The law also creates caps on penalties and interest that can be charged to delinquent taxpayers, and a maximum statute of limitations. For example, the law requires that a statute of limitations on collecting local taxes be six years or less except in cases of fraud.
Those might sound like common-sense items, but most cities didn't have such taxpayer protections until the impending law required them. "It could be important," said John C. Phillips, Rock Island's city manager.
The "rights" required by the state law basically ensure that all taxpayers are treated equally. Just as important, the law gives taxpayers recourse if they dispute the amount of taxes owed to a local government body.
More than 90 percent of municipalities that responded to a survey by the Illinois State Chamber of Commerce "didn't provide any basic [legislated] ground rules" for local taxes, said Connie Beard, executive director of the Illinois Chamber Tax Institute.
The Illinois legislature earlier this year passed a law to rectify the situation and "put the ground rules on paper," Beard said.
"It's a good thing," said Moline Mayor Stan Leach. "This is a review process that the taxpayer has a right to."
But "taxpayer" doesn't mean people. "What it really deals with is taxes paid by corporations ... not individuals," said Larry Frang, assistant director of the Illinois Municipal League, which lobbied for significant changes to the first version of the bill. Because of the group's efforts, the law gave municipalities more flexibility in the penalties and statute of limitations it could set.
Local taxes include things such as a fuel tax, a pillow tax for hotels, and a home-rule sales tax for retailers. Leach said that while Moline already reviews disputes over local taxes, the city council was expected to approve the bill of rights at its meeting December 26.
The Rock Island City Council passed its version last week. Rock Island's old tax ordinances specified penalties for late payments, but nothing else. "It certainly didn't have the level of details" that the state law requires, Phillips said.
The problem of cities having no local-tax rules became clear as more municipalities hired tax auditors, Beard said. Utility companies with large areas of service began noticing an increasing number of audits from different cities, she said, but there were no procedures in place if they disputed the claims of the auditors. "The utility companies didn't like the auditors coming in without a specific set of regulations," Frang said.
Beard stressed that it's still up to individual cities to determine such things as statutes of limitations and penalties. "We left as much control at the local level as possible," she said. That wouldn't have been true under the original proposal floated by the Illinois Chamber of Commerce.
Frang said that the first bill, drafted at the request of the Illinois Chamber, made "it very difficult to audit somebody" because of the regulations it put on audits, such as requiring a six-week notice. The original legislation also set penalties and statutes of limitations instead of creating ceilings, which is what the final version does.
Compromises that gave cities more leeway made the legislation acceptable to the Illinois Municipal League, Frang said, but "we'd still like to have more flexibility."
Although the legislation became Illinois law in July, most cities didn't get around to passing ordinances until very recently. "We really didn't have a whole lot of time," Phillips said. The Illinois Municipal League released a sample ordinance about a month ago, giving cities little breathing room.
Phillips said his city's attorney and finance director are still reviewing the state law and the Illinois Municipal League ordinance, trying to figure out whether they will have any impact on day-to-day operations of the city. "It does not appear that way right now," he said.
Phillips said the reasoning behind the law is valid, but the issue of tax disputes has never cropped up in Rock Island. If there is a problem, the city would be able to handle it without formal procedures, he said. "We try to do the right thing as a local government," he said. "We would try to employ some reason there. We would work with" the taxpayer.
The General Assembly should have allowed cities to solve the problem as it came up, instead of using a statewide mandate, he said.
"It seems a little overkill," he added. "It's a pre-emption of our authority."