SPRINGFIELD -- Metropolitan Life Insurance Co. is on the hook for a $2.2 million tax penalty imposed by a 2003 amnesty program even though it didn't know it owed extra taxes at the time, the Illinois Supreme Court ordered Thursday.
In a 4-2 decision with one justice not taking part, the court ruled that the phrase "all taxes due" in the amnesty act means just that: taxes due, whether the taxpayer knows they are.
MetLife must forfeit the penalty on underpaid taxes from 1998 and 1999, despite not knowing what it had to cough up until an audit was finished in 2004, eight months after the amnesty ended.
Lawmakers adopted an amnesty program that ran for six weeks in fall 2003, allowing scofflaws to pay back taxes dating to 1983 without penalty. It generated $175 million from 70,000 sheepish latecomers, $135 million more than anticipated. Those who got caught or came forward after the amnesty had to pay a doubled, 200 percent penalty.
Justice Rita Garman, writing the court's opinion, found a simple definition for the language of the tax-collection law.
"The plain and ordinary meaning of the phrase `all taxes due' in the 2003 Amnesty Act refers to taxes that are due based upon properly reportable income at the time the taxpayer's tax return is required to be filed," Garman wrote. "Therefore, when MetLife failed to pay those taxes during the amnesty period, it became liable for the 200 percent interest the department imposed."
Taxpayers could also avoid the penalty by making a "good-faith estimate" of underpaid taxes during the amnesty -- the idea being that although auditors don't share details about what they're looking at, taxpayers generally know the areas of concern based on the questions they're asked.
In 2000, three years before the amnesty program, the IRS began a routine audit of MetLife's returns from 1997-99, followed by an Illinois Department of Revenue audit in 2002.
When MetLife learned in mid-2004 it had underpaid its taxes, it conceded it owed late-payment interest of 100 percent, but only under protest paid the 200 percent the Revenue Department demanded.
John Calagna, MetLife communications vice president, said Thursday that company officials "need time to evaluate the ruling" and had no immediate comment.
Justice Ann Burke, in a dissent joined by Justice Lloyd Karmeier, found the majority opinion difficult to swallow, saying it was not what lawmakers intended with the law.
"The majority's interpretation of the Amnesty Act punishes MetLife for failing to prepay an unascertainable amount of taxes before those taxes were actually due," Burke wrote.
She added that the company got slammed with the extraordinary interest for not paying a tax that state law "did not require it to pay, and which the department could not have collected before the audit was concluded, a time long after the amnesty period had ended."
The court noted that its decision jibes with one by a state appellate court in another challenge to the 2003 law by Marriott International Inc. That case involves interest penalties of about $657,000.
For reasons not explained in the opinion, Chief Justice Thomas Kilbride took no part in the MetLife decision.
Illinois conducted another amnesty program in 2010. It yielded $408 million from 78,200 taxpayers.