Supreme Court Summaries

Opinions filed June 20, 2013


Metropolitan Life Insurance Co. v. Hamer, 2013 IL 114234

Appellate citation: 2012 IL App (1st) 110400.


      JUSTICE GARMAN delivered the judgment of the court, with opinion.

      Justices Freeman, Thomas, and Theis concurred in the judgment and opinion.

      Justice Burke dissented, with opinion, joined by Justice Karmeier.

      Chief Justice Kilbride took no part in the decision.


      In 2003, the Illinois legislature established a tax amnesty period which was 1½ months long and which was to take place between October 1, 2003, and November 17, 2003. This enactment was called the Tax Delinquency Amnesty Act. Pursuant to this statute, “all taxes due” from as far back as 1983 through the first half of 2002 could be paid without the state seeking to collect any interest or penalties. All taxes so paid would abate. There was also a provision that unpaid tax liabilities not paid within this amnesty period would incur interest at 200%.

      The Illinois Department of Revenue adopted implementing regulations, which provided that a taxpayer participating in the amnesty program must pay its entire tax liability regardless of whether that liability was known to the Department or the taxpayer. Those who were unsure of their tax liability were to make a good-faith estimate of it and pay it during the amnesty period. Refunds based on subsequent changes (such as those arising from later federal tax determinations) were provided for.

      The plaintiff taxpayers in this case are Metropolitan Life Insurance Company and Unitary Subsidiaries. A routine audit of their federal tax returns for 1998 and 1999 was begun at the end of 2000 and completed in mid-2004, after the amnesty period had expired. This federal audit produced changes in their Illinois tax liability, and the taxpayers paid those taxes, along with single interest, after the amnesty period had expired. However, the Department assessed an interest penalty of 200%, or over $2 million, relying on the statute at issue here. This additional interest penalty was paid under protest.

      In the circuit court of Cook County, the taxpayers filed a 2008 complaint for an injunction and a declaratory judgment, challenging the 200% interest assessment and claiming a denial of due process. They were successful in the circuit and appellate courts. The appellate court majority opined that it was illogical to require a taxpayer to pay a tax liability of which neither the taxpayer nor the Department was aware, and that the regulatory provision concerning a good-faith estimate of additional tax liability exceeded the intent of the 2003 Amnesty Act. The Department of Revenue appealed.

      In this decision, the Illinois Supreme Court held for the Department, stating that the question here is the meaning of the phrase “all taxes due,” and that this means those taxes which are due when initial returns are required to be filed, rather than taxes known to be due during the amnesty period. Taxpayers who were under audit by the Internal Revenue Service and who, thus, were uncertain as to what their ultimate Illinois tax liability would be had an opportunity to participate in the 2003 amnesty program by making a good-faith estimate pursuant to the regulations and making payment based on it. The supreme court rejected the taxpayers’ argument that the regulations allowing this result overreached and contradicted the intent of the Act. A recent decision of the appellate court, Marriott International, Inc. v. Hamer, 2012 IL App (1st) 111406, is consistent with the result reached here.

      In ruling as it did, the appellate court had not reached the taxpayers’ issue of a substantive due-process violation. The supreme court did that in this decision, finding no constitutional violation because those in the taxpayers’ position had an opportunity to avoid 200% interest by making a good-faith estimate of tax liability and paying it during the amnesty period, with the possibility of a refund. These taxpayers did not do so.

      The results reached in the courts below were reversed.