Executive Report

Attorney General Opinions

Advantage to foreign corporations?
A FOREIGN [to Illinois] corporation is not required to reduce its paid-in surplus in the same manner as prescribed for Illinois corporations under section 60a of the Business Corporation Act, according to Atty. Gen. William J. Scott. ["Paid-in surplus" means a surplus received by a corporation from capitalization of stock. It is basically a technical accounting term used for computing fees and franchise taxes.] Foreign corporations may reduce their paid- in surplus in any manner permitted by the laws of the state or country under which they are organized, according to the attorney general. The August 18 opinion was given in reply to a query from Secy. of State Alan J. Dixon in regard to the Swingline Corporation of Delaware, which is authorized to do business in Illinois.

Swingline, a manufacturer of office equipment, formed a wholly-owned subsidiary corporation in December 1975 called the Wilson Jones Company and "spun-off approximately $84 million of its paid-in surplus to the new subsidiary. This effectively divided franchise tax payments between the two firms. Although that "spin- off might not have been permissible under Illinois law, Scott said in his opinion that the secretary of state must accept a report submitted under the Business Corporation Act (///. Rev. Stat. 1975, Ch. 32, sec. 157.119) from the subsidiary corporation and could not instead require Swingline to pay franchise taxes on its original paid-in surplus figure of $200 million.

Dale Reynolds of the corporation division of the Secretary of State's Office said, "We have given the opinion to our counsel and as of now we don't expect to comply with it. We feel it would give foreign corporations an unfair advantage." Legal counsel Bob Brodt explained further that "the attorney general may have overlooked a section of the Business Corporation Act which says that foreign corporations may not have greater rights or privileges than a domestic corporation" (///. Rev. Stat. 1975, Ch. 32, sec. 157.103).

Shawn Denny of the Attorney General's Office — and the lawyer who drafted the Swingline opinion — stood by it. Denny said he did not believe that section 103 of the Business Corporation Act, which says that foreign corporations shall "enjoy the same, but no greater, rights and privileges as a domestic corporation," applies to internal management of foreign corporations. Denny says he interprets a reduction of paid- in surpluses to be an "internal affair," which the state may not regulate.

Spokesmen in the Secretary of State's Office estimate the attorney general's interpretation could cost the state upwards of $l million in franchise taxes annually (S-1287).

The bad news and good news
Somebody goofed. Because the legislature failed last spring to specify rates, Illinois community colleges may not receive credit hour grants for fiscal 1978, which began last July 1. The attorney general ruled that unless the legislature acts to establish a grant rate for fiscal 1978, the Illinois Community College Board will have no authority to distribute money appropriated for local districts by H.B. 2417 — now P.A. 80-59.

Board members say the problem of authorization arose because of an unpopular amendment that was tacked on to a grant rate bill in the House. When the Senate refused to concur in the amendment — which would have allowed districts to levy certain taxes without referendum — the bill died. Yet there is no cause for alarm, according to Jim Howard, deputy director of the Illinois Community College Board, "I'm quite sure there will be a rate bill and it will pass," said Howard, in reference to the fall veto session of the General Assembly.

The good news for community colleges is that the minimum average grants for fiscal 1977 are $17.61 per semester hour, and all districts are entitled to this amount regardless of last year's appropriation since a $17.61 minimum grant for fiscal 1977 is spelled out in the Public Community College Act (///. Rev. Stat. 1976 Supp., Ch. 122, sec. 102-16) (S-1293).

Opinions in brief

Auctioneers aren't exempt from sections 24-3 and 24-4 of the Criminal Code, which sets restrictions upon the sale and delivery of firearms and requires sellers of concealable firearms to keep gun registry records. Under Illinois statutes auctioneers qualify both as "sellers" and "deliverers" when auctioning weapons, therefore they must comply with provisions designed "to insure that firearms do not fall into the hands of persons not competent to handle them" (S-1291).

The lease of a county building to a not-for- profit corporation for use as a dormitory for a junior college is all right under the Illinois Constitution since such use qualifies as a "public purpose." "This public purpose is served whether done directly by the community college board or indirectly through a not-for-profit foundation," said the attorney general (S-1288).

Income tax case files may properly be examined by outside consultants to the Illinois Department of Revenue for the purpose of improving operations of the department's Conference and Hearings Division. Although examination by such consultants for an "official purpose within the Department" is allowed by the confidentiality provision of the Illinois Income Tax Act, the consultants must be carefully supervised to insure that they do not misuse the information (S-1289).

Records of soil and water conservation districts are under the jurisdiction of the appropriate local records commission. "Such districts are municipal corporations as contemplated by the Local Records Act (///. Rev. Stat. 1975, Ch. 116, sec. 43.103)," said the opinion (S-1290).

Fees collected by a clerk of the circuit court are to be deposited with the county treasurer. This requirement is rooted in statutory law, not constitutional, since circuit court clerks aren't covered by the Illinois Constitution of 1970 under provisions dealing with local government fees-- section 9(a) of Article VII. In addition, clerks of circuit courts are mandated to collect fees for marriages in court (S-1292)

30 / November 1977 / Illinois Issues


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