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Update on Illinois Sales Tax Rebate Disclosure Legislation
A Policy Update last month described how the State of Illinois policy of disbursing a portion of sales tax revenues to municipalities based on the location of sales may encourage municipalities to offer sales tax rebates to retail and other "order of acceptance" businesses that locate in their borders. A recent lawsuit by the Regional Transportation Authority (RTA) and several other taxing bodies, alleging that sales tax rebates by the Villages of Channahon and Kankakee have prompted companies to establish so-called "sham offices" outside the RTA service area, brought about a legislative effort to increase the transparency of these sales tax rebate agreements.
This legislation, House Bill 3859, has been approved by the General Assembly. If signed by the Governor, it would require municipalities and counties to file reports with the Illinois Department of Revenue (IDOR) concerning sales tax rebate agreements. The bill would require municipalities and counties to file these reports within 90 days for existing agreements and within 30 days after a new agreement is executed. The reports would include:
- The name of the business and county or municipality entering into the agreement
- The location of the business within the county or municipality
- Whether the business maintains additional places of business within the state
- How the amount of sales tax to be rebated is to be determined
- The duration of the agreement
- The names of any businesses that would directly or indirectly receive a share of the rebate
- A copy of the agreement
IDOR and the county or municipality would be required to redact sales figures, the amount of sales tax collected, and the amount of sales tax rebated. This redacted information would be exempt from the Freedom of Information Act. It is unclear whether the county and municipality would redact this information prior to submittal to IDOR. Under the bill, IDOR would post the reports, excluding the copy of the agreement, to their website. IDOR would be required to update this website on a monthly basis.
While the bill requires the withholding of information on the actual public dollars at stake, HB 3859 could still increase transparency of these agreements. CMAP continues to urge the State and local governments to increase access to all available information on how taxpayer dollars are being spent in these efforts to spur local economic development.