                           ILLINOIS OFFICIAL REPORTS
                                         Supreme Court




                   Metropolitan Life Insurance Co. v. Hamer, 2013 IL 114234




Caption in Supreme         METROPOLITAN LIFE INSURANCE COMPANY et al., Appellees, v.
Court:                     BRIAN HAMER, Director of the Illinois Department of Revenue, et al.,
                           Appellants.



Docket No.                 114234


Filed                      June 20, 2013


Held                       Where statute provided that, during a six-week amnesty, “all taxes due”
(Note: This syllabus       could be paid without interest or penalty, but that double interest would
constitutes no part of     accrue on liabilities unpaid during that time, taxpayers then under federal
the opinion of the court   audit for prior years without knowing how their liabilities would change
but has been prepared      were properly charged that double interest where, during the amnesty,
by the Reporter of         they did not pay good-faith estimated taxes as provided by regulation, but
Decisions for the          paid their increased liabilities only when those became known after the
convenience of the         amnesty expired.
reader.)


Decision Under             Appeal from the Appellate Court for the First District; heard in that court
Review                     on appeal from the Circuit Court of Cook County, the Hon. James C.
                           Murray, Jr., Judge, presiding.


Judgment                   Appellate court judgment reversed.
                           Circuit court judgment reversed.
Counsel on               Lisa Madigan, Attorney General, of Springfield (Michael A. Scodro,
Appeal                   Solicitor General, and Eric Truett and Sunil S. Bhave, Assistant
                         Attorneys General, of Chicago, of counsel), for appellants.

                         John A. Biek, Andrea R. Dudding and Christopher D. Mickus, of Neal,
                         Gerber & Eisenberg LLP, of Chicago, for appellees.

                         Marilyn A. Wethekam and Fred O. Marcus, of Horwood Marcus & Berk
                         Chrtd., of Chicago, for amicus curiae Council on State Taxation.


Justices                 JUSTICE GARMAN delivered the judgment of the court, with opinion.
                         Justices Freeman, Thomas, and Theis concurred in the judgment and
                         opinion.
                         Justice Burke dissented, with opinion, joined by Justice Karmeier.
                         Chief Justice Kilbride took no part in the decision.


                                           OPINION

¶1        In 2003, the Illinois General Assembly enacted the Tax Delinquency Amnesty Act (2003
      Amnesty Act) (35 ILCS 745/10 (West 2004)), which established an amnesty program for all
      taxpayers owing any tax imposed by Illinois law. It further provided that, upon payment by
      a taxpayer of “all taxes due” for any taxable period between June 30, 1983, and July 1, 2002,
      the Department of Revenue (Department) would abate and not seek to collect any interest or
      penalties and would not seek civil or criminal prosecution of that taxpayer. The amnesty
      period extended from October 1, 2003, through November 17, 2003. Those taxpayers who
      failed to pay their unpaid tax liabilities within that period would be charged 200% interest.
      The Department promulgated regulations implementing an amnesty program, providing that
      a taxpayer participating in the amnesty program must pay its entire tax liability regardless of
      whether the liability was known to the Department or to the taxpayer. The regulations further
      provided that taxpayers who were unsure of their tax liability were to make a good-faith
      estimate of the liability and pay it during the amnesty period.
¶2        The Internal Revenue Service (IRS) audited the 1997, 1998, and 1999 federal income tax
      returns of plaintiffs, Metropolitan Life Insurance Company and Unitary Subsidiaries
      (collectively, MetLife). Following completion of the audit, MetLife filed its amended Illinois
      tax returns showing additional tax due. Because MetLife paid the additional taxes after the
      amnesty period expired, the Department assessed 200% interest. MetLife paid the taxes due
      under protest and filed an action disputing that it owed more than 100% interest and seeking
      an injunction to order defendant State Treasurer to refund the double interest charged. The
      circuit court of Cook County granted MetLife’s motion for summary judgment. The appellate
      court affirmed, with one justice dissenting. 2012 IL App (1st) 110400. This court granted

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     defendants’ petition for leave to appeal. Ill. S. Ct. R. 315 (eff. Feb. 26, 2010).

¶3                                       BACKGROUND
¶4       MetLife timely filed its Illinois corporate income tax returns for the years 1998 and 1999
     and paid the tax liability stated therein. On December 12, 2000, the IRS began a routine audit
     of MetLife’s federal income tax returns. The audit was completed in July 2004, eight months
     after the expiration of the amnesty period. In May 2002, the Department commenced an audit
     of MetLife’s 1998 and 1999 Illinois income tax returns. MetLife provided the auditor with
     the changes to its federal returns as a result of the federal audit (referred to as the federal
     change tax liability). Based upon MetLife’s submissions, the Department determined that
     MetLife owed additional Illinois income tax. On May 8, 2008, the Department assessed a
     200% interest penalty against MetLife with respect to the additional tax determined to be
     due. MetLife paid the penalty under protest.
¶5       In July 2008, MetLife filed its complaint for an injunction and for declaratory judgment
     under the State Officers and Employees Money Disposition Act (30 ILCS 230/1 et seq. (West
     2010)). It sought a declaration that the Department was not entitled to assess double interest.
     MetLife conceded that it owed a 100% interest penalty. It sought a finding that application
     of the double interest penalty to its federal change tax liability violated its due process rights
     under the United States and Illinois constitutions. It further sought a preliminary injunction
     to prohibit the Department from transferring the double interest assessment money from the
     protest fund to the general revenue fund until the court entered a final judgment. The trial
     court granted the injunction. The Department filed a motion to dismiss the action and to
     dissolve the preliminary injunction. The trial court denied the motion.
¶6       MetLife filed a motion for summary judgment. The motion contained stipulated facts as
     follows. MetLife timely filed its Illinois corporate income tax returns for the tax years 1998
     and 1999, and paid the tax liabilities reported in the returns. In December 2000, the IRS
     commenced an audit of MetLife’s 1997, 1998, and 1999 federal income tax returns, which
     took more than 3½ years to complete. In May 2002, the Department began an audit of
     MetLife’s 1998 and 1999 Illinois corporate income tax returns. On June 20, 2003, the Illinois
     legislature enacted the 2003 Amnesty Act. The amnesty period began October 1, 2003, and
     concluded on November 17, 2003. Under the 2003 Amnesty Act, a taxpayer who did not
     satisfy a tax liability that was eligible for amnesty by the conclusion of the amnesty period
     was subject to double interest on that unpaid tax liability. The federal audit of MetLife’s
     returns was completed in July 2004. In or after August 2004, MetLife provided the final
     adjustments of the IRS to the Department’s auditor in lieu of filing amended Illinois returns
     for the years in question. In December 2004, the auditor determined that MetLife owed
     additional Illinois income taxes for 1998 and 1999 as a result of the changes to its federal
     returns. MetLife paid the federal change tax liability during the course of the Department’s
     audit. MetLife made its final payment in May 2007 at the conclusion of the audit. The
     Department’s auditor informed MetLife that it would receive a separate bill for double
     interest on the back taxes pursuant to the provisions of the 2003 Amnesty Act. In July 2008,
     MetLife paid the double interest under protest and commenced this action.


