Citibank, N.A. v. The Illinois Department of Revenue
104 N.E.3d 400
| Ill. | 2017Background
- Citibank financed consumer purchases for Illinois retailers on a non-recourse basis, advancing amounts that included the sales tax the consumers owed; retailers remitted ROTA tax to the State.
- Some financed accounts defaulted; Citibank wrote off the uncollectible balances as bad debts and claimed corresponding federal tax deductions.
- Citibank filed an administrative claim seeking refund/credit under section 6 of the Retailers’ Occupation Tax Act (ROTA) for the portion of written-off balances attributable to ROTA; the Department denied the claim.
- The Illinois circuit court and the appellate court reversed/affirmed respectively, holding Citibank (as assignee of retailers’ rights) could claim refunds; the Department appealed to the Illinois Supreme Court.
- The Supreme Court considered statutory text, the Department’s regulation on bad debts (86 Ill. Adm. Code 130.1960(d)), prior precedent (Stone, Snyderman, Kleinwort), and the 2015 legislative amendment adding section 6d to ROTA.
Issues
| Issue | Citibank's Argument | Department's Argument | Held |
|---|---|---|---|
| Whether a non-retailer lender (Citibank) may directly claim ROTA refunds for bad debts via assignments from retailers | Citibank: Assignments transferred retailers’ refund rights so Citibank stepped into retailers’ shoes and may recover | Department: ROTA and precedent limit refunds to the remitter (retailer); allowing lenders to claim undermines statutory safeguards and risks unjust enrichment | Held: No — legislature and precedent limit refund claims to the remitter; lenders cannot directly claim refunds here |
| Whether section 6 (or Dept. regulation) permits assignment of pre-claim rights to seek refunds | Citibank: Statute does not prohibit assignment of refund claims; Stone supports assignability | Department: Section 6 permits only assignment of an issued credit memorandum, not pre-claim rights; allowing broader assignment conflicts with statutory scheme | Held: Assignment of unadjudicated refund rights is not permitted; §6 only contemplates assignment of an issued credit memorandum to a taxpayer who can use it |
| Whether Dept. regulation 86 Ill. Adm. Code 130.1960(d) entitles lenders or assignees to bad-debt credits | Citibank: Regulation’s subsection (d)(3) is not limited to retailers; stipulations show retailers effectively self-financed or assigned rights | Department: Regulation contemplates relief through the remitting retailer; permitting lenders to claim circumvents reporting and safeguard provisions | Held: Regulation must be read consistent with statute; refund procedure requires retailer as claimant; lender claim disallowed |
| Whether legislative amendment (section 6d) indicates support for lender claims or confirms retailer-only process | Citibank: Section 6d continues policy of refunding sales tax on credit sales and did not forbid assignment to lenders | Department: Section 6d authorizes relief to the retailer and prescribes retailer-based reporting and accounting — confirming retailer-only process | Held: Section 6d confirms legislature’s preference for retailer-centered refund and reporting; supports disallowing direct lender claims |
Key Cases Cited
- Kleinwort Benson N. Am., Inc. v. Quantum Fin. Servs., Inc., 181 Ill. 2d 214 (1998) (discusses general rule favoring assignability and public-policy limits)
- People ex rel. Stone v. Nudelman, 376 Ill. 535 (1940) (credit memorandum issued to remitter is assignable after allowance by the Department)
- Snyderman v. Isaacs, 31 Ill. 2d 192 (1964) (lessee who paid tax indirectly cannot recover; refund statute limits relief to the remitter)
- Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351 (2009) (explains ROTA’s basic structure and retailer remitter obligation)