Ally Financial, Inc. v. Chicago Department of Administrative Hearings
2025 IL App (1st) 240025
Ill. App. Ct.2025Background
- Ally Financial, Inc. (Ally), an automotive leasing and finance company, was assessed by the City of Chicago for unpaid lease transaction taxes and titled personal property use taxes related to vehicle leases, including interest and penalties, after an audit covering July 1, 2009, to June 30, 2014.
- Ally acquired vehicle leases from independent auto dealers through a Master Lease Agreement (MLA), wherein the dealer would assign leases and vehicle title to Ally after the customer signed the dealer-originated lease.
- The Chicago Department of Finance (DOF) issued assessments against Ally for not remitting lease tax on down payments (capitalized cost reduction, or CCR payments) and use tax on vehicles that were moved into and registered in Chicago during the lease term.
- Ally contested the assessments before the Department of Administrative Hearings (DAH), then sought administrative review in the Circuit Court of Cook County after the ALJ and circuit court affirmed the City's decisions.
- On appeal, Ally challenged responsibility for lease tax on CCR payments, the timing/amendment of tax notices beyond the statute of limitations, proration of lease tax on "move-in" vehicles, and liability for use tax on vehicles initially registered outside the City but later registered within the City.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of 2020 Amended Lease Tax Notice | 2020 amendment time-barred by statute of limitations | 2020 amendment relates back to timely 2016 notice since protest pending; not final | For Defendant: 2020 notice was timely |
| Lease Tax Liability for CCR Payments | Ally not lessor at payment time; dealers responsible for CCR lease tax | Ally is assignee/lessor, receives CCR via credit and must remit lease tax | For Defendant: Ally liable for CCR lease tax received as credit |
| Prorated Lease Tax on Move-In Vehicles | No authority for prorated lease tax on payments made before vehicle enters Chicago | Tax due for periods vehicle is used in City; CCR should be prorated | For Plaintiff: No proration—lease tax due only when payment/vehicle in City |
| Use Tax on Subsequently Moved/Registered Vehicles | Use tax due only at time of purchase, if registered in Chicago | Use tax is on use in City—liability arises upon registration in City | For Defendant: Use tax due when vehicle is used/registered in Chicago |
Key Cases Cited
- Benson v. Industrial Comm'n, 91 Ill. 2d 445 (findings of fact reviewed for manifest weight of evidence)
- Northwest Diversified, Inc. v. Desai, 353 Ill. App. 3d 378 (requirements for valid assignment of property interest)
- Cincinnati Insurance Co. v. American Hardware Manufacturers Ass’n, 387 Ill. App. 3d 85 (assignment occurs when assignor transfers identifiable interest)
- American Federation of State, County & Municipal Employees, Council 31 v. Illinois State Labor Relations Board, State Panel, 216 Ill. 2d 569 (agency fact findings clearly erroneous standard)
- Express Valet, Inc. v. City of Chicago, 373 Ill. App. 3d 838 (statutory interpretation principles for ordinances)