{ "id": 411679, "name": "ROCKWOOD HOLDING COMPANY, Plaintiff-Appellant, v. THE DEPARTMENT OF REVENUE, Defendant-Appellee", "name_abbreviation": "Rockwood Holding Co. v. Department of Revenue", "decision_date": "2000-03-24", "docket_number": "No. 1 \u2014 98 \u2014 4081", "first_page": "1120", "last_page": "1132", "citations": [ { "type": "official", "cite": "312 Ill. App. 3d 1120" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "219 N.E.2d 494", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1966, "opinion_index": 0 }, { "cite": "35 Ill. 2d 86", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5380023 ], "year": 1966, "opinion_index": 0, "case_paths": [ "/ill-2d/35/0086-01" ] }, { "cite": "692 N.E.2d 295", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1998, "pin_cites": [ { "page": "302" } ], "opinion_index": 0 }, { "cite": "181 Ill. 2d 191", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 821407 ], "year": 1998, "pin_cites": [ { "page": "205" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/181/0191-01" ] }, { "cite": "648 N.E.2d 118", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1994, "pin_cites": [ { "page": "120" } ], "opinion_index": 0 }, { "cite": "271 Ill. 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App. 3d", "case_ids": [ 3570274 ], "year": 1986, "pin_cites": [ { "page": "925", "parenthetical": "recognizing the concept of negative taxable income for purpose of Illinois taxation" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/146/0923-01" ] }, { "cite": "421 N.E.2d 236", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1981, "pin_cites": [ { "page": "238" } ], "opinion_index": 0 }, { "cite": "96 Ill. App. 3d 293", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 12130486 ], "year": 1981, "pin_cites": [ { "page": "295" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/96/0293-01" ] }, { "cite": "554 N.E.2d 428", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1990, "pin_cites": [ { "page": "431-32" } ], "opinion_index": 0 }, { "cite": "196 Ill. App. 3d 583", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2490867 ], "year": 1990, "pin_cites": [ { "page": "589" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/196/0583-01" ] }, { "cite": "99 L. Ed. 1024", "category": "reporters:federal", "reporter": "L. Ed.", "year": 1955, "pin_cites": [ { "page": "1028" } ], "opinion_index": 0 }, { "cite": "349 U.S. 232", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11334394 ], "weight": 2, "year": 1955, "pin_cites": [ { "page": "235" }, { "page": "736" } ], "opinion_index": 0, "case_paths": [ "/us/349/0232-01" ] }, { "cite": "389 N.E.2d 168", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1979, "pin_cites": [ { "page": "173" } ], "opinion_index": 0 }, { "cite": "70 Ill. App. 3d 844", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5577004 ], "year": 1979, "pin_cites": [ { "page": "850" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/70/0844-01" ] }, { "cite": "410 N.E.2d 828", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 7, "year": 1980, "pin_cites": [ { "page": "833" }, { "page": "833" }, { "page": "831" }, { "page": "1068" }, { "page": "1068" }, { "page": "1068" }, { "page": "833" } ], "opinion_index": 0 }, { "cite": "81 Ill. 2d 502", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5480801 ], "weight": 4, "year": 1980, "pin_cites": [ { "page": "512-13" }, { "page": "513" }, { "page": "509" }, { "page": "512" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/81/0502-01" ] }, { "cite": "571 N.E.2d 800", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1991, "opinion_index": 0 }, { "cite": "212 Ill. App. 3d 702", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2598035 ], "year": 1991, "opinion_index": 0, "case_paths": [ "/ill-app-3d/212/0702-01" ] }, { "cite": "26 U.S.C. \u00a7 172", "category": "laws:leg_statute", "reporter": "U.S.C.", "weight": 2, "year": 1988, "opinion_index": 0 }, { "cite": "580 N.E.2d 117", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1991, "opinion_index": 0 }, { "cite": "141 Ill. 2d 543", "category": "reporters:state", "reporter": "Ill. 2d", "year": 1991, "opinion_index": 0 }, { "cite": "572 N.E.2d 389", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1991, "pin_cites": [ { "page": "390" } ], "opinion_index": 0 }, { "cite": "213 Ill. App. 3d 889", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2604693 ], "year": 1991, "pin_cites": [ { "page": "891" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/213/0889-01" ] }, { "cite": "606 N.E.2d 1111", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1992, "opinion_index": 0 }, { "cite": "153 Ill. 2d 76", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 4738801 ], "year": 1992, "pin_cites": [ { "page": "97-98" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/153/0076-01" ] }, { "cite": "634 N.E.2d 712", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1994, "opinion_index": 0 }, { "cite": "158 Ill. 2d 391", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 780274 ], "year": 1994, "pin_cites": [ { "page": "398" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/158/0391-01" ] }, { "cite": "672 N.E.2d 1136", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1996, "pin_cites": [ { "page": "1141" } ], "opinion_index": 0 }, { "cite": "173 Ill. 2d 469", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 147590 ], "year": 1996, "pin_cites": [ { "page": "479" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/173/0469-01" ] } ], "analysis": { "cardinality": 1275, "char_count": 30190, "ocr_confidence": 0.774, "pagerank": { "raw": 1.2658442887152475e-07, "percentile": 0.6135635706946622 }, "sha256": "636b7814702249efdaa524850eeb455722a179048f453af5ac87a323838c9e4e", "simhash": "1:e9a57e9a9ac5b4a0", "word_count": 4994 }, "last_updated": "2023-07-14T15:51:04.567640+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "ROCKWOOD HOLDING COMPANY, Plaintiff-Appellant, v. THE DEPARTMENT OF REVENUE, Defendant-Appellee." ], "opinions": [ { "text": "JUSTICE BUCKLEY\ndelivered the opinion of the court:\nDefendant, Illinois Department of Revenue (Department), assessed plaintiff, Rockwood Holding Company, with underpayment of its 1986 Illinois income taxes. Plaintiff protested the assessment, but after a hearing, the Department rejected the challenge. Then, pursuant to the Administrative Review Law (735 ILCS 5/3 \u2014 101 (West 1994)), plaintiff filed a verified complaint in the circuit court of Cook County. The circuit court affirmed the Department\u2019s decision and this timely appeal followed.\nOn appeal, plaintiff asserts that its 1986 income has been overstated by more than $1,500,000 because its 1984 loss, which was deductible for federal purposes, was not deductible for Illinois purposes. Specifically, plaintiff seeks reversal of the circuit court\u2019s decision and contends that (1) it is entitled to alternative relief under section 304(f) of the Illinois Income \"Tax Act (the Act) (35 ILCS 5/101 et seq. (West 1992)); (2) its income must be adjusted so that only the net income will be taxed; (3) if the Act does not allow for any adjustment, then defendant\u2019s overstatement of plaintiff\u2019s taxable income violates the uniformity clause of the Illinois Constitution (Ill. Const. 1970, art. IX, \u00a7 2) and the due process clause of the United States Constitution (U.S. Const., amend. Xiy \u00a7 1); and (4) the penalties imposed on plaintiff should be abated for reasonable cause. For the reasons set forth below, we affirm.\nFACTS\nThe underlying facts are undisputed. Plaintiff is a holding company incorporated in Delaware and authorized to do business in Illinois that owns companies in the business of investing and real estate. In 1984, plaintiff became a 50% general partner in the CasterRockwood Partnership (Partnership). The Partnership was formed as part of a financing arrangement for the Midland-Ross Corporation. The sole function of the Partnership was to purchase 1,360,000 shares of Midland-Ross preferred stock for $33.50 per share and hold the stock for two years. After the two-year period, the Partnership was to sell the stock back to Midland-Ross for at least $41.71 per share.\nThe transaction went ahead as planned. The Partnership borrowed $45,560,000 and purchased the stock in 1984. In 1986, Midland-Ross redeemed the stock for $65,497,600. The Partnership paid off the loan, distributed profits to the partners and then dissolved.\nIn 1984, the Partnership suffered a net loss because its dividend income was less than its interest expense on the money borrowed to purchase the stock. Plaintiffs share of the loss was $1,724,388 and its business income apportionable to Illinois was $64,424 in 1984. As a result, plaintiffs net income was ($1,659,964) and it did not pay taxes in 1984 under the Act. However, when the stock was redeemed in 1986, the Partnership realized profits of $9,820,775. Plaintiff offset that income by deducting the amount of the 1984 partnership loss on its 1986 tax return. After an audit, plaintiffs partnership income was adjusted upward by the Department from ($110,021) to $9,710,754, and it was determined that plaintiff owed an additional $525,880 in taxes, penalties and interest. The Department issued a notice of deficiency, and plaintiff filed a timely protest and request for a hearing.