New and Improved Illinois Tax Amnesty Law: Creating Pavlov's Taxpayer?

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For the second time in seven years, Illinois will ring the dinner bell and entice taxpayers to show up for another helping of tax relief in the form of a tax amnesty program for all taxes collected by the Illinois Department of Revenue ("the Department"). Amendments to the Tax Delinquency Amnesty Act (the "TDAA" and the "New Amnesty Law") made by Senate Bill 377 were sent to the Governor for his signature on June 25, 2010. The New Amnesty Law will become law in 60 days (on August 24) unless the Governor signs or vetoes the bill at an earlier date. The Governor has previously expressed concern about the impact of recurring amnesties on voluntary tax compliance, but, with Illinois having recently been referred to by a New York Times writer as "Greece by the Lake," the State's budget woes may outweigh otherwise valid policy concerns.

Under the New Amnesty Law, the Department will administer an amnesty program from October 1, 2010 through November 8, 2010 (a period a week shorter than the last Illinois amnesty program in 2003) for any taxable period ending after June 30, 2002 but prior to July 1, 2009. As was the case under the 2003 amnesty program, a payment of tax during the amnesty period is rewarded with a full abatement of interest and penalties, but failure to pay the tax amounts owed to the Department during the amnesty program will result in imposition of penalties and interest at 200 % of the otherwise applicable rates.

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