Court Opinion

ID: 9710683
Source: CourtListenerOpinion
Date Created: 2023-08-26 04:15:16.113433+00
Date Added: 2024-06-11T18:22:58.968674
License: Public Domain

JUSTICE HOLDRIDGE, dissenting: I respectfully dissent. The decision of the circuit court was correct. The railway accurately reported its federal taxable income for 1988 when it filed its 1988 Illinois income tax return on September 7, 1989. The only changes resulting from the 1992 IRS audit of the 1988 federal income tax return were adjustments to the net operating loss carryovers and the investment tax credit carryovers available for subsequent tax years. There were no changes to either taxable income, items of income or deductions, or tax liability reported on the 1988 federal income tax return. Consequently, the circuit court was correct in determining that the Department was time-barred from issuing its notice of deficiency by the applicable three-year statute of limitations. In construing the relevant exception to the statute of limitations, this court should note the axiom of statutory construction that exceptions to a statute must be strictly construed. People v. Folkers, 112 Ill. App. 3d 1007 (1983). Illinois case law particularly favors strict construction of statutes of limitations. Dow Chemical Co. v. Department of Revenue, 224 Ill. App. 3d 263 (1991). Here, I believe the majority has failed to strictly construe the applicable statute of limitations. The majority maintains that the railway’s position is fundamentally flawed in that it confuses taxable income with tax liability. However, it appears that the majority has confused net operating loss carryovers and investment credit carryovers with “taxable income” as that term is contemplated under the Illinois Income Tax Act (Act). The record clearly establishes that the 1992 IRS audit resulted in no change to “the taxable income, any item of income or deduction, or tax liability reported” by the railway for the federal tax return for the year 1988. The IRS audit report established that the taxable income for 1988 after the audit was $1,653,605, which was the same amount of taxable income reported on the original return. The only changes resulting from the federal audit of the 1988 tax year included adjustments to income in subsequent years. As no change occurred in either the taxable income, any item of income of deduction, or the tax liability reported on the 1988 federal income tax return, the exception to the three-year statute of limitations contained in section 506(b) of the Act could not be invoked. I would affirm the circuit court of Tazewell County, and I dissent on that basis.