\nAt the hearing, plaintiff maintained that it should be allowed to deduct the 1984 partnership loss from its 1986 income. Specifically, plaintiff argued that section 201 of the Act only allows a tax on \u201cnet income,\u201d but in the event that an offset was not required by section 201, it was entitled to relief under section 304(f) of the Act. See Ill. Rev. Stat. 1985, ch. 120, pars. 2 \u2014 201(a), 3 \u2014 304(f). The administrative law judge (ALJ) issued a recommendation for disposition rejecting plaintiffs argument on the basis that \u201ccarryforward or carryback of this negative amount was not permitted because there was no provision in the [Act]\u201d during the time relevant to this case. The Department, therefore, upheld its position, and plaintiff filed a verified complaint for administrative review in the circuit court of Cook County. The circuit court issued an order affirming the Department\u2019s conclusion on the merits and subsequently entered judgment in the Department\u2019s favor on September 29, 1998, in the amount of $596,737 for $246,661 in underpaid taxes, $232,043 in interest and $118,033 in penalties. This appeal followed.\nANALYSIS\nWe should first note that the parties to this appeal do not present any factual disputes; only the legal issues are in controversy. Consequently, we are not bound by the administrative agency\u2019s conclusions of law or statutory construction and we will review those decisions de novo. See Raintree Health Care Center v. Illinois Human Rights Comm\u2019n, 173 Ill. 2d 469, 479, 672 N.E.2d 1136, 1141 (1996). However, we do recognize that Illinois courts may defer to an administrative agency\u2019s interpretations and enforcement of statutes because of the considerable experience and expertise it may have concerning the issues before it. Bonaguro v. County Officers Electoral Board, 158 Ill. 2d 391, 398, 634 N.E.2d 712 (1994), citing Ahrahamson v. Illinois Department of Professional Regulation, 153 Ill. 2d 76, 97-98, 606 N.E.2d 1111 (1992).\nI\nThe starting point for taxation in Illinois is section 201(a) of the Act, which is titled \u201c[t]ax imposed\u201d and states in relevant part: \u201cA tax measured by net income is hereby imposed on every individual, corporation, trust and estate *** on the privilege of earning or receiving income in or as a resident of this State.\u201d Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 201(a). The Act defines \u201cnet income\u201d in section 202 as \u201cthat portion of [the taxpayer\u2019s] base income for such year *** which is allocable to this State *** less the standard exemption allowed by Section 204 and the deduction allowed by Section 207.\u201d Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 202(a). \u201c[B]ase income,\u201d for the purposes of a corporation, is \u201can amount equal to the taxpayer\u2019s taxable income for the taxable year.\u201d Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 203(b)(1). And \u201ctaxable income\u201d is \u201cincome properly reportable for federal income tax purposes for the taxable year under the provisions of the Internal Revenue Code.\u201d Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 203(e)(1). Therefore, the Act \u201cpiggy-backs\u201d onto the federal calculation of income and uses federal taxable income as the premise for tax liability. See Kraft, Inc. v. Sweet, 213 Ill. App. 3d 889, 891, 572 N.E.2d 389, 390 (1991), appeal denied, 141 Ill. 2d 543, 580 N.E.2d 117 (1991); see also Taxation Today, Dept. of Rev. Newsltr., par. 400 \u2014 236, at 22, 430-32 (C.C.H.) (Spring 1987).\nIf the taxpayer is a corporation, then it is a nonresident for allocation and apportionment purposes. See Ill. Rev. Stat. 1985, ch. 120, pars. 15 \u2014 1501(a)(14), (a)(20). For nonresidents, allocation and apportionment depends upon whether the income is \u201cnonbusiness income\u201d or \u201cbusiness income.\u201d See Ill. Rev. Stat. 1985, ch. 120, pars. 3 \u2014 302, 3 \u2014 303, 3 \u2014 304. This distinction between the two types of income exists in the Act but has no analog under federal tax law. Once income is allocated or apportioned under the Act, the standard exemption is subtracted (section 204), yielding the taxpayer\u2019s net income, which is then multiplied by the tax rate.