The City of Chicago Department of Finance (“the Department”) has expanded the enforcement of its personal property lease transaction tax. Through a new Information Bulletin, the Department has offered all taxpayers not under audit review or investigation by the Department and not currently paying the tax to file a voluntary disclosure form with the Department by January 1, 2016, to receive either a full abatement of all tax, interest and penalties for past years or be required to pay only one year of back taxes, without interest and penalties, depending on the type of lease transaction at issue. Basically, the full abatement relates to failing to pay the tax on non-possessory leases of computers or computer software based on an interpretation of Exemption 11 in the tax relating to the de minimis use of computers as it was interpreted by the Department prior to the issuance of the Department’s Ruling 12 in 2015. The partial abatement (only one year of tax due) is for all other non-possessory leases of computers or computer software. This specifically includes cloud-based services, where a charge is made to a customer for the customer’s remote access and use of software, data or computer hardware by that customer over the Internet, when the terminal or device used for such remote access and use is located in the City of Chicago.
Businesses and customers possibly subject to this 9-percent tax (and not seeking to challenge it for any reason) should consider applying for the voluntary disclosure since the normal voluntary disclosure period is four years with interest.