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¶7          In its motion for summary judgment, MetLife argued that its federal change tax liability
       was not eligible for amnesty because the 2003 Amnesty Act did not require a taxpayer to pay
       an unassessed, unagreed-upon tax liability subject to an ongoing federal audit. MetLife noted
       that the 2003 Amnesty Act applied to “all taxes due” from a taxpayer and it argued that
       phrase should refer to taxes assessed and due at the time of the amnesty application.
¶8          The circuit court granted MetLife’s motion for summary judgment. The court concluded
       that the phrase “all taxes due” in the 2003 Amnesty Act referred to known tax liabilities. The
       2003 Amnesty Act was intended by the legislature to provide a “carrot and stick” to
       encourage taxpayers to voluntarily pay their known tax liability. The court relied on
       dictionary definitions of “tax” and “due” in finding that “all taxes due” referred to a present
       obligation or a yet to be determined obligation. The court concluded that MetLife’s
       obligation for taxes due for past years was not determined until August 2004, which was
       beyond the amnesty period.
¶9          The appellate court affirmed, with one justice dissenting. 2012 IL App (1st) 110400. The
       majority agreed with the circuit court that “all taxes due” meant those taxes that a taxpayer
       knew were due and owing during the amnesty period. Thus, because MetLife did not know
       it owed additional taxes until after the amnesty period had ended, it could not have
       participated in the amnesty program. Id. ¶ 16. The majority rejected the Department’s
       reliance on section 601(a) of the Illinois Income Tax Act (Income Tax Act) (35 ILCS
       5/601(a) (West 2010)), which provides that taxes for a taxable year become due when the tax
       return for that year is required to be filed. According to the majority, when MetLife filed its
       1998 and 1999 income tax returns and paid the amount of the tax shown due on the returns,
       it paid the amount that was due. MetLife became liable for the additional taxes only after the
       expiration of the amnesty period. 2012 IL App (1st) 110400, ¶ 17. The majority similarly
       rejected the Department’s reliance on its regulations promulgated in connection with the
       2003 Amnesty Act, finding that it was illogical to require a taxpayer to pay a tax liability of
       which neither the taxpayer nor the Department was aware. The majority also found that the
       requirement in the regulations that taxpayers in MetLife’s position make a good-faith
       estimate of their additional tax liability exceeded the legislative intent behind the 2003
       Amnesty Act. Id. ¶¶ 23, 24.
¶ 10        Justice Hoffman dissented, concluding that the phrase “all taxes due” in the 2003
       Amnesty Act means all taxes due on the date fixed for filing the taxpayer’s return, without
       assessment, notice, or demand, and without regard to any extension of time for filing the
       return. Justice Hoffman found the statutory language to be clear and unambiguous and that
       a plain reading of section 601(a) of the Income Tax Act established that because MetLife did
       not pay all the taxes that were properly due when it filed its returns and it did not pay the
       additional amounts during the amnesty period, it was liable for double interest. Id. ¶ 37.

¶ 11                                    ANALYSIS
¶ 12       The 2003 Amnesty Act directed the Department to establish an amnesty program for all
       taxpayers owing any tax imposed by the laws of Illinois. The amnesty period ran from
       October 1, 2003, through November 17, 2003. The 2003 Amnesty Act provided:


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                     “The amnesty program shall provide that, upon payment by a taxpayer of all taxes
                due from that taxpayer to the State of Illinois for any taxable period ending after June
                30, 1983 and prior to July 1, 2002, the Department shall abate and not seek to collect
                any interest or penalties that may be applicable and the Department shall not seek
                civil or criminal prosecution for any taxpayer for the period of time for which
                amnesty has been granted to the taxpayer. Failure to pay all taxes due to the State for
                a taxable period shall invalidate any amnesty granted under this Act. Amnesty shall
                be granted only if all amnesty conditions are satisfied by the taxpayer.” 35 ILCS
                745/10 (West 2004).
¶ 13       Pursuant to the legislature’s directive, the Department promulgated regulations (27 Ill.
       Reg. 15161 (emergency rule eff. Sept. 11, 2003)) establishing an amnesty program. It
       provided that to participate in the amnesty program, a taxpayer must pay the entire tax
       liability irrespective of whether that liability was known to the Department or to the taxpayer.
       27 Ill. Reg. 15161, 15168. Taxpayers, including taxpayers under audit during the amnesty
       period, who were unsure of the exact amount of their tax liability were to make a good-faith
       estimate of the amount of the liability. 27 Ill. Reg. 15161, 15168-69.
¶ 14       In connection with enactment of the 2003 Amnesty Act, the legislature amended section
       3-2 of the Uniform Penalty and Interest Act to provide that if a taxpayer had a tax liability
       that was eligible for amnesty under the 2003 Amnesty Act and failed to satisfy the tax
       liability during the amnesty period, the interest charged to the taxpayer would be imposed
       at a rate that was 200% of the rate that would otherwise be imposed. 35 ILCS 735/3-2(f)
       (West 2004).
¶ 15       The Income Tax Act provides that a taxpayer who is subject to a change in its tax liability
       due to a change in its federal tax return must notify the Department of the change in the form
       of an amended return not later than 120 days after the federal change has become final. 35
       ILCS 5/506(b) (West 2010). Section 903 of that Act provides that the amount of tax shown
       to be due on a tax return shall be deemed assessed on the date of the filing of the return,
       including any amended return showing an increase in the tax owed. Where an amended
       return is filed with the Department due to a change in a taxpayer’s federal tax return, any
       deficiency in tax resulting therefrom shall be deemed to be assessed on the date of filing the
       amended return. 35 ILCS 5/903(a)(1), (3) (West 2010).
¶ 16       With respect to taxpayers under federal audit, the Department’s regulation provided that:
                “A taxpayer who is under federal audit may participate in the Amnesty Program by
                following the procedure set out in subsection (k) above and making a good faith
                estimate of the increased liability that may be owed to the Department. For purposes
                of participating in the Amnesty Program only, a taxpayer may file an amended return
                reporting a federal change prior to receiving final notification from the Internal
                Revenue Service that the change has occurred. Although participants in the Amnesty
                Program may not seek or claim refunds, a limited exception to this rule will be
                permitted for taxpayers whose refund claims are based upon final determinations of
                the Internal Revenue Service or the federal courts.” 27 Ill. Reg. 15161, 15170.
¶ 17       Summary judgment is proper when “the pleadings, depositions, and admissions on file,