\nIn the case at bar, plaintiff asserts that it should not have to pay the judgment entered by the circuit court because its actual income was overstated by more than $1,500,000. This alleged distortion in plaintiffs income was apparently the result of the 1984 partnership loss being deductible for federal purposes, but not for Illinois purposes. As a result, the 1984 loss was trapped in 1984 and could not be carried forward to 1986. The subsequent amendment of the Act in 1985 would have allowed plaintiffs loss to be carried forward in a manner similar to the Internal Revenue Code (IRC). See Ill. Rev. Stat. 1987, ch. 120, par. 2 \u2014 207; Pub. Act 84 \u2014 1042, eff. November 26, 1985; 26 U.S.C. \u00a7 172 (1988). However, the new version of the Act did not apply to losses \u201ccarried forward from a taxable year ending prior to December 31, 1986.\u201d Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 203(b)(2)(E). Plaintiff, therefore, insists that since the Illinois General Assembly recognized the unfairness of the Act and corrected the inconsistency, it should not be responsible for the tax liability that resulted from the stock purchase-sale transaction. We will now address each specific argument in turn.\nII\nPlaintiff first contends that the General Assembly could have never intended the result sought by the Department. Specifically, plaintiff refers to sections 304(f) and 102 of the Act and argues that each provides the alternative relief necessary to reach a fair result.\nA\nSection 304(f) of the Act allows for an \u201calternative allocation\u201d of business income to Illinois if \u201cthe allocation and apportionment provisions of subsections (a) through (e) [of section 304] do not fairly represent the extent of a person\u2019s business activity.\u201d Ill. Rev. Stat. 1985, ch. 120, par. 3 \u2014 304(f). To proceed under this section, the taxpayer may petition the Department for, or the Department may require, \u201c[t]he employment of any other method to effectuate an equitable allocation and apportionment of the person\u2019s business income.\u201d Ill. Rev. Stat. 1985, ch. 120, par. 3 \u2014 304(f)(4).\nBoth the Department and the circuit court rejected this argument. The ALJ\u2019s recommendation stated that section 304(f) did not apply in this case because the issue is not apportionment or allocation, and the parties stipulated to the fact that nonunitary partnership expense was properly allocated to Illinois after apportionment to Illinois of all unitary income. The ALJ then made clear that since the taxpayer was not challenging the amount of the taxpayer\u2019s income from Illinois sources, but instead, \u201cwhether any portion of the distributive share of expenses allocated against apportionable business income could be carried forward to another tax year,\u201d relief under section 304(f) was not available. The circuit court also found this section inapplicable, particularly since the language of section 304 \u201conly pertains to situations where the general statutory formulae for \u2018allocation and apportionment\u2019 fail to fairly represent the true extent of a taxpayer\u2019s activities within Illinois.\u201d We agree with these determinations.\nPlaintiff asks this court to read section 304(f) broadly, so as to correct \u201c \u2018glitches\u2019 \u201d that were not foreseen at the time of enactment. We decline this invitation. The plain language of section 304(f) seeks to achieve a fair representation of \u201cthe extent of a person\u2019s business activity\u201d in Illinois. It does not address the calculation of the taxpayer\u2019s tax liability. And while we agree with plaintiff that the decision in Miami Corp. v. Department of Revenue, 212 Ill. App. 3d 702, 571 N.E.2d 800 (1991), allowed the court to tailor alternative relief to a unitary corporate taxpayer using section 304(f), we find that case unpersuasive here. In Miami Corp., the taxpayer was a unitary corporation that sought to use a different method of apportionment to allocate the income derived from its out-of-state operations. The case, however, said nothing about calculating the taxpayer\u2019s income or the fairness of not allowing a loss carryforward.\nAn additional basis for rejecting plaintiff\u2019s argument is the prospective nature of section 207 of the Act. It is well established that the allowance of a deduction for net losses is a privilege created by statute as a matter of legislative benevolence. Bodine Electric Co. v. Allphin, 81 Ill. 2d 502, 512-13, 410 N.E.2d 828, 833 (1980), aff'g 70 Ill. App. 3d 844, 850, 389 N.E.2d 168, 173 (1979), citing United States v. Olympic Radio & Television, Inc., 349 U.S. 232, 235, 99 L. Ed. 1024, 1028, 75 S. Ct. 733, 736 (1955). As a result, courts have determined that deductions are to be strictly construed in favor of taxation. Chen v. Department of Revenue, 196 Ill. App. 3d 583, 589, 554 N.E.2d 428, 431-32 (1990), citing Balia v. Department of Revenue, 96 Ill. App. 3d 293, 295, 421 N.E.2d 236, 238 (1981). Therefore, a taxpayer will not be entitled to a deduction absent a showing that the deduction is allowed by statute, and the burden of this showing rests on the taxpayer. Bodine, 81 Ill. 2d at 513, 410 N.E.2d at 833.