Appeals panel: Chicago tour boat biz deserves new hearing for tax protest, because county misled on deadline

By Scott Holland | May 23, 2019

daryl_mitchell from Saskatoon, Saskatchewan, Canada [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)]

CHICAGO — An Illinois appeals court says a Chicago sightseeing tour boat company was wrongly denied the chance to contest the county's attempt to make it pay taxes on its Lake Michigan and Chicago River tours because the county's Revenue Department misled the company on the deadline for filing its protest.

The underlying dispute is a Cook County Department of Revenue assessment against Mercury Sightseeing Boars and Mercury Skyline Yacht Carriers. A Revenue Department auditor told Mercury it had until Oct. 1, 2014, to protest the assessment, but the deadline actually was Sept. 29 — a fact not pointed out until an administrative law judge assigned to the protest raised it before ruling the department forfeited a timeliness objection and ruling in favor of Mercury.

The county took the matter to Cook County Circuit Court, where Judge Daniel Kubasiak determined the deadline was "jurisdictional" and couldn’t be forfeited, then reversed the earlier decision without considering the merits of Mercury's challenge. Mercury appealed to the Illinois First District Appellate Court, which issued an opinion May 22

Justice David Ellis wrote the opinion; Justices James Fitzgerald Smith and Nathaniel Howse concurred.

Although the panel agreed there was a time-based limitation on the administrative body’s authority to hear protests, it nonetheless found the county Revenue Department “violated the procedural due process rights of Mercury by affirmatively misleading Mercury, if unintentionally, on the proper deadline for filing,” Ellis wrote. “The proper remedy for that constitutional violation is to allow Mercury its hearing on the merits.”

The tax in question is Cook County’s 3 percent amusement tax on admissions. The county enacted the tax in 1996 to be imposed on “patrons of every amusement,” but did not assess Mercury until 2014. Ellis said the records of the case include an Oct. 6, 2000, letter from the Revenue Department's former director to an unspecified recipient stating “it has been and still is the County’s position that both sightseeing cruises and water taxi services are not amusements as defined in the Ordinance and, therefore, are not subject to the tax.”

That position changed in July 2014, when a revenue auditor determined tour boats were obligated to pay. The next month the auditor repeatedly contacted Mercury to demand it register and remit payment for admissions in May and June. After two phone conferences, the county issued a delinquency notice dated Sept. 9, 2014, which Mercury received Sept. 11.

The panel explained the key evidence was a Sept. 24 email in which the auditor said the deadline for filing a protest was 20 days from when Mercury received the notice. That date wasn’t disputed until July 19, 2016, when the administrative law judge, without prompting, noted the deadline was 20 days from when the letter was sent, not when it was received.

Ellis explained the justices rejected “Mercury’s attempts to inject ambiguity” about mailing in the county’s ordinance governing assessments and protests, finding the protest deadline did expire Sept. 29. The panel also said the Revenue Department lacks statutory authority to hear late protests.

However, Ellis explained, there is merit to Mercury’s claim the department’s information was “so confusing and misleading” it deprived the company of is procedural right to due process under the state and federal constitutions. While the panel still rejected some of Mercury’s arguments about what in the county’s paperwork might have been misleading, it said the auditor’s choice to definitely cite an incorrect deadline is dispositive.

“Requiring DOR to provide accurate information about protest deadlines and procedures, if it chooses to give any information at all, is not imposing in the least,” Ellis wrote. “We are not presented here with a situation where Mercury’s lawyer stopped a janitor in the bathroom for this information, or even called a general number and asked the question of the first person who answered. This auditor, from Mercury’s perspective, was the face of DOR and someone clearly familiar with the administrative procedures surrounding a tax protest.”

The panel said the proper remedy is to determine the late filing didn’t deprive the Department of Administrative Hearings’ jurisdiction to hear the protest. It reversed the decision, remanded back to the county court and said Kubasiak should consider the merits of the administrative law judge’s decision.

Mercury has been represented by the Chicago firm of Jenner & Block.

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Organizations in this Story

Cook County Cook County Department of Revenue Illinois First District Appellate Court Jenner & Block Mercury Sightseeing Boats, Inc.

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