDOR, can
adopt a rule:
- Emergency Rulemaking: Emergency rules are adopted and
effective immediately to address a situation that reasonably
constitutes a threat to the public interest, safety, or welfare.
Emergency rules are effective for not longer than 150 days.
- Peremptory Rulemaking: Peremptory rules are required as a
result of federal law, rules, and regulations, a court order, or a
collective bargaining agreement that precludes compliance with
the general rulemaking requirements and precludes the exercise
of discretion by the agency as to the content of the rule.
Peremptory rules are effective immediately upon filing with the
secretary of state.
- General Rulemaking: The general, or normal, rulemaking
process commences with the initial publication of a proposed
rulemaking in the Illinois Register, which begins the first notice
and comment period that lasts for no less than 45 days from the
date of publication. The IDOR website maintains an up-to-date
list of all proposed rulemakings and their status.
HAVING YOUR VOICE HEARD
During the first notice period, members of the public may submit
comments on proposed rules to the agency that proposed the
rulemaking. Members of the public may also require a public
hearing on the proposed rules. If the hearing request is made within
14 days of the initial publication of the rulemaking by 25 members
of the public, an association with a minimum of 100 members, or by
an affected unit of local government, a hearing must be held.
At the end of the first notice period, an agency may commence the
JCAR review process by filing its “second notice” document with
the JCAR. The second notice filing must include all public
comments received during the first notice period and the agency’s
evaluation of those comments. The second notice filing must detail
any changes made to the proposed rulemaking during the first
notice period and the agency’s rationale for those changes.
Generally, the second notice filing is seen only by the JCAR and its
staff unless requested by a member of the public. I generally
request copies of second notice filings for rulemakings I
commented on. In the interest of transparency, the IDOR has begun
publishing copies of second filings on its website.
The second notice period may last for a maximum of 45 days,
unless extended by agreement of the agency and the JCAR. During
the second notice period, the JCAR staff review the rulemaking to
determine whether the agency complied with the IAPA’s procedural
requirements, whether there is statutory authority for the
rulemaking, and whether the agency has satisfactorily addressed
issues raised by the public during the first notice period.
Members of the public also can file comments and concerns with
the JCAR’s committee members and staff. Because time is short for
the second notice review, I often file copies of my comments with
the JCAR staff when I file comments with the IDOR.
After the review of the agency’s second notice filing, the JCAR staff
submits its recommendations to the committee for consideration at
its monthly meeting. The committee can vote to object to the
rulemaking on various grounds. A typical objection is that the
agency exceeded its statutory authority with respect to all or a
portion of the rulemaking, or that the agency did not properly follow
the IAPA’s procedural requirements. The committee also can object
that the agency has not properly considered the impact of the
rulemaking on small businesses. The agency is required to respond
to these objections before adopting the rule and can agree to
modify the rule or adopt the rule despite the objection.
In certain situations—if the rulemaking constitutes a serious threat
to the public interest, safety, or welfare—the JCAR has authority to
block the adoption of a rule by a three-fifths majority vote. In recent
years, the JCAR has acted with some regularity to block the
adoption of rules. If the JCAR has not voted to block the rulemaking,
the JCAR review is concluded, and the agency is free to adopt the
rule. The agency then submits the adopted rule to the secretary of
state for publication in the Illinois Register along with a copy of the
JCAR certification of no objection or the agency’s response to any
advisory objections. The IAPA requires the rulemaking process from
initial publication to adoption to be completed within one year.
Bottom line: Now that the process is decoded, if you see a
proposed rule that you don’t like, know that you have the
opportunity to provide input and influence its modification before
it becomes effective.