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       together with the affidavits, if any, show that there is no genuine issue as to any material fact
       and that the moving party is entitled to a judgment as a matter of law.” 735 ILCS 5/2-1005(c)
       (West 2010). We review the circuit court’s grant of summary judgment de novo. Lazenby v.
       Mark’s Construction, Inc., 236 Ill. 2d 83, 93 (2010).
¶ 18        This case requires us to interpret the 2003 Amnesty Act. The primary purpose of statutory
       construction is to determine and give effect to the intent of the legislature. Brucker v.
       Mercola, 227 Ill. 2d 502, 513 (2007). The best indication of that intent is the language of the
       statute, which must be given its plain and ordinary meaning. People v. Hammond, 2011 IL
       110044, ¶ 53. It is improper for a court to depart from the plain language of the statute by
       reading into it exceptions, limitations, or conditions that conflict with the clearly expressed
       legislative intent. Illinois Graphics Co. v. Nickum, 159 Ill. 2d 469, 479 (1994). Statutory
       interpretation is a question of law that we review de novo. Mattis v. State Universities
       Retirement System, 212 Ill. 2d 58, 76 (2004).
¶ 19        The question before us is the meaning of the phrase “all taxes due” in the 2003 Amnesty
       Act. The appellate court held that this phrase refers to those taxes that a taxpayer knew were
       due and owing during the amnesty period. The Department disagrees and looks to the
       dictionary definitions of “due” and “owing.” The Department also cites section 601(a) of the
       Income Tax Act, which provides, as indicated above, that a taxpayer shall pay any tax due
       on or before the date for filing a return for the tax period, without assessment, notice, or
       demand. Thus, according to the Department, a tax liability becomes “due” on the date that
       the tax return must be filed. MetLife’s income tax liabilities for 1998 and 1999 became due
       in 1999 and 2000, respectively. Its unpaid tax liabilities were eligible for amnesty because
       at the time of the amnesty period, MetLife had unpaid tax liabilities for tax periods covered
       by the 2003 Amnesty Act. The Department argues that the appellate court erred in finding
       that by paying the amount of taxes that it reported on its 1998 and 1999 income tax returns,
       MetLife paid all taxes due at that time.
¶ 20        The 2003 Amnesty Act does not define the phrase “all taxes due.” Where a term is
       undefined, we presume that the legislature intended the term to have its popularly understood
       meaning. People v. Maggette, 195 Ill. 2d 336, 349 (2001). It is appropriate to employ a
       dictionary to ascertain the meaning of an otherwise undefined word or phrase. Landis v.
       Marc Realty, L.L.C., 235 Ill. 2d 1, 8 (2009). Black’s Law Dictionary defines “due” as
       “[i]mmediately enforceable” and “[o]wing or payable; constituting a debt.” Black’s Law
       Dictionary 574 (9th ed. 2009). Taxes generally become due upon the deadline for filing a tax
       return. MetLife does not argue otherwise. In this sense, Illinois’ taxing scheme is consistent
       with the federal scheme. Section 601(a) of the Income Tax Act provides that a taxpayer shall
       pay income taxes on or before the date for filing a return for the tax period without
       assessment, notice, or demand. This provision is consistent with section 6151(a) of the
       federal Internal Revenue Code, which provides that when a tax return is required to be filed,
       the taxpayer shall, without assessment or notice and demand, pay such tax at the time and
       place for filing the return, without regard to any extension of time for filing the return. 26
       U.S.C. § 6151(a) (2006). See Baral v. United States, 528 U.S. 431, 437 (2000) (section
       6151(a) of the Internal Revenue Code directly contradicts the concept that payment of
       income tax may be made only when the liability is known and fixed by assessment). We also

