What does Illinois General Information Letter IT 19-0007-GIL conclude about Refunds – Credit Of Overpayment To Liabilities?

Plain-English summary

A researcher conducting a 50-state survey asked the Illinois Department of Revenue a narrow but pointed question: when Illinois law says the Department "may" credit a taxpayer's overpayment against that taxpayer's outstanding tax liability, does that mean the Department can choose not to do it, or is the offset actually automatic?

The Department responded with a General Information Letter rather than a binding ruling, since the inquiry was a general legal-research question rather than a request tied to a specific taxpayer's facts. It walked through three sources of authority: Section 909 of the Illinois Income Tax Act (35 ILCS 5/909), which uses "may"; Section 2505-275 of the Civil Administrative Code (20 ILCS 2505/2505-275), which also uses "may"; and the Department's own regulation implementing both, 86 Ill. Adm. Code 100.9400, which uses "shall."

The Department's conclusion: because Illinois gives administrative rules and regulations the same force and effect as statutes, the regulation's "shall" controls in practice. So even though the enabling statutes are phrased permissively, the requirement to apply an overpayment against a tax liability owed to the Department is treated as mandatory, not optional.

The letter also reminded the requester that a GIL is general guidance only, not a statement of Department policy and not binding on the Department, and pointed out how to request a binding Private Letter Ruling instead if the requester ever needs one for an actual, specific factual situation.

What this means for you

Taxpayers with an outstanding balance and an incoming refund

If you have an unpaid liability with the Illinois Department of Revenue and you are also due a refund or have made an overpayment, expect the Department to apply (credit) that overpayment against the liability rather than send you a check. This ruling confirms that outcome is treated as mandatory under the Department's regulations, not a case-by-case discretionary call.

Tax professionals, researchers, and multi-state compliance staff

If you're comparing how states handle offset of refunds against prior-year deficiencies, note that Illinois's statutory text (35 ILCS 5/909 and 20 ILCS 2505/2505-275) is permissive ("may"), but the Department's regulation (86 Ill. Adm. Code 100.9400) restates the rule as mandatory ("shall"). Under Illinois administrative law, a duly promulgated rule carries the same force as the statute it implements, so for practical purposes you should treat the offset as automatic when advising clients or drafting comparative surveys.

Anyone relying on this letter

This is a General Information Letter, not a Private Letter Ruling. It is not a statement of Department policy and is not binding on the Department, even as to the requester. If you need a binding answer for your own specific facts, the letter directs you to submit a Private Letter Ruling request under the items listed in 86 Ill. Adm. Code 1200.110(b).

Common questions

Q: Does Illinois automatically apply a refund against an existing tax liability?
A: According to this letter, yes in practice. The statutes technically say the Department "may" do so, but the Department's regulation, 86 Ill. Adm. Code 100.9400, uses "shall," and Illinois treats regulations as having the same force as statutes. So the credit is treated as mandatory.

Q: Does this only apply to income tax liabilities?
A: No. Section 2505-275 of the Civil Administrative Code lets the Department credit an overpayment against any final tax liability arising under any Act the Department administers, not just the Illinois Income Tax Act. It can also apply to federal offsets arranged with the U.S. Treasury.

Q: Is this letter binding on the Department?
A: No. It is expressly a General Information Letter under 86 Ill. Adm. Code 1200.120(b) and (c), issued because the request was a general legal-research question rather than about a specific taxpayer's facts. It is not a statement of Department policy.

Q: What if I want a binding answer for my own situation?
A: The letter tells the requester that a taxpayer who is not under audit and wants a binding answer should submit a Private Letter Ruling request containing the information listed in items 1 through 8 of 86 Ill. Adm. Code 1200.110(b).

Citations and references

Statutes and rules:

• 35 ILCS 5/909 (Illinois Income Tax Act, Section 909 – crediting overpayments against tax liability)
• 20 ILCS 2505/2505-275 (Civil Administrative Code – Department's authority to credit overpayments, including federal offset agreements)
• 86 Ill. Adm. Code 100.9400 (Department's Income Tax Rules implementing Section 909 and Section 2505-275)
• 86 Ill. Adm. Code 1200.120(b), (c) (General Information Letters are general information, not binding Department policy)
• 86 Ill. Adm. Code 1200.110(b) (requirements to request a binding Private Letter Ruling)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2019.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2019/it19-0007-gil.pdf

Original ruling text

IT 19-0007-GIL 05/10/2019 REFUNDS – CREDIT OF OVERPAYMENT TO LIABILITIES
Regulation 100.9400 requires Department to credit overpayments to liability for tax imposed
under the IITA. (This is a GIL)

