Business people and attorneys will often serve as officers in multiple companies. For example, a business person may serve as an officer in an affiliate or subsidiary. As another example, attorneys frequently serve as corporate secretaries in multiple client corporations, as part of the legal service provided to the client corporation. Still another example is serving as an officer for a former employer and then becoming an officer for a new employer.
But problems can arise when one of the corporations becomes delinquent in its Illinois taxes. In such a case, a tax registration application (REG-1) to the Illinois Department of Revenue may be denied if one of the officers of the applying corporation is also an officer of a corporation delinquent in its taxes.
The denial of tax registration is based on 35 ILCS 120/2a that reads, in relevant part:
“The Department [of Revenue] may deny a certificate of registration to any applicant if the owner, any partner, any manager or member of a limited liability company, or a corporate officer of the applicant, is or has been the owner, a partner, a manager or member of a limited liability company, or a corporate officer, of another retailer that is in default for moneys due under this Act."
We have discussed this provision with officials of the Illinois Department of Revenue (IDOR). According to the officials, it is the policy of IDOR to impose a denial in each case where the officer of the registering/ renewing business entity is also an officer of an unrelated delinquent filer in order to collect the money that is due under the Act. Of course, these discussions are unofficial and not binding on the IDOR.
As a result, business people should be careful about the corporations in which they serve as officers. A business person leaving a corporation in which he or she serves as an officer should also take steps to effectively resign and have his or her name removed from the IDOR registration. Otherwise, a future employer in which the person serves as an officer could have tax registration problems.