New Revenues from State Tax Amnesty Still Questionable

December 09, 2010

Despite initial results showing that the State of Illinois’ recent tax amnesty program brought in more than $500 million in delinquent tax revenues, a report from the legislature’s financial oversight commission questions how much new General Funds revenue is actually included in the total funds received.

The General Assembly approved the tax amnesty program to help boost revenues as part of the FY2011 enacted budget. The legislation allowed delinquent taxes owed to the State from periods between June 30, 2002, and June 30, 2009 to be paid by residents and businesses without penalty. To take advantage of the program, these past due bills had to be paid between October 1, 2010, and November 8, 2010. After the amnesty period ended, fines for any delinquent taxes not paid would be doubled. Initially the Governor’s Office of Management and Budget (GOMB) estimated new General Funds revenue generated by the amnesty program would total $250 million for FY2011. However, in its overview of the FY2011 enacted budget the Commission on Government Forecasting and Accountability (COGFA) reduced its estimate of the new General Funds revenue from the amnesty program by 60% to $100 million.  

In its November monthly briefing, COGFA reported that as of December 1, 2010, the State received a total of $546.7 million in total tax collections attributable to the amnesty period. This includes taxes owed for sales tax, personal income tax, corporate income tax and automobile rental taxes. The total for FY2011 is slightly more than the $532 million collected during the last State tax amnesty period in FY2004. However, not all of the funds collected through the program are deposited in the State’s General Funds. Some of the delinquent taxes are owed to other funds.  

A large portion of the total collections from the amnesty are also not new funds but accelerated payments to that would have been otherwise collected through the State’s ordinary tax enforcement programs. Some of these revenues are already included in the State’s total revenue estimates for FY2011 or can be attributed as normal payments expected in subsequent years. In an analysis of the net State General Funds revenue from the FY2004 amnesty program, the Illinois Department of Revenue found that one-third of the funds would have been otherwise collected in the same fiscal year and approximately equal amounts would have been collected in FY2005 and FY2006 without the amnesty incentive. 

Of the total FY2011 amnesty taxes collected, the State will receive $331.8 in net General Funds revenues compared to the $317 million in FY2004. However, in FY2004 the Illinois Department of Revenue estimated that only $32 million of the net General Funds revenue were new funds that would not have been collected in FY2004 or subsequent years through normal tax enforcement programs.

Total new funds for FY2011 will not be calculated until after all receipts are processed, which may take another month. The following chart show the total tax collections during the amnesty compared to net General Funds collected and total new funds for FY2004 and FY2011.


According to the briefing from COGFA, the revenue department has indicated it will prepare an analysis in the coming months of how much of the $331.8 million in FY2011 net General Funds revenues are new and not already accounted for in the State’s other revenue estimates. However, regardless of whether the revenues are new or already anticipated, the surge in funds from the amnesty program will help with the State’s current cash flow problems. Under an extended lapse period, the State must pay off all of its bills carried forward from FY2010, which totaled $6.4 billion, by December 31, 2010 while it continues to struggle to pay for its current FY2011 operations.