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Franchise tax/filing fee amnesty program offered

Posted January 27, 2008 10:00 pm

Tim Landis

Even the smallest businesses pay a $25 franchise tax and $75 corporate filing fee with the state of Illinois each year. Now, the state is offering amnesty to 25,000 to 30,000 companies that have fallen behind.

The amnesty program is thought to be a first of its kind, at least under modern state incorporation laws, specifically targeted to the annual taxes and fees paid by business ranging from mom-and-pop shops to global corporations.

"Every business that is incorporated in Illinois has to remain in good standing," Robert Durchholz, administrator of the corporate division for the Illinois secretary of state's office, said Monday.

The secretary of state's office administers incorporation laws in Illinois. The laws first were written in 1872 and last revised in 1983.

The Illinois General Assembly authorized the amnesty offer last year for a program that raises about $200 million annually in state revenue. But no estimate has been made of revenue that could result from amnesty.

"It's really kind of an unknown. It depends on participation and what's owed. You could have a very small liability," said Ray Cachares, acting director of business services for the secretary of state's office.

Businesses incorporated in Illinois, regardless of size, must file annual reports on corporate officers, including names and titles, capitalization costs, stock issues, address, registered business agent and other information.

About 94 percent of Illinois businesses pay only the minimum $25-a-year franchise fee, while some large companies that frequently issue stock pay up to $2 million, according to the agency.

About 25,000 to 30,000 businesses each year are involuntarily dissolved for failure to pay, though about one third eventually are reinstated.

Cachares said a business is notified when reports are due - each year prior to the annual date of incorporation - and have 5 1/2 months to pay taxes, penalties and interest before the business is dissolved.

While amnesty programs have been offered for state income and sales taxes, a spokesman for Secretary of State Jesse White said this is thought to be the first time in recent memory that amnesty has been offered for corporate filing frees and franchise taxes.

"It's was driven by the General Assembly, and we're just administering the program," said Henry Haupt, who added that the term "franchise tax" could be misleading, as the tax and fee requirements apply to most businesses.

"A lot of people hear 'franchise,' and think it means McDonald's," he said.

Tim Landis can be reached at (217) 788-1536.

How it works:

n Approximately 384,000 companies are required to file corporate reports with the Illinois secretary of state's office each year, including a $75 annual filing fee. Franchise taxes range from a minimum of $25 a year for the smallest businesses up to $2 million for large corporations.

n Business owing taxes and filing fees can petition to a state amnesty program from Feb. 1 through March 17. Amnesty includes taxes, fees, penalties and immunity from civil or criminal prosecution by the secretary of state's office. After March 17, the monthly interest rate on delinquent payments doubles from 1 percent to 2 percent.

n Information is available online, www.cyberdriveillinois.com, or by contacting the business services office of the secretary of state, 782-6961 in Springfield, or (312) 793-3380 in Chicago.

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