The Illinois Supreme Court held that a life insurance company was subject to a double interest penalty for additional income taxes that were assessed following federal adjustments made after an amnesty period had ended. The court found that the reference to payment of “all taxes due” in the amnesty provision meant “taxes that were properly reportable at the time the initial tax return was required to be fi led, rather than taxes known to be due during the amnesty period.” Therefore, the court held that because the company “failed to pay those taxes during the amnesty period, it became liable for the 200% interest” penalty imposed by the Illinois Department of Revenue. The court also held that the imposition of the 200-percent interest penalty did not violate the company’s substantive due process rights.
The Indiana Tax Court held that the income a corporation received as a partner of a general partnership doing business in Indiana was income derived from sources within Indiana. The corporation argued that, under Indiana law, receipts in the form of “dividends from investments” are attributable to Indiana only if a taxpayer’s commercial domicile is in Indiana. The court determined that the “critical question” was whether the income the corporation received as a partner had the character of operational income or investment income because, if it was operational income, it was not income in the form of “dividends from investments.” The court held that “the mere fact that” the corporation was a partner in a general partnership gave its income from the partnership the character of operational income and, therefore, it constituted income derived from sources within Indiana and was taxable. The court also found that the corporation’s “lack of control” by reason of its minority interest was insufficient to show that it did not participate in the management of the partnership and, thus, that it was a mere passible investor similar to a limited partner.
Originally published in Corporate Business Taxation Monthly on September 3, 2013.
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