\nOriginally, the Act did not contain provisions allowing for net loss deductions. The legislature envisioned that losses would be captured by using federal taxable income as the base for Illinois tax liability, because any net loss would be subtracted while calculating federal taxable income. See Chicago Title & Trust Co. v. Department of Revenue, 146 Ill. App. 3d 923, 925, 497 N.E.2d 480, 482 (1986) (recognizing the concept of negative taxable income for purpose of Illinois taxation); see also J. Truskowski, The New Illinois Net Operating Loss Provisions, 73 Ill. B.J. 654, 654 (1985). However, this method was unworkable as some taxpayers received the benefit of this deduction twice. 73 Ill. B.J. at 654-55. This led to the enactment of section 207 in 1985.\nSection 207 of the Act now aligns itself with the IRC and provides that when \u201cthe taxpayer\u2019s net income results in a loss, such loss shall be allowed as a carryover or carryback deduction in the manner allowed under Section 172 of the Internal Revenue Code.\u201d Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 207; 26 U.S.C. \u00a7 172 (1988). Unfortunately for plaintiff, section 207 does not contain any language regarding retroactive application. A public act enacting section 207 specifically states \u201c[t]his Act takes effect upon its becoming a law and shall apply to all taxable years ending on or after December 31, 1986.\u201d See Pub. Act 84 \u2014 1042, eff. November 26, 1985. This use of prospective language is a good indication that the General Assembly did not intend to allow for the carryforward of losses sustained prior to 1986. See Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 203(h) (stating that \u201cthere shall be no modifications or limitations on the amounts of income, gain, loss or deduction\u201d unless expressly provided for). Accordingly, since the loss at issue occurred in the 1984 tax year, we also find that section 207 of the 1985 version of the Act does not apply in this case.\nB\nPlaintiff further argues that section 102 of the Act offers alternative relief because it incorporates the federal \u201ctax benefit rule.\u201d\nThe applicable version of section 102 of the Act states:\n\u201cConstruction. Except as otherwise expressly provided or clearly appearing from the context, any term used in this Act shall have the same meaning as when used in a comparable context in the United States Internal Revenue Code of 1954 or any successor law or laws relating to federal income taxes and other provisions of the statutes of the United States relating to federal income taxes as such Code, laws and statutes are in effect for the taxable year.\u201d Ill. Rev. Stat. 1985, ch. 120, par. 1 \u2014 102.\nThe language employed in this section makes clear that the terms used in the Act will have the same meaning as comparable terms in the IRC. This provision insures a certain level of uniformity, particularly since the Act utilizes federal taxable income as a starting point for calculating Illinois income tax liability. However, we will defer to the Illinois Supreme Court\u2019s judgment and find that section 102 \u201cdoes not, by itself, incorporate substantive provisions of the [IRC].\u201d Bodine, 81 Ill. 2d at 509, 410 N.E.2d at 831.\nIll\nPlaintiff\u2019s next contention is that the Department\u2019s approach unfairly overstates actual net income from the Partnership over its three-year existence. Therefore, it argues that this treatment is incorrect because section 201 of the Act only authorizes a tax on \u201cnet income.\u201d See Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 201.\nAccording to the applicable version of the Act, \u201cnet income\u201d is the taxpayer\u2019s \u201cbase income,\u201d or federally taxable income, with modifications, allocated or apportioned to Illinois less the standard deduction. See Ill. Rev. Stat. 1985, ch. 120, pars. 2 \u2014 202, 2 \u2014 203(b)(1). The modifications include the addition of state and local bond interest and Illinois income tax paid as well as the subtraction of federal bond interest, Illinois income tax refunds and property replacement tax, to name a few. Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 203(b)(2); see also Madison Park Bank v. Zagel, 97 Ill. App. 3d 743, 745, 423 N.E.2d 939, 941 (1981), vacated as moot, 91 Ill. 2d 231, 437 N.E.2d 638 (1982). However, section 203(b)(2)(E) expressly excluded net operating losses \u201ccarried forward from a taxable year ending prior to December 31, 1986.\u201d (Emphasis added.) Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 203(b)(2)(E).\nPlaintiff first argues that this case should be controlled by Madison Park. In that case, the taxpayer had a negative federal taxable income for the 1974 tax year and carried the loss back to 1971 by filing amended Illinois and federal tax returns. Madison Park, 97 Ill. App. 3d at 744-45, 423 N.E.2d at 940. When the taxpayer then entered the 1974 loss on its 1974 Illinois return, the Department objected on the grounds that a double benefit for the 1974 loss would occur and argued that the taxpayer could only enter \u201czero,\u201d rather than a negative amount. Madison Park, 97 Ill. App. 3d at 745, 423 N.E.2d at 940. The court disagreed with the Department, finding no statutory limitation in the Illinois Act that would modify the federal definition of taxable income so as to only include positive amounts. Madison Park, 97 Ill. App. 3d at 745-46, 423 N.E.2d at 941. It applied section 102 of the Act (discussed above in part II, B) and determined that since the federal definition of taxable income is not limited to positive amounts, an Illinois return may contain taxable income in a negative amount. Madison Park, 97 Ill. App. 3d at 745-46, 423 N.E.2d at 941. However, the court rejected the Department\u2019s efforts to creatively interpret the Act and, instead, pointed to a portion of the statute that did not \u201cpermit the same item to be deducted more than once.\u201d Ill. Rev. Stat. 1977, ch. 120, par. 2 \u2014 203(f); Madison Park, 97 Ill. App. 3d at 746, 423 N.E.2d at 941.\nWe find Madison Park inapplicable in this case for two reasons. First, the third district\u2019s decision was vacated as moot by the supreme court the following year and no longer has the force of law. People ex rel. Black v. Dukes, 96 Ill. 2d 273, 278, 449 N.E.2d 856, 858 (1983), citing Madison Park, 97 Ill. App. 3d 743, 423 N.E.2d 939. Second, the Madison Park opinion apparently rejects loose interpretations of the Act that attempt to achieve equitable results. Instead, the court relied on a strict reading of the statute and its relevant provisions.\nPlaintiff also argues that the supreme court\u2019s decision in Continental Illinois Bank & Trust Co. v. Lenckos, 102 Ill. 2d 210, 464 N.E.2d 1064 (1984), dictates an equitable reading of the Act that would provide relief from the excess tax liability.\nAt issue in Continental was the definition of \u201cinterest\u201d in portions of the Act requiring addition modifications to taxable income and whether the taxpayer could amortize bond premium on federally tax exempt municipal bonds when determining Illinois base income. Continental, 102 Ill. 2d at 214, 464 N.E.2d at 1066. The interest on the bonds exceeded the rate of return on similar securities in the market, so the taxpayer paid a higher price for the bonds. Continental, 102 Ill. 2d at 214-15, 464 N.E.2d at 1066; see Hanover Bank v. Commissioner of Internal Revenue, 369 U.S. 672, 677, 8 L. Ed. 2d 187, 191, 82 S. Ct. 1080, 1083-84 (1962) (providing an explanation of bond premium). However, because the interest paid by the bond was exempt from federal taxation but added to taxable income in Illinois, the taxpayer argued that \u201cinterest\u201d under the Act should be interest paid minus the amortized bond premium, since the bond premium represented a return of capital. Continental, 102 Ill. 2d at 214, 464 N.E.2d at 1066.\nThe supreme court agreed with the taxpayer. It first found that the amortized bond premium was a return of capital and not \u201cnet income\u201d under the Act. Continental, 102 Ill. 2d at 218, 410 N.E.2d at 1068. Next, the court stated that there was no reason to treat federally tax-exempt bonds differently than federally taxable bonds and that any distinction of this nature was arbitrary and would violate the uniformity clause of the Illinois Constitution. 102 Ill. 2d at 218-19, 410 N.E.2d at 1068. Finally, the court found that the General Assembly\u2019s amendment allowing for deduction of bond premiums, even though not issued retroactively, was a clarification of existing law and, therefore, withstood the Department\u2019s contention of prospective application only. Continental, 102 Ill. 2d at 219-20, 410 N.E.2d at 1068.