SB3397 98TH GENERAL ASSEMBLY

LRB098 18944 HLH 54091 b

98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
SB3397

Introduced 2/14/2014, by Sen. Toi W. Hutchinson

SYNOPSIS AS INTRODUCED:

35 ILCS 120/6d new

Amends the Retailers' Occupation Tax Act. Provides that a retailer is relieved from liability for any tax that becomes due and payable if the tax is represented by amounts that are found to be worthless or uncollectible and have been charged off in accordance with generally accepted accounting principles on and after July 1, 2014. Provide for a deduction if the retailer had previously paid such a tax. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Retailers' Occupation Tax Act is amended by adding Section 6d as follows:

(35 ILCS 120/6d new)

Sec. 6d. Deduction for uncollectible debt.

(a) A retailer is relieved from liability for any tax that becomes due and payable if the tax is represented by amounts that are found to be worthless or uncollectible and have been charged off in accordance with generally accepted accounting principles. A retailer that has previously paid such a tax may, under rules and regulations adopted by the Department, take as a deduction the amount charged off by the retailer. If these accounts are thereafter in whole or in part collected by the retailer, the amount collected shall be included in the first return filed after the collection, and the tax shall be paid with the return. For purposes of this Section, the term "retailer" includes a retailer's affiliate.

(b) With respect to the payment of taxes on purchases made through a private-label credit card:

(1) If consumer accounts or receivables are found to be worthless or uncollectible, the retailer may claim a deduction on a return, or obtain a refund of, the tax remitted by the retailer on the unpaid balance due if:

(A) the accounts or receivables have been charged off as bad debt on the lender's books and records on or after July 1, 2014; and

(B) a deduction was not previously claimed and a refund was not previously allowed on that portion of the accounts or receivables.

(2) If the retailer or the lender subsequently collects, in whole or in part, the accounts or receivables for which a deduction or refund has been granted under paragraph (1), the retailer must include the taxable percentage of the amount collected in the first return filed after the collection and pay the tax on the portion of that amount for which a deduction or refund was granted.

(3) The deduction or refund allowed includes all credit sale transaction amounts that are outstanding with respect to the specific private-label credit card account or receivable at the time the account or receivable is charged off, regardless of the date the credit sale transaction actually occurred.

(4) A retailer may use one of the following methods to determine the amount of the deduction or refund:

(A) an apportionment method to substantiate the amount of tax imposed under this Act which is included in the bad debt to which the deduction or refund applies; this method must use the retailer's Illinois and non-Illinois sales, the retailer's taxable and non-taxable sales, and the amount of tax the retailer remitted to this State; or

(B) A specified percentage of the accounts or receivables giving rise to the deduction or refund, which is derived from a sampling of the retailer's or lender's records.

(5) For purposes of computing the deduction or refund, payments on the accounts or receivables shall be allocated based on the terms and conditions of the contract between the retailer or lender and the consumer.

(c) For purposes of this Section:

"Lender" means a person who owns or has owned a private-label credit card account or an interest in a private-label credit card receivable that:

(1) the person purchased directly from a retailer who remitted the tax imposed under this Act or the retailer's affiliates, or transferred from a third party;

(2) the person originated pursuant to that person's contract with the retailer who remitted the tax imposed under this Act or the retailer's affiliates; or

(3) is a retailer's affiliate of a person described in paragraph (1) or paragraph (2), or an assignee or other transferee of such person.

"Private-label credit card" means a charge card or credit card that carries, refers to, or is branded with the name or logo of a retailer. The deduction or refund provided in this section applies only to purchases from the retailer whose name or logo appears on the card and purchases from the retailer's affiliates or franchisees.

"Retailer's affiliates" means an entity affiliated with the retailer under 26 U.S.C. 1504, or an entity that would be an affiliate under that Section had the entity been a corporation.

Section 99. Effective date. This Act takes effect upon becoming law.