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       note section 203(e)(1) of the Income Tax Act, which provides in pertinent part that “a
       taxpayer’s gross income, adjusted gross income, or taxable income for the taxable year shall
       mean the amount of gross income, adjusted gross income or taxable income properly
       reportable for federal income tax purposes for the taxable year under the provisions of the
       Internal Revenue Code.” 35 ILCS 5/203(e)(1) (West 2010).
¶ 21       MetLife argues that section 601(a) does not govern the meaning of the phrase “all taxes
       due” in the 2003 Amnesty Act, particularly when federal changes are involved. It contends
       that, pursuant to section 506(b) of the Income Tax Act, it had an obligation to report and pay
       the additional tax to the Department only when the federal changes were finalized and the
       additional tax was known. We reject MetLife’s argument. Section 506(b) contains only a
       reporting requirement. Taxpayers with a federal change must report the change to the
       Department within 120 days of the finalization of that change. The language of that section
       does not prevent taxpayers with a federal change liability from participating in the amnesty
       program.
¶ 22       In arguing that the phrase “all taxes due” in the 2003 Amnesty Act means taxes assessed
       and due at the time the amnesty application is made, MetLife relies on two appellate court
       cases interpreting a previous amnesty law, the 1984 Tax Delinquency Amnesty Act (1984
       Amnesty Act) (Pub. Act 83-1428 (eff. Sept. 16, 1984)). The language of that statute also
       contained the phrase “all taxes due” found in the 2003 statute. MetLife cites Schmidt v.
       Department of Revenue, 163 Ill. App. 3d 269 (1987). There, the plaintiff paid taxes under
       protest and sought administrative review. While the case was pending, the legislature enacted
       the 1984 Amnesty Act and the plaintiff applied for amnesty as to the taxes in dispute. The
       Department granted the plaintiff’s application and subsequently filed a motion to dismiss the
       plaintiff’s complaint for administrative review, arguing that the plaintiff’s amnesty
       application amounted to an election of remedies. The circuit court granted the motion and
       the plaintiff appealed. The appellate court affirmed. The court determined that the plain
       meaning of the provisions of the 1984 Amnesty Act indicated that the purpose of the statute
       was to create finality with respect to the Department’s tax assessments. The court noted that
       the statute provided for payment of “all taxes due” and that upon such payment, the
       Department would not seek further collection or enforcement action. The appellate court
       found that since the statute referred to the amount of tax due upon making the amnesty
       application and did not contemplate litigation by either the Department or the taxpayer, the
       language “all taxes due” meant those taxes assessed and due at the time the amnesty
       application was made, rather than amounts that might ultimately be found to be due
       following judicial review. Id. at 273.
¶ 23       Figgie International, Inc. v. Department of Revenue, 167 Ill. App. 3d 196, 202 (1988),
       also cited by MetLife, followed Schmidt. These two cases do not help MetLife’s cause.
       Schmidt’s interpretation of the phrase “all taxes due” in the 1984 Amnesty Act was made in
       the context of determining that the legislature intended assessments of taxes made pursuant
       to an amnesty application to be final and not subject to judicial review. There was no
       question in Schmidt as to when the taxes were actually due and payable. The same reasoning
       applies to Figgie, which simply followed the reasoning in Schmidt. MetLife argues that the
       legislature is presumed to have acted with knowledge of the holdings of these two cases

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       when it enacted the 2003 Amnesty Act. However, since neither Schmidt nor Figgie made a
       judicial determination as to when taxes were due, MetLife’s argument fails.
¶ 24        MetLife emphasizes that its federal change tax liability was unknown to it or the
       Department at any time during the amnesty period. It argues that because, as of the end of
       the amnesty period, MetLife was disputing some of the proposed federal changes and was
       still receiving from the IRS notices of proposed adjustment after the amnesty period expired,
       it could not have made even an educated guess as to its increased Illinois tax liability, let
       alone a good-faith estimate. MetLife argues that section 601(a) of the Income Tax Act does
       not govern payments under a tax amnesty program or payments of federal change tax
       liabilities. Rather, according to MetLife, section 601(a) governs only the filing of a
       taxpayer’s initial return. MetLife’s only support for this argument, however, is its citation of
       the 1984 Amnesty Act and the two appellate court cases interpreting it. As we have
       concluded, MetLife’s reliance on the 1984 statute and on Schmidt and Figgie is misplaced.
       In any event, the legislature was aware of section 601(a) when it drafted the 2003 Amnesty
       Act and it did not provide for a different time frame for the payment of taxes eligible for
       amnesty.
¶ 25        MetLife also notes that subsequent to the enactment of the 2003 Amnesty Act, the
       legislature enacted the 2010 Amnesty Act (35 ILCS 745/1 et seq. (West 2010)). In
       connection with that statute, the legislature amended the Uniform Penalty and Interest Act
       to provide that unpaid tax liabilities for tax periods between June 30, 2002, and July 1, 2009,
       must be satisfied within the 2010 amnesty period to avoid double interest, “except for any
       tax liability reported pursuant to Section 506(b) of the Income Tax Act (35 ILCS 5/506(b))
       that is not final.” 35 ILCS 735/3-2(g) (West 2010). MetLife argues that this amendment was
       a clarification of the legislature’s intent in enacting the 2003 Amnesty Act. It asserts that it
       was unnecessary to include language in section 3-2 exempting nonfinal tax liabilities from
       the 2003 amnesty program because the Department’s regulations under the 1984 Amnesty
       Act did not suggest that a nonfinal federal change tax liability would be included in the 2003
       amnesty program. MetLife surmises that, with knowledge of the Department’s regulations
       under the 2003 Amnesty Act, the legislature found it necessary to expressly carve out an
       exception for those nonfinal tax liabilities. We note that, generally, a material change made
       by an amendatory act in the language of an unambiguous statute creates a presumption of a
       change in legal rights, although this presumption can be rebutted by evidence of a contrary
       legislative intent. People v. Woodard, 175 Ill. 2d 435, 449 (1997). The circumstances
       surrounding the enactment of an amendment must be considered. If they indicate that the
       legislature intended to interpret the original act, the presumption of change will be rebutted.
       An amendment of an unambiguous statute indicates a purpose to change the law, while no
       such purpose is indicated by the mere fact of an amendment of an ambiguous provision.
       O’Connor v. A&P Enterprises, 81 Ill. 2d 260, 271 (1980). MetLife does not direct our
       attention to any such circumstances surrounding passage of the 2010 Amnesty Act and the
       amendment of section 3-2 of the Income Tax Act, relying instead exclusively on Schmidt and
       Figgie and its claim that the legislature accepted those judicial interpretations of “taxes due”
       in enacting the 2003 Amnesty Act. We have already rejected this argument. We likewise
       reject MetLife’s argument that passage of the 2010 Amnesty Act and the accompanying

