United States Liability Insurance Co. v. Department of Insurance

Summary

The Illinois Appellate Court held that the retaliatory tax statute unambiguously requires the income-tax component to be based on income taxes accrued under section 201(a) through (d) of the Illinois Income Tax Act, rather than taxes paid. It affirmed the circuit court’s determination that the Department of Insurance regulation requiring refunds to be accounted for on a cash basis conflicted with the statute and was invalid. The plaintiffs were therefore entitled to apply an approximately $8.6 million income-tax refund to the years in which the overpayments occurred.

Holdings

1. Section 444(3) of the Illinois Insurance Code unambiguously provides that the income-tax component of the Illinois retaliatory tax is the corporate income tax that accrued or was imposed under section 201(a) through (d) of the Illinois Income Tax Act during the relevant year, not the income tax actually paid.
2. Title 50, section 2515.50(b)(5), of the Illinois Administrative Code is invalid because its requirement that the Illinois basis include income taxes paid conflicts with the statute's requirement that the retaliatory tax include corporate income taxes imposed or accrued in the relevant year.

Questions Presented

1. Whether section 444(3) of the Illinois Insurance Code unambiguously requires the income-tax component of the retaliatory tax to be based on income taxes imposed or accrued under section 201(a) through (d) of the Illinois Income Tax Act rather than income taxes paid on a cash basis.
2. Whether Title 50, section 2515.50(b)(5), of the Illinois Administrative Code is invalid because it requires income-tax refunds to be accounted for on a cash basis and therefore conflicts with the retaliatory-tax statute.

Disposition

affirmed