Waste Management wins appeal vs IL Revenue Department over compressed natural gas tax refund claim

By David Hutton | Jan 8, 2018

CHICAGO — A state appeals court says Waste Management should get a refund of more than $200,000 it paid in state fuel taxes prior to the state's decision in 2014 to formally declare compressed natural gas - which it used to fuel some of its vehicles - a taxable motor fuel. 

In an unpublished order, Justice Daniel J. Pierce delivered the decision of the three-justice panel of the Illinois First District Appellate Court, with justices Sheldon A. Harris and John B. Simon concurring with the decision, which was issued as under Supreme Court Rule 23, limiting its use as precedent.

The Illinois Independent Tax Tribunal had ruled Waste Management owed motor fuel taxes for its use of compressed natural gas (CNG) for its vehicles.

Waste Management took its case to the appellate court, claiming it was due a refund for the taxes it paid to the Illinois Department of Revenue because CNG wasn’t taxable under the Motor Fuel Tax Law.

The appeal was filed after the Illinois Independent Tax Tribunal affirmed IDOR’s ruling.

From February 2012 to September 2014, Waste Management reported its CNG usage to IDOR each month, and self-assessed and paid the motor fuel tax.

In August 2014, IDOR formally amended its motor fuel tax regulations and, for the first time, interpreted the law as including CNG as a taxable fuel.

Waste Management filed claims seeking a refund of more than $200,000 in motor fuel taxes that it paid for its CNG-fueled vehicles prior to IDOR’s amendment.

Both parties filed cross-motions for summary judgment, with Waste Management claiming the act defines motor fuel as a liquid and CNG is not a liquid.

For its part, IDOR’s cross-motion for summary judgment maintained that the act’s definition of motor fuel was “ambiguous and susceptible to multiple reasonable interpretations.”

IDOR further maintained that because CNG wasn’t excluded from the act, it should be included.

In the opinion, Pierce noted that the legislature “specifically did not incorporate ‘combustible gases’ into the Section 1.1 definition of ‘motor fuel’ in the act. The legislature specifically excluded all combustible gases (except liquid natural gas) from the definition of special fuel.”

Moreover, Pierce noted that even if the court accepted IDOR’s argument that the law offered a broad interpretation that leaned in favor of taxation, it couldn’t ignore the legislature’s intention in Section 1.1, defining “motor fuel” as volatile and inflammable liquids. He also noted that in Section 1.13, “special fuel” is defined as volatile and inflammable liquids, to the exclusion of combustible gases. 

“The fact that the legislature defined ‘motor fuel’ to apply specifically to volatile and inflammable liquids and to exclude combustible gases like CNG prohibits our expanding the act beyond the statutory definition of ‘motor Fuel,’” Pierce wrote. “We find that Section 17 of the act does not include CNG within the specific definition of ‘motor fuel’ in Section 1.1 of the act.”

As a result, the court reversed the tax tribunal's decision, holding that Waste Management is "entitled to a refund of the taxes it paid on its CNG-powered vehicles between February 2012 and September 2014," according to the decision.

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Illinois Department of Revenue Illinois First District Appellate Court Waste Management of Illinois

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DANIEL J PIERCE

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