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       amendment to section 3-2 of the Income Tax Act were intended merely to clarify the
       legislature’s intent in enacting the 2003 Amnesty Act.
¶ 26       MetLife argues that the appellate court was not required to defer to the Department’s
       “overreaching regulations” after finding them to be illogical and that the regulations
       exceeded the legislative intent of the 2003 Amnesty Act. MetLife asserts that the payment
       of a good-faith estimate of tax liability to participate in the amnesty program was required
       only by the Department’s regulations. We have effectively rejected this argument above in
       finding that the phrase “all taxes due” in the 2003 Amnesty Act refers to those taxes due at
       the time the initial return is required to be filed. In addition, as noted by the Department’s
       counsel at oral argument, it is not useful to compare the 1984 Amnesty Act to the 2003
       Amnesty Act because in 1984, there was no need to make a good-faith estimate of taxes due
       since there was no requirement that taxpayers participate in the amnesty program and there
       was no penalty for not participating. In 2003, the legislature imposed a 200% interest penalty
       on those taxpayers who did not participate; thus, it was necessary to provide a way for
       taxpayers whose tax liability was uncertain to participate in the program. The Department’s
       good-faith estimate regulation made that participation possible. We therefore reject
       MetLife’s argument that the Department’s regulations overreached and contradicted the
       legislative intent of the Amnesty Act.
¶ 27       While this case was in the briefing stage, this court allowed the Department to cite an
       appellate case whose decision is contrary to that of the appellate decision here. In Marriott
       International Inc. v. Hamer, 2012 IL App (1st) 111406, the IRS began an audit in 2004 of
       Marriott’s federal tax returns for the years 2000 through 2002. That audit resulted in
       additional federal income tax liability for those years. Following a state audit, the
       Department determined that Marriott owed additional state tax. Because the 2003 Amnesty
       Act applied to Marriott’s tax returns and Marriott did not pay all of its Illinois income tax
       liability during the amnesty period, the Department assessed 200% interest on Marriott’s
       unpaid tax liability. Marriott paid the taxes and interest under protest. The trial court granted
       summary judgment to Marriott on the basis that because Marriott had paid all the taxes it
       reported on its tax returns and because it did not know of its additional tax liability during
       the amnesty period, double interest did not apply. The appellate court reversed, finding that
       the phrase “all taxes due” in the 2003 Amnesty Act meant all taxes properly reportable for
       federal income tax purposes for the taxable year, pursuant to section 203(e)(1) of the Income
       Tax Act. Id. ¶ 26. The court also rejected Marriott’s reliance on Schmidt and agreed with
       Justice Hoffman’s dissent in the instant case. Id. ¶¶ 36, 41.
¶ 28       We agree with the appellate court in Marriott and with Justice Hoffman in the instant
       case and hold that the plain and ordinary meaning of the phrase “all taxes due” in the 2003
       Amnesty Act refers to taxes that are due based upon properly reportable income at the time
       the taxpayer’s tax return is required to be filed. Therefore, when MetLife failed to pay those
       taxes during the amnesty period, it became liable for the 200% interest the Department
       imposed.
¶ 29       MetLife also argues that imposition of the 200% interest under the facts of this case
       violated its right to substantive due process. MetLife raised this issue in the appellate court
       but the court did not reach the issue in light of its decision holding that MetLife was

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       improperly assessed 200% interest.
¶ 30        The power of the state to impose fines and penalties for a violation of its statutory
       requirements is coeval with government. In re Marriage of Miller, 227 Ill. 2d 185, 196
       (2007). However, the legislature’s authority to set such fines and penalties is limited by the
       requirements of due process. St. Louis, Iron Mountain & Southern Ry. Co. v. Williams, 251
       U.S. 63, 66 (1919). Where, as here, the statute at issue does not implicate a fundamental
       constitutional right, courts employ the rational basis test to determine whether the statute
       satisfies due process. Under this test, the statute need only bear a reasonable relationship to
       a legitimate state interest. Miller, 227 Ill. 2d at 197. A statutory penalty will not run afoul of
       due process unless it is so severe and oppressive as to be wholly disproportionate to the
       offense and obviously unreasonable. Id. at 198.
¶ 31        MetLife does not argue that the state lacked a legitimate interest that was served by the
       double interest penalty or that the 200% interest provision lacks a reasonable relationship to
       a legitimate state interest. Rather, it argues that the provision should not have been applied
       to it because it did not know during the amnesty period what its federal change tax liability
       was going to be. MetLife contends that the Department’s “good-faith estimate” regulations
       compounded the problem by attempting to coerce MetLife into overpaying its additional
       Illinois income tax liability to avoid being subjected to the double interest. According to
       MetLife, any good-faith estimate would have amounted to nothing more than a guess, given
       the numerous issues raised by the IRS in the federal audit.
¶ 32        The Department responds that charging MetLife 200% interest on taxes not paid during
       the amnesty period is rationally related to the state’s legitimate interest in raising revenue.
       According to the Department, the legislature enacted the 2003 Amnesty Act at a time of
       financial crisis and the double interest provision served as an appropriate “stick” to
       encourage taxpayers to pay any unpaid tax liability during the amnesty period. Further, notes
       the Department, it provided by regulation for refunds for taxpayers who overestimated their
       tax liability and thus overpaid their taxes during the amnesty period.
¶ 33        We agree with the Department. We find that the 2003 Amnesty Act bore a reasonable
       relationship to the state’s legitimate interest in raising revenue. The legislature gave
       taxpayers in MetLife’s position an opportunity to avoid the statutory 200% interest by
       making a good-faith estimate of their tax liability and paying that liability during the amnesty
       period. Further, we reject MetLife’s argument that even had it made a good-faith estimate
       and paid those taxes during the amnesty period, there is no guarantee that it could have
       obtained a refund of any overpayment, given the one-year limitation on applying for refunds.
       MetLife’s argument is hypothetical and speculative because it chose not to make a good-faith
       estimate of its increased tax liability and did not pay any of the tax deficiency during the
       amnesty period. Those taxpayers who paid their tax liability during the amnesty period were
       rewarded with a 100% abatement of interest and penalties and were protected from any civil
       or criminal liability. Those who chose not to make a good-faith estimate of their tax liability
       during the amnesty period were penalized for failing to do so. Although 200% interest is a
       considerable penalty, we do not find it to be so arbitrary and unreasonable as to violate
       substantive due process.


                                                 -10-
¶ 34                                       CONCLUSION
¶ 35       We hold that the phrase “all taxes due” in the 2003 Amnesty Act means taxes that were
       properly reportable at the time the initial tax return was required to be filed, rather than taxes
       known to be due during the amnesty period. We further hold that the imposition of 200%
       interest pursuant to section 3-2(f) of the Uniform Penalty and Interest Act upon taxpayers
       who failed to pay a tax liability eligible for amnesty under the 2003 Amnesty Act does not
       violate substantive due process.

¶ 36       Appellate court judgment reversed.
¶ 37       Circuit court judgment reversed.

