Client Alert - Illinois Business Update
Illinois Secretary of State Announces Amnesty Program for Delinquent Franchise Taxes and License Fees
Recently, the Illinois Secretary of State announced that corporations can avoid penalties and interest due on unpaid franchise taxes and license fees. Under the Franchise Tax and License Fee Amnesty Act of 2007, the Secretary of State will forgive interest and penalties and will not institute civil or criminal prosecutions against corporations, if they pay all past due franchise taxes and license fees.
Franchise Taxes and Annual Reports
Illinois requires all domestic and foreign corporations to pay a tax on the corporation's paid-in capital. An initial tax payment must be made at the time of authorization at a rate of 1.5 percent of paid-in capital. Annual reports are required thereafter on a corporation's anniversary date, and franchise taxes of 1 percent of paid-in capital must be paid. A tax is also imposed on the net increase in paid-in capital at a rate of 1.5 percent in the year of an increase.
If domestic corporations fail to pay the initial tax, the Secretary of State imposes interest at the rate of 2 percent per month. A penalty is also assessed if a domestic corporation fails to file an annual report or to report a change in paid-in capital at a rate of 10 percent of the tax due. Interest is also imposed at a rate of 2 percent per month. Foreign corporations that fail to pay required taxes are assessed a penalty at whichever is greater: 10 percent of the initial franchise tax, or $200 plus $5 per each month the corporation transacts business in Illinois without authorization.
The Amnesty Program
The Corporate Business Tax Amnesty Program runs from February 1, 2008 through March 17, 2008. To take advantage of the program, corporations must file petitions for amnesty, and pay all past due franchise taxes and license fees. In order to be eligible, corporations may not be a party to pending civil or criminal litigation, or the subject of a criminal investigation concerning franchise taxes or license fees.
In addition, if corporations have failed to report increases in paid-in capital, they will only be required to pay the taxes that would have been due for the most recent four year period, instead of the usual seven year period. All penalties and interest will be waived. Only corporations are permitted to participate in the amnesty program - limited liability companies, limited partnerships, limited liability partnerships, and non-for-profit corporations are not eligible.
If you would like more information about the amnesty program, or have questions about corporate governance issues in general, please contact Mr. Gonzalez at 312-558-9779 or at egonzalez@elvisgonzalezltd.com
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