 |
Home | Search | Browse | About IPO | Staff | Links |
|
Home | Search | Browse | About IPO | Staff | Links |
|
Judicial Rulings  Illinois Supreme Court Combined reporting method The issue in the case, Caterpillar Tractor Co. v. Daniel J. Lenckos, Director of Revenue, involved deductions taken by Caterpillar for foreign taxes when computing Illinois taxes on the combined income of the unitary group; but 16 corporations intervened in the suit to challenge the legality of the combined reporting method itself. The combined or unitary reporting method determines the state income tax for a corporation subsidiary in Illinois on a basis compared to the worldwide earnings of the entire corporation. Each subsidiary is looked at, not as a separate company, but as a unitary business group when computing taxes. The intervenors contended that the Illinois Income Tax Act does not provide for "reporting as a member of a unitary business group and authorizes only the reporting of the separate taxable income of a corporation," thus showing "a legislative intent to bar the unitary or combined reporting method." However, Justice Daniel P. Ward, in speaking for the high court, said that the purpose of the combined reporting method is to "permit the fair determination of the portion of business income that is attributable to business activity in Illinois by the reporting member of a unitary group. ..." He added that the legislature permits the substitution of one computing method for another if it provides an accurate measure of taxable business activity. In affirming the Peoria Circuit Court and the 3rd District Appellate Court decisions, the high court said, "The purpose of the combined methods is solely to permit an accurate determination of income attributable to and taxable by Illinois in the case of a member of a unitary business group." The court pointed out that its decision on the legality of the unitary apportionment method would not "decide whether each of the 16 [intervening] corporations may properly be regarded as a unitary business group" to which the method might be applied. The court also affirmed the judgment of the appellate court that Caterpillar could not take a foreign tax credit on its federal return in order to reduce its federal tax liability and also take a deduction from the federal taxable income reported on the state return so as to reduce state taxable income. Adoption records Justice Thomas J. Moran, in speaking for the court, said, "We believe the adoptee does not have a fundamental right to examine his adoption records." He noted that adoption records can be opened by a court order in cases of physical or psychological needs. Reclassification The ruling, in the case Central Illinois Light Co. v. J. Thomas Johnson, Director of Revenue will require Fulton County to refund to CILCO $1.7 million from its 1980 taxes. It also represents a loss of approximately $150 million local governments hoped to gain if the reclassification was upheld. Justice Daniel P. Ward said in the court opinion, "... property . . . classified and taxed as personalty prior to January 1, 1979, may not, under the Replacement Tax Act [Ill. Rev. Stat. 1979, ch. 120, sec. 499.1], now be reclassified as real property for purposes of taxation." He said, "It is clear it was the legislature's intent ... to 'freeze' classifications of property that had been made by assessing officials pursuant to agreements such as that involved here." However, the court did not address contentions from the Department of Revenue that any new machinery or equipment or any other property obtained, or any new utility construction completed, after January 1, 1979, be classified as real property. Ward said that this issue should be left "for another day" since it had not been brought up in this case. Some public felons The ruling coincides with a recent decision by the General Assembly Retirement System to allow three former representatives to collect pension benefits after they were convicted of crimes connected with their duties as public officials. At issue in the case is a provision in the Illinois Pension Code that denies pension benefits to any person "convicted of any felony relating to or arising out of or in connection with his service as an employee" and applies to "all future entrants entering service subsequent to July 11, 1955 . . ." (Ill. Rev. Stat. 1977, ch. 108 1/2, sec. 9-235, 12-191). In the cases, Henry Arnold v. The Board of Trustees of the County Employees' Annuity and Benefit Fund of Cook County and Vito Abbinanti v. Park Employees' Annuity and Benefit Fund, both Arnold and Abbinanti said that despite convictions relating to their public jobs, they are entitled to receive benefits because both had entered into their respective retirement programs before 1955 when the statute took effect. Justice Thomas J. Moran, in speaking for the high court, agreed that "... the intent of the legislature [was] to make the felony forfeiture provision applicable only to those employees 'entering service after July 11, 1955.'" Moran also refuted the contention of the annuity boards that the felony forfeiture provision applies to all persons enrolled in compulsory pension plans regardless of the starting date of employment. Moran pointed out that the language of the statute is such that "the provision [is] applicable only to those persons entering public service after 1955 regardless of the type of plan in which they were enrolled." The decision of the high court overturned the decision of the Cook County Circuit Court and affirmed that of the 1st District Appellate Court. □ 34/May 1981/Illinois Issues |
|
|