Citibank’s Claim for Tax Refund Flops at Illinois High Court

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By Michael J. Bologna

Citibank N.A. can’t claim a $1.6 million refund on Illinois sales taxes attributable to bad credit card debt from retail purchases financed by the bank, the Illinois Supreme Court ruled Nov. 30.

The high court, in an unanimous ruling, found no basis in case law or legislative intent for Citibank’s claim that credit card lenders have standing to file refund claims under Section 6 of the Retailers’ Occupation Tax Act (ROTA), which governs the issuance of credit memoranda or refunds of ROTA tax payments ( Citibank, N.A. v. Ill. Dep’t of Revenue , Ill., No. 121634, 11/30/17 ).

The court affirmed the Illinois Department of Revenue’s view throughout the litigation that credit card lenders aren’t “retailers” under ROTA and don’t have standing to file refund claims under Section 6. The court also supported the DOR’s arguments that Illinois law doesn’t recognize credit providers as assignees of the retailers’ rights to obtain refunds. To find otherwise, the court said, would be “an end-run” around legislative intent.

“Given the legislature’s clearly expressed preference in the statutory framework for reporting, remission, and refund only through the retailer, we find Citibank’s position untenable—indeed ‘an end-run around’ the statutes enacted by the legislature,” the court ruled.

The ruling was a major win for the revenue department after losses in Cook County Circuit Court and the Illinois Appellate Court.

“The Illinois Department of Revenue is pleased with the judgment handed down today by the Illinois Supreme Court, finding that Citibank is not owed a refund on Retailers’ Occupation Tax for uncollectible debt they financed for sale of goods made by affiliated retailers,” department spokesman Terry Horstman told Bloomberg Tax.

Peter Larsen, Citibank’s counsel in the matter, didn’t immediately respond to a request for comment. Larsen is chair of the tax practice group at Akerman LLP in Jacksonville, Fla.

Narrow Group of Taxpayers

Melissa Miller, a tax senior manager with Ernst & Young LLP in Chicago, said the ruling could have had refund implications for a narrow group of taxpayers in the financial services industry if the Supreme Court had affirmed the lower court rulings.

“It’s an important decision, but I also think it’s very isolated,” she said.

The Citibank dispute involved tax issues going back almost a decade.

Citibank, the consumer division of financial services for Citigroup Inc., incurred bad credit card debts on purchases between Jan. 1, 2008, and Dec. 31, 2009. After retailers assigned their rights to tax refunds under the ROTA, the lender sought a refund of $1.6 million. The revenue department denied the requested refund, finding the Illinois Legislature never intended credit companies such as Citibank to receive such benefits.

A circuit court reversed the department’s determination, finding that Citibank was entitled to a refund as the retailers’ assignee. An appeals panel affirmed the circuit court’s judgment, holding that neither the ROTA nor public policy precluded assignment of the right to pursue a refund.

Refunds for Retailers

But Chief Justice Lloyd A. Karmeier, writing for the Supreme Court, rejected such views, pointing to the court’s ruling in Snyderman v. Isaacs, which established that only a remitter of tax has standing to seek a refund.

“The ROTA is, after all, the Retailers’ Occupation Tax Act,” Karmeier wrote.

Moreover, the chief justice said the court could find no basis for finding the Legislature intended for lenders to have assignment rights, permitting them to request refunds from the state.

“It appears to us that allowing claims by the lender via assignment would circumvent the legislature’s statutory policy—recognized by this court as far back as at least the Snyderman decision—of requiring refund requests to be submitted through the remitter of the tax, so as to avoid reporting problems that might arise,” Karmeier wrote. “We conclude it is not the intent of the legislature, as expressed in its statutory enactments, to allow a direct action for a refund by a lender against the Department under these circumstances.”

To contact the reporter on this story: Michael J. Bologna in Chicago at

To contact the editor responsible for this story: Cheryl Saenz at

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