After a successful trial-run, the Illinois Department of Revenue (IDOR) recently announced plans to expand its Audit Fast Track Resolution (FTR) program to general income tax disputes in October.
The FTR program allows for the expedited resolution of audit disputes through a conference with a neutral mediator while a case is still under the jurisdiction of the IDOR Audit Bureau. The IDOR launched the FTR program as a pilot in December 2018, targeting certain “cash businesses,” such as restaurants, that may lack formal tax record-keeping processes. The IDOR then made the program permanent in September 2020 and expanded its scope to all sales tax audits except for Motor Fuel Use Tax.
Officials from the IDOR told Bloomberg Tax that the decision to expand the program follows the successful resolution of 80 percent of FTR cases that have gone through the conference process. Although the FTR program has mostly resolved cases involving cash-based businesses, the IDOR expects the mix of participants to evolve as the program starts processing income tax disputes, Audit Bureau manager Roger Koss told Bloomberg Tax.
Illinois FTR Program Basics
The primary goal of the FTR program is to resolve disputed audit adjustments through a one-day conference with a neutral mediator, called an “FTR Facilitator.”
- Currently, the IDOR will send a taxpayer a “Fast Track Eligible” notice, which triggers a 20 day deadline to file the FTR application via email.
- If a taxpayer is accepted into the program, a mediation session, called an FTR Conference, is scheduled within 60 days.
- The FTR Facilitator will notify the taxpayer of approval within 15 days after the filing of an application.
The single-day FTR Conference can be attended by the taxpayer’s authorized designee and will only cover the documents and issues presented during the audit. The FTR program is optional, allowing a taxpayer to withdraw at any time without losing statutory rights.
Statute of Limitations
The FTR application includes a waiver of the statute of limitations period that runs from the application filed date through 120 days after the issuance of a closing memorandum that formally ends the FTR process.
Mandatory Confidentiality Agreement
The FTR application contains a confidentiality agreement that must be executed at the time the application is filed. A taxpayer must agree that any discussions, offers, counter-offers or proposed audit adjustments or resolutions are confidential and shall not be disclosed nor used as evidence or admissions in any subsequent administrative or judicial proceedings. Any violation of the agreement constitutes a material breach which may result in the voidance of any related FTR resolution and/or disqualification in subsequent participation in the FTR program.
Other FTR Program Considerations
Although the FTR program is an attractive option for taxpayers seeking to wrap up an audit and avoid the costs of litigation, acceptance is not guaranteed – the IDOR retains complete discretion regarding whether to accept a taxpayer into the FTR program. Reasons for rejection from the FTR Program include:
- Untimely application;
- Taxpayer’s failure to comply with the auditor’s document requests, or other taxpayer audit delays;
- The presence of issues or evidence that are not part of the audit record;
- Any audit-related criminal investigation by the state of Illinois;
- The taxpayer seeks an offer in compromise based on an ability to pay.
Finally, the IDOR states that it may reject an application if “one or more of the audit issues sought for FTR resolution requires judicial interpretation or is otherwise reserved for litigation and not appropriate for FTR consideration.” This last open-ended consideration means that it remains to be seen whether the IDOR will accept FTR applications involving high-dollar disputes or complex issues. It is also unclear whether the expansion of the FTR program will impact the willingness of auditors to resolve adjustment disagreements during the course of an audit, or if auditors will rely on FTR Facilitators to make difficult calls. We expect to see further guidance regarding the FTR program expansion later in the year.