¶ 38       JUSTICE BURKE, dissenting:
¶ 39       The 2003 Tax Delinquency Amnesty Act (Amnesty Act) established an amnesty program
       which allowed a delinquent taxpayer to pay “all taxes due” for any taxable period after June
       30, 1983, and prior to July 1, 2002, during a six-week reporting period from October 1, 2003,
       through November 15, 2003. 35 ILCS 745/10 (West 2004). For taxpayers participating in the
       program, the Illinois Department of Revenue (Department) would abate and not seek to
       collect any applicable interest or penalties, nor would the Department seek civil or criminal
       prosecution. Id. At the same time the legislature extended this carrot, it also extended a stick,
       amending section 3-2 of the Uniform Penalty and Interest Act to provide that a taxpayer who
       had “a tax liability that is eligible for amnesty” under the Amnesty Act but who failed to pay
       that liability during the amnesty period was subject to a penalty of 200% interest. 35 ILCS
       735/3-2(f) (West 2004).
¶ 40       MetLife, the taxpayer in this appeal, was hit with the stick and assessed a 200% interest
       penalty for its failure to participate in the 2003 amnesty program. This assessment was made
       by the Department even though MetLife was undergoing both a state and federal audit during
       the amnesty period and even though MetLife owed no taxes to the state at that time. Further,
       even if MetLife had wished to apply for amnesty in order to reap the corresponding benefits
       of no interest or penalties, it could not have done so. At the time of the amnesty program,
       neither the Department nor MetLife knew whether MetLife owed any additional taxes to the
       State of Illinois, let alone the amount of such tax liabilities.
¶ 41       Both the lower courts recognized that MetLife was wrongfully penalized for its failure
       to pay “all taxes due” during the amnesty period, when no determination had been made at
       that time that MetLife owed taxes to the state and no determination had been made that it
       was a delinquent taxpayer. 2012 IL App (1st) 110400. The majority, however, now reverses
       the lower courts, holding that MetLife was subject to the double interest penalty because it
       failed to prepay the correct amount of taxes “due” to the state during the time period covered
       by the Amnesty Act. Supra ¶ 35. In my view, the result reached by the majority goes far
       beyond what the legislature intended when it enacted the Amnesty Act and offends basic
       principles of logic and common sense. I therefore dissent.


                                                 -11-
¶ 42                                         I. Background
¶ 43        MetLife timely filed its Illinois corporate income tax returns for tax years 1998 and 1999
       and paid the tax liabilities reported on those returns. On December 12, 2000, the United
       States Internal Revenue Service (IRS) began a routine audit of the consolidated federal
       income tax returns that MetLife and its non-unitary subsidiaries had filed for tax years 1997,
       1998, and 1999. The federal audit was completed in July 2004, more than 3½ years after it
       commenced. In May 2002, the Illinois Department of Revenue began an audit of MetLife’s
       state corporate income tax returns for tax years 1998 and 1999. The state audit was not
       concluded until May 2007, approximately five years after its commencement. Thus, at the
       time of the 2003 amnesty period, from October 1, 2003, through November 15, 2003, neither
       MetLife nor the Department knew whether MetLife owed any additional state income taxes
       for tax years 1998 and 1999.
¶ 44        In August 2004, approximately nine months after the expiration of the amnesty period,
       MetLife provided its finalized federal audit adjustments to the Department’s auditor pursuant
       to section 506(b) of the Illinois Income Tax Act (35 ILCS 5/506(b) (West 2010)). The
       auditor incorporated these federal changes into the state income tax audit and determined that
       MetLife owed additional income taxes for 1998 and 1999 as a result of the federal changes
       (the “federal change tax liability”). Over the course of the ongoing state audit, MetLife made
       three separate payments to the Department for its additional income tax liability. MetLife
       made its first payment of $678,191 on February 24, 2005, after receiving and executing a
       document entitled “Waiver of Restriction on Assessment and Collection of Deficiency in Tax
       and Acceptance of Overpayment” (Form IL-870). The state auditor later discovered an error
       in the computation of MetLife’s federal change tax liability, after which MetLife paid an
       additional $270,085 on January 11, 2006. MetLife made its final payment of $705,879 in
       May 2007 at the conclusion of the state audit.
¶ 45        On May 8, 2008, the Department assessed double interest totaling $2,207,456 against
       MetLife with respect to its federal change tax liability because MetLife failed to participate
       in the amnesty program. MetLife paid the penalty under protest and filed the instant verified
       complaint for injunction and declaratory judgment. While MetLife conceded that it owed
       single interest on its unpaid tax liabilities for 1998 and 1999, it objected to the imposition
       of the double interest penalty. MetLife contended that it should not have been penalized for
       its failure to participate in the amnesty program where it had no present liability for unpaid
       state income taxes at that time.
¶ 46        Both the trial and appellate courts held that MetLife did not have a tax liability eligible
       for amnesty and could not have participated in the amnesty program when it did not know
       during the amnesty period whether it owed any additional income taxes.

¶ 47                                          II. Analysis
¶ 48       For the Department to impose the penalty of 200% interest under 3-2 of the Uniform
       Penalty and Interest Act (35 ILCS 735/3-2(f) (West 2004)), the taxpayer must have had a
       “tax liability that is eligible for amnesty under the [Amnesty Act],” and the taxpayer must

