December 14, 2017

City of Chicago Department of Finance Changes the Terms of its Voluntary Disclosure Program

Authored by Breen Schiller

 in State & Local Tax (SALT)

With no formal announcement it appears that the City of Chicago Department of Finance ("City") has changed the terms of its voluntary disclosure program ("VDA Program").

Historically, the City's VDA program provided for a limited look-back period of four years, the full abatement of penalties, and now the City will also grant the waiver of half the interest that would otherwise apply to participating taxpayers. This is a positive development for taxpayers choosing to participate in the City's VDA program and good policy considering taxpayers participating in the VDA are coming forth on their own accord to come into compliance. Generally, when trying to negotiate a settlement of any nature with the City (or most jurisdictions for that matter, city or state) the waiver of interest is typically off the table. The reasoning being that the application of interest is pursuant to statute or ordinance and taxpayers are told that a department's "hands are tied." With no amendment to the City's Voluntary Disclosure ordinance (M.C.C. §3-4-246) this change in policy regarding the abatement or waiver of interest has obviously resulted in a change of the City's interpretation of the ordinance. Section 3-4-246, in part, states as follows:

…The guidelines, which may be amended from time to time, may permit eligible taxpayers and tax collectors to pay interest at a rate less than the amount set forth in Section 3-4-190 of this chapter and to pay not more than those liabilities arising during the four-year period immediately prior to the date on which a taxpayer or tax collector applies to participate in the program….

While the issue of "change of interpretation" is a lengthy article on its own, and generally does not result in anything positive for taxpayers, here it has. With no official announcement from the City, I am venturing to guess that the City is now reading the above-cited excerpt from the ordinance to provide it authority to lower the amount of interest imposed on taxpayers participating in the VDA.

This is not something that the City is making any sort of public announcement on, but it should. This is good policy and rewards taxpayers for voluntarily coming forward instead of hitting them with interest on liabilities they may not have known existed.

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