Lauzen, Kane state's attorney's office trade blame after cannabis taxes go uncollected

Editor's note: This story was updated to correct the date when a county board ordinance was passed in November 2010 and that it was two years before Kane County Board Chairman Chris Lauzen was elected for his first term.

Every dime Kane County officials counted on from local cannabis sales went up in smoke this week after they learned paperwork wasn't filed with the state to collect taxes on the purchases.

The cost of the mistake and resulting finger-pointing has reignited political animosity between State's Attorney Joe McMahon's office and county board Chairman Chris Lauzen.

Joe Onzick, the county's executive director of finance, informed county board members this week he suspected a problem when he could find no evidence of cannabis tax dollars coming in from the state as he worked toward closing out the books for this fiscal year.

Onzick checked with the Illinois Department of Revenue and learned the county never filed paperwork with the state after approving a 2.5% sales tax on municipal sales of cannabis in October 2019. Neither the county's development department nor the county clerk's office had any record of notifying the state and local cannabis businesses to start collecting the tax this July.

After learning of the mistake, Onzick had the clerk's office send in the paperwork, but the deadline for the county to begin collecting the tax in January 2021 has passed. The soonest it can collect cannabis tax money will be July 1 - marking a full year of lost revenue.

County board members asked Onzick whose responsibility it was to file the paperwork.

"I can't point the finger at a specific person," he said. "I just know it wasn't done."

That didn't stop Lauzen from blaming the state's attorney's office. Filing legal paperwork is a function of the county's legal experts, Lauzen said.

He pointed to Joe Lulves, who is in charge of the office's civil division. The department wrote the ordinance the board approved to create the cannabis tax.

"This is not a general county error, but rather a specific individual failure due to either incompetence or a carelessness," Lauzen said.

This case, the state's attorney's office said, is Lauzen's fault for not directing Onzick or other staff members overseen by the county board office to file the paperwork.

Lauzen has been in a political fight with the state's attorney's office for much of his tenure. The office has reprimanded him on several occasions for overstepping his authority.

In a letter to the county board in response to Lauzen's accusation, Lulves said Lauzen's finger-pointing "continues a pattern of avoiding responsibility."

He attached a communication from the Illinois Department of Revenue dated September 2019 that outlines deadlines for filing cannabis tax paperwork and where it must be sent. Lulves said it was sent to the county board office, which Lauzen oversees.

Lulves attached a September 2019 bulletin from the Illinois State Association of Counties outlining the same procedure the clerk's office sent to the county board office.

Also attached is a county board ordinance passed in November 2010, two years before Lauzen was elected for his first term. It details an appropriation from the Motor Fuel Tax Allotment fund the county needed to notify the Illinois Department of Transportation about. The ordinance directs the county clerk's office to make that notification.

Lauzen said he never received the documents Lulves referenced.

"It's ridiculous to expect non-lawyers to do highly paid lawyers' legal work," Lauzen said in an interview.

County board members have yet to assign blame. Two months ago, after a dust-up over a county employee working from Minnesota during the pandemic, they sent Lauzen a letter reminding him he has "no authority to direct the day-to-day operations and conduct of the county departments."

Lauzen estimated the county will lose about $1 million in revenue, but board members were skeptical. Such estimates will vary locally with the number of cannabis businesses and sales. Lake County, which is slightly larger than Kane County, is estimating $52,000 in cannabis tax revenue for its 2021 budget.

County board members suggested a direct appeal to the state to allow the county to begin collecting the tax in January if there no way to recoup the tax dollars it did not collect in 2020.