                                                -12-
       have failed “to satisfy the tax liability during the amnesty period provided for in that Act.”
       In turn, for there to be a “tax liability” eligible for amnesty under section 10 of the Act, there
       had to be “taxes due” from the taxpayer during the taxable period ending after June 30, 1983,
       and prior to July 1, 2002. Thus, this case turns on the meaning of the phrase “taxes due” in
       section 10 of the Amnesty Act.
¶ 49        The majority holds that “the plain and ordinary meaning of the phrase ‘all taxes due’ in
       the 2003 Amnesty Act refers to taxes that are due based upon properly reportable income at
       the time the taxpayer’s tax return is required to be filed.” Supra ¶ 28. The sole legal authority
       cited by the majority for this conclusion is section 601(a) of the Income Tax Act (35 ILCS
       5/601(a) (West 2004)). Supra ¶ 20. Section 601(a) states that taxes reported on a tax return
       are “due thereon” at the time a taxpayer files the return. Thus, the majority holds that, even
       though MetLife did not actually know whether it owed additional taxes during the amnesty
       period, those taxes were nevertheless “due” at the time MetLife filed its returns in 1998 and
       1999 and, therefore, MetLife had a “tax liability” subject to the Act. I disagree.
¶ 50        It is always a risky undertaking to lift a statutory term from one context and place into
       another (see, e.g., People v. Vincent, 226 Ill. 2d 1 (2007)), and the majority has erred in doing
       so here. We cannot rely on the definition of “due” in section 601(a) because the intent of the
       Amnesty Act is to punish taxpayers who had a known delinquency at the time of the amnesty
       period. Incorporating the meaning of “due” from section 601(a) into the Act has the perverse
       effect of punishing a taxpayer for failing to pay an unknown and as yet undetermined
       liability. This is absurd on its face and cannot be correct.
¶ 51        That the legislature intended to punish taxpayers who were in delinquency at the time of
       the amnesty period is obvious from the plain language of the Amnesty Act. The title of the
       Act is the Tax Delinquency Amnesty Act. 35 ILCS 745/10 (West 2004). The term
       “delinquency” is defined as “1. A failure or omission; a violation of a law or duty. *** 2. A
       debt that is overdue in payment.” Black’s Law Dictionary 493 (9th ed. 2009). It is thus
       evident that the legislature intended to punish delinquent taxpayers who were not in
       compliance with the Illinois tax laws at the time of the amnesty program. Legislative
       statements further underscore this point. See, e.g., 93d Ill. Gen. Assem., House Proceedings,
       May 29, 2003, at 158 (statements of Representative Black) (“I would simply submit that the
       cost of going after some of the scoff laws can exceed the amount of money that we
       sometimes are able to collect. *** I think it’s a reasonable attempt in a very difficult fiscal
       period to try and convince some people to get caught up in their tax payments.”); 93d Ill.
       Gen. Assem., Senate Proceedings, May 31, 2003, at 41 (statements of Senator Welch) (“This
       is for past-due taxes ***, and the idea here is that we can get these taxes due off the books
       ***.”); 93d Ill. Gen. Assem., Senate Proceedings, May 31, 2003, at 43 (statements of Senator
       Link) (“What we’re trying to do is collect a bill—an undue tax burden to our State from
       people that owe us money and that are willing to pay ***.”); 93d Ill. Gen. Assem., Senate
       Proceedings, May 31, 2003, at 47 (statements of Senator Welch) (“What we’re doing here
       is saying an amnesty means they admit that they owe a certain amount of money. If they
       didn’t admit they owed it, they wouldn’t pay that amount.”).
¶ 52       In addition, later amendments to the Amnesty Act and the Uniform Penalty and Interest
       Act reveal that the legislature never intended for amnesty to apply to taxpayers who were

                                                 -13-
       under audit and were unaware of the existence or amount of additional taxes owed to the
       State. In 2010, the General Assembly amended the Act to establish another amnesty period
       which was nearly identical to the 2003 amnesty program, with one notable exception. See
       35 ILCS 745/10 (West 2010). The double interest penalty was imposed on taxpayers who
       failed to satisfy a tax liability which was eligible for the 2010 amnesty program, “except for
       any tax liability reported pursuant to Section 506(b) of the Illinois Income Tax Act (35 ILCS
       5/506(b)) that is not final.” 35 ILCS 735/3-2(g) (West 2010). In other words, taxpayers with
       nonfinal tax liabilities were specifically excluded from participation in the 2010 amnesty
       program and thus were exempt from the double interest penalty. The 2010 amendments make
       it absolutely clear that the legislature never intended to penalize taxpayers who had uncertain
       future tax liabilities for their failure to pay taxes during the amnesty period.
¶ 53        In light of the foregoing, the phrase “taxes due” under section 10 of the Amnesty Act, in
       my view, must mean a known delinquency at the time of the amnesty period. Under this
       standard, the relevant question is whether MetLife was a delinquent taxpayer which had a
       known tax debt owing to the Department at the time of the amnesty period. To illustrate why
       MetLife was not a delinquent taxpayer, it is helpful to examine the state laws pertaining to
       income tax filing. Income tax collection in Illinois is based on self-assessment.1
¶ 54        Under section 601(a) of the Illinois Income Tax Act, a taxpayer files a return, which
       discloses what the taxpayer owes the state in income tax. 35 ILCS 5/601(a) (West 2004). The
       amount of tax shown on the tax return is “due thereon” to the Department, and no
       assessment, notice, or demand by the Department is required. Id. The amount of tax shown
       on the return is deemed to be assessed on the date of filing of the return. 35 ILCS 5/903(a)
       (West 2004). As soon as practicable after the return is filed, the Department shall examine
       the return to determine whether it states the correct amount of tax. 35 ILCS 5/904(a) (West
       2004). If the Department finds that the tax amount shown on the return is less than the
       correct amount of tax, the Department “shall issue a notice of deficiency to the taxpayer
       which shall set forth the amount of tax and penalties proposed to be assessed.” Id. The notice
       of deficiency constitutes an assessment of the tax and penalties specified in the notice after
       60 days have passed without the taxpayer filing a protest. 35 ILCS 5/904(d) (West 2004).
¶ 55        Regardless of whether a notice of deficiency has been issued, a taxpayer is required to
       report to the Department any change to its federal taxable income. 35 ILCS 5/506(b) (West
       2004). Such report may be in the form of an amended Illinois tax return or other form of
       notification and must be filed within 120 days of an agreement or final determination by the
       IRS. Id. Amended Illinois returns used to report such a federal change are required to be
       signed under penalties of perjury. 35 ILCS 5/504 (West 2004). Where a taxpayer files a
       report or amended return pursuant to section 506(b), any deficiency in Illinois tax resulting
       from the change to federal taxable income “shall be deemed to be assessed on the date of


               1
                Federal income taxes are also self-assessed. See 26 U.S.C. § 6151(a) (2006); Baral v.
       United States, 528 U.S. 431, 437 (2000) (income taxes may be “paid” prior to formal assessment of
       the taxes); see also Flora v. United States, 362 U.S. 145, 176 (1960) (“Our system of taxation is
       based upon voluntary assessment and payment, not upon distraint.”).