May 10, 2019

Re: Illinois income tax
Dear Xxxx:
This is in response to your letter received April 19, 2019, in which you request information regarding
Illinois income tax. The nature of your request and the information you have provided require that we
respond with a General Information Letter, which is designed to provide general information, is not a
statement of Department policy and is not binding on the Department. See 86 Ill. Adm. Code
1200.120(b) and (c), which may be found on the Department's web site at www.tax.illinois.gov.
Your letter states as follows:
I am doing a 50 state survey of the law relevant to a state’s ability to withhold a refund owed a
taxpayer based on a deficiency in a prior year.
I set forth the law of your state that allows it to make such an offset.
http://www.ilga.gov/legislation.ilcs/ilcs5.asp?ActID=577&ChapterID=8
I note that most states’ legislation makes such an offset mandatory, if the deficiency has been
sufficiently established as a matter of law.
However, your state’s legislation uses the word “may” or other such language to suggest that
the state need not, in any specific case, withhold a refund based on a prior year’s established
tax deficiency.
I believe all states automatically withhold refunds if a pending deficiency appears in the
taxpayers record. I am looking for confirmation of this (or course if that is not the case with
respect to your state, I would like to know that).
RULING
Section 909 of the Illinois Income Tax Act, 35 ILCS 5/909, states, in part, as follows:
(a) In general. In the case of any overpayment, the Department, within the applicable period of
limitations for a claim for refund, may credit the amount of such overpayment, including any
interest allowed thereon, against any liability in respect of the tax imposed by this Act,
regardless of whether other collection remedies are closed to the Department on the part of
the person who made the overpayment and shall refund any balance to such person or credit
any balance to that person pursuant to an election under subsection (b) of this Section.

IT 19-0007-GIL
Page 2

emphasis added.
As of the date of this letter, Section 909 may be found here:
http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=003500050HArt%2E+9&ActID=577&ChapterI
D=8&SeqStart=13500000&SeqEnd=15700000
Section 2505-275 of the Civil Administrative Code of Illinois, Department of Revenue, 20 ILCS
2505/2505-275, states as follows:
Sec. 2505-275. Tax overpayments. In the case of overpayment of any tax liability arising
from an Act administered by the Department, the Department may credit the amount of the
overpayment and any interest thereon against any final tax liability arising under that or any other
Act administered by the Department. The Department may enter into agreements with the
Secretary of the Treasury of the United States (or his or her delegate) to offset all or part of an
overpayment of such a tax liability against any liability arising from a tax imposed under Title 26
of the United States Code. The Department may collect a fee from the Secretary of the Treasury
of the United States (or his or her delegate) to cover the full cost of offsets taken, to the extent
allowed by federal law, or, if not allowed by federal law, from the taxpayer by offset of the
overpayment.
emphasis added. As of the date of this letter, Section 2505-275 may be found here:
http://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=340&ChapterID=5
Section 100.9400 of the Department’s Income Tax Rules, 86 Ill. Adm. Code 100.9400, states, in part,
as follows:
a)

In General. The Department, within the applicable period of limitations for a claim for
refund, shall credit the amount of any overpayment, including interest allowed on the
overpayment, against any liability for tax imposed under the IITA or any other Act
administered by the Department on the person who made the overpayment, and it shall
refund the balance to that person. (See IITA Section 909(a) and Section 2505-275 of the
Department of Revenue Law [20 ILCS 2505/2505-275].)

emphasis added. As of the date of this letter, Section 100.9400 may be found here:
http://www.ilga.gov/commission/jcar/admincode/086/08600100BB94000R.html
As outlined above, there are 2 Illinois statutes which authorize the Illinois Department of Revenue to
apply an overpayment to any liability for tax imposed under the Illinois Income Tax Act or any other Act
administered by the Department on the person who made the overpayment. The Department has
promulgated administrative rules to implement that statutory authority. In Illinois, administrative rules
and regulations are given the same force and effect as statutes. Therefore, the requirement to apply
an overpayment against a tax liability imposed by the Department is treated as mandatory.

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IT 19-0007-GIL
Page 3
As stated above, this is a general information letter which does not constitute a statement of policy that
applies, interprets or prescribes the tax laws, and it is not binding on the Department. If you are not
under audit and you wish to obtain a binding Private Letter Ruling regarding your factual situation,
please submit all of the information set out in items 1 through 8 of Section 1200.110(b). If you have any
further questions regarding this letter, you may contact me at (217) 782-2844.
Sincerely,

Michael D. Mankowski
Associate Counsel - Income Tax

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