Illinois Governor Pat Quinn recently signed a bill (HB 5192) establishing an independent tax tribunal. The enactment of the Illinois Tax Tribunal Act of 2012 (Public Act 097-1129) means that Illinois taxpayers soon will be able to challenge state tax assessments before paying the disputed tax in a hearing forum independent of the Department of Revenue and presided over by administrative law judges who are state tax experts. The new system will replace the existing one in which Illinois taxpayers must choose between a prepayment hearing within the Department of Revenue, or a post-payment refund suit before a state trial court judge.

The Tribunal will consist of a Chief Administrative Law Judge (“ALJ”) with a five-year term, and up to three additional ALJs with staggered four-year terms. Each ALJ will be appointed by the Governor with the advice and consent of the Senate. Each ALJ must be licensed to practice law in Illinois and have substantial knowledge of State tax laws. The Tribunal will begin hearing matters on July 1, 2013. Taxpayers filing a protest before July 1, 2013, that would otherwise fall under the jurisdiction of the Tribunal may elect to have the protest heard by the Tribunal, provided the election is made on or after July 1, 2013, but within 30 days of filing the protest.

The Tribunal will have jurisdiction to hear most protests of asserted tax or penalty liability or the denial of a refund where the amount at issue exceeds $15,000, excluding penalties and interest. In the case of notices solely asserting a penalty or interest, or both, the Tribunal will have jurisdiction where the total penalties and interest exceed $15,000. The Tribunal’s jurisdiction will include, but not be limited to, the State’s income tax and its four sales and use taxes. The Tribunal’s jurisdiction will not include property tax assessments.

Taxpayers will commence proceedings before the Tribunal by filing a petition or protest and paying a $500 filing fee. Hearings will be open to the public, but taxpayers may petition to close portions of the hearing for good cause. At any point in the proceedings prior to the hearing, the parties may jointly petition the Tribunal for mediation. If granted, an ALJ other than the one initially assigned to the case will serve as the mediator. The decision of the Tribunal may be appealed by either party to the Illinois Appellate Court.