                                                 -14-
       filing such report or amended return and such assessment shall be timely notwithstanding any
       other provisions of this Act.” 35 ILCS 5/903(a)(3) (West 2004). The Department may then
       issue a notice of deficiency for additional Illinois income taxes due within two years after the
       date of the taxpayer’s report or amended return. 35 ILCS 5/905(e)(2) (West 2004).
¶ 56        Importantly, the Department’s determination of additional Illinois income taxes due
       based on federal changes to taxable income does not mean that a taxpayer violated the
       Income Tax Act when filing its original return. A taxpayer’s original return is properly
       prepared and filed where it reports to Illinois, under penalties of perjury, the federal taxable
       income and other amounts disclosed to the IRS on the taxpayer’s federal return. See
       generally 35 ILCS 5/203(b), 403(b) (West 2004). In the event that a taxpayer is required to
       amend its original return and pay additional income taxes based on federal changes, the
       taxpayer is not treated as delinquent by the Income Tax Act. Although the taxpayer may be
       required to pay interest accruing to the date of its original return (35 ILCS 735/3-2 (West
       2004)), no additional penalty is assessed for underreporting taxes on the original return or
       failing to pay the additional taxes when the original return was filed (see generally 35 ILCS
       735/3-3(b) to (b-20), (c) (West 2004) (setting forth penalties for underreporting and
       underpaying taxes)).
¶ 57        In the case at bar, MetLife timely filed its Illinois income tax returns for 1998 and 1999
       and paid the taxes shown on the returns at the time and place required by section 601(a) of
       the Income Tax Act.2 During the six-week 2003 amnesty period, MetLife was undergoing
       a federal and state audit of its income taxes. As of the end of the amnesty period, the
       Department had not issued a notice of deficiency indicating that MetLife owed additional
       Illinois income taxes, nor had the IRS made a final determination of changes to MetLife’s
       federal taxable income. In July 2004, approximately eight months after the expiration of the
       amnesty period, MetLife was notified that its federal taxable income had been adjusted by
       the IRS due to the federal audit. MetLife subsequently reported to the Department the
       finalized federal changes within 120 days after the IRS determination, pursuant to section
       506(b) of the Income Tax Act. The tax liabilities based on the federal changes were not
       deemed to be assessed until MetLife reported those changes to the Department. See 35 ILCS
       5/903(a)(3) (West 2004). MetLife later paid its additional income taxes in accord with the
       results of the audit and paid interest accruing to the due date of its original returns. See 35
       ILCS 735/3-2(c) (West 2004). MetLife did not protest the assessment of single interest
       because such interest was not a penalty for its failure to pay taxes. Rather, the interest
       compensated the state for the amount of MetLife’s additional income taxes that, with earlier
       resolution of uncertain tax issues, it would have paid to the state on the due date of its
       original tax returns for 1998 and 1999.
¶ 58        MetLife thus was in full compliance with the Illinois tax laws with regard to the manner


               2
                 I note that the Department has not alleged that MetLife intentionally underreported its
       taxable income on its 1998 and 1999 tax returns. Under penalty of perjury (35 ILCS 5/504 (West
       2004)), MetLife reported what it believed to be the properly payable amount of income tax liability
       at the time it filed its returns.

                                                  -15-
       in which it reported and paid its taxes due to the State of Illinois. MetLife met all applicable
       deadlines set by the Illinois Income Tax Act and followed the statutory procedures for
       reporting and paying federal change tax liabilities, including interest, to the Department.
       Accordingly, since MetLife was under no legal obligation at the time of the amnesty period
       to report any federal changes to its taxable income, nor did MetLife owe any additional
       Illinois income taxes to the Department, MetLife obviously was not eligible to participate
       in the amnesty program.
¶ 59        The result reached by the majority leads to absurd results which the legislature could not
       possibly have intended. See Brucker v. Mercola, 227 Ill. 2d 502, 514 (2007) (“when
       undertaking the interpretation of a statute, we must presume that when the legislature enacted
       a law, it did not intend to produce absurd, inconvenient or unjust results”). The majority’s
       interpretation of the Amnesty Act punishes MetLife for failing to prepay an unascertainable
       amount of taxes before those taxes were actually due to the Department according to the
       provisions of the Income Tax Act. Further, the majority’s reading penalizes MetLife with
       double interest for not paying a tax that the Income Tax Act did not require it to pay, and
       which the Department could not have collected before the audit was concluded, a time long
       after the amnesty period had ended. The majority’s construction is inconsistent with the
       statutory language of the Act, which targets taxpayers who were delinquent at the time of the
       amnesty period. MetLife is not included in this group of taxpayers. It is unreasonable to
       suggest that the General Assembly intended to punish taxpayers for their inability to predict
       a future federal change tax liability. It is therefore absurd to define “all taxes due” to mean
       uncertain additional tax liability that was not known either to the taxpayer or to the
       Department during the 2003 amnesty period.
¶ 60        The Department maintains that any absurdities or uncertainties regarding the
       interpretation of the Amnesty Act are addressed by the Department’s emergency rules
       promulgated pursuant to the Act (27 Ill. Reg. 15161 (emergency rule eff. Sept. 11, 2003)).
       The rules purport to require taxpayers to pay their entire tax liability during the amnesty
       period, “irrespective of whether that liability is known to the Department or the taxpayer,”
       and require taxpayers under audit during the amnesty program to make a “good faith
       estimate” of their tax liability and to pay the estimated taxes to the Department.
¶ 61        The Department’s emergency rules impose requirements that go far beyond those
       recognized by the 2003 Amnesty Act itself. The General Assembly directed the Department
       to adopt rules as necessary to implement the Amnesty Act (35 ILCS 745/10 (West 2004)),
       but did not authorize it to collect taxes even when the Department does not know if there is
       a tax liability. The Department’s regulations improperly require taxpayers under audit to
       guess the amount of their federal changes in order to avoid the risk of paying double interest
       on any shortfall. There is no instruction provided as to how a taxpayer might go about
       making a “good faith estimate” of unpaid taxes, particularly where, as in this case, MetLife
       was still negotiating proposed federal adjustments with the IRS well after the amnesty period
       ended. The appellate court below stated that they were “unable to discern any logical
       interpretation” of the Department’s rules. 2012 IL App (1st) 110400, ¶ 23. I agree. The rules
       do not dispel the absurdity of the majority’s interpretation of the Act, they contribute to it.
¶ 62        Because MetLife was not a delinquent taxpayer and owed no income taxes to the state

                                                -16-
       during the 2003 amnesty period, MetLife was not eligible for amnesty and should not have
       been subject to a double interest penalty. The majority’s holding to the contrary is
       unreasonable and unjust. I therefore dissent.

¶ 63      JUSTICE KARMEIER joins in this dissent.




                                             -17-