\nThus, in Continental, the court did what plaintiff seeks in this case, looked to the nature of the transaction involved and then analyzed it according to the objective of the Act. The court found that a tax on a return of investment capital was improper since the Act only allows for the imposition of a tax on \u201cnet income.\u201d Continental, 102 Ill. 2d at 218-19, 464 N.E.2d at 1068. Here, plaintiff argues that we should look beyond the annual accounting principle and examine the integrated nature of the stock purchase-sale agreement in determining net income. While this is a compelling argument from a fairness standpoint, it is difficult to move past the fact that the new section 207, enacted in 1985, expressly excluded coverage to tax years ending prior to December 31, 1986, and changed tax treatment under the Act. Continental, on the other hand, did not confront an amendment of this nature. As a result, it was reasonable for the supreme court to find that a subsequent amendment allowing the deduction of the amortized portion of interest paid on state and municipal bonds was a clarification of an existing law that could be applied retroactively. Here, however, in the absence of ambiguous statutory language, we will rely upon the plain language of the Act. See Scalise v. Zarate, 303 Ill. App. 3d 718, 723, 708 N.E.2d 421, 423 (1999). Therefore, we find that the plain language of the Act precludes retroactive application.\nIV\nPlaintiff next contends that it was taxed more than its actual net income from the Partnership because the loss and income occurred in different taxable years, whereas a taxpayer making the same investment could offset its loss if the income and loss occurred in the same taxable year. Therefore, it argues that the 1986 deficiency is invalid under the uniformity clause of the Illinois Constitution (Ill. Const. 1970, art. IX, \u00a7 2) and the due process clause of the United States Constitution (U.S. Const., amend. Xiy \u00a7 1).\nA\nThe uniformity clause of the Illinois Constitution provides:\n\u201cIn any law classifying the subjects or objects of non-property taxes or fees, the classes' shall be reasonable and the subjects and objects within each class shall be taxed uniformly. Exemptions, deductions, credits, refunds and other allowances shall be reasonable.\u201d Ill. Const. 1970, art. IX, \u00a7 2.\nTo survive the scrutiny of the constitutional uniformity requirement, classifications contained in nonproperty tax laws must be based on a real and substantial difference between persons or entities taxed and those not taxed, and the classifications must bear a reasonable relationship to the object of the legislation \u2014 in this case, raising revenue. Milwaukee Safeguard Insurance Co. v. Selcke, 179 Ill. 2d 94, 98, 688 N.E.2d 68, 70 (1997), citing Allegro Services, Ltd. v. Metropolitan Pier & Exposition Authority, 172 Ill. 2d 243, 250, 665 N.E.2d 1246, 1251 (1996); Searle Pharmaceuticals, Inc. v. Department of Revenue, 117 Ill. 2d 454, 468, 512 N.E.2d 1240, 1245 (1987). The party attacking the tax classification is not required to negate every conceivable basis that might support it. Searle, 117 Ill. 2d at 468, 512 N.E.2d at 1245. Rather, the taxing body bears the initial burden of producing a justification for the classifications, and the party challenging the classifications has the burden of persuading the court that the justification offered is unsupported by the facts or insufficient as a matter of law. Allegro Services, 172 Ill. 2d at 255, 665 N.E.2d at 1253-54.\nIn the instant case, the \u201creal and substantial difference\u201d in the taxing method employed is a result of the nature of the transaction. Plaintiff asserts that it should not have been treated differently merely because it chose to structure its stock purchase agreement over a two-year period. However, we do not find this argument persuasive. See Commissioner of Internal Revenue v. National Alfalfa Dehydrating & Milling Co., 417 U.S. 134, 149, 40 L. Ed. 2d 717, 727, 94 S. Ct. 2129, 2137 (1974). The Department relied on an annual accounting principle to provide a uniform and simplified taxation process. It also disallowed carrybacks and carry forwards like those in IRC section 172 prior to the addition of section 207 because some taxpayers were using the same deductions twice. So, to achieve the goal of raising revenue for the State of Illinois, the Department disallowed certain deductions. It just so happens that plaintiffs loss occurred prior to the prospective amendment of the Act. Yet this does not mean that the Department provided different tax treatment for corporations due to the substance of their business (Federated Distributors, Inc. v. Johnson, 125 Ill. 2d 1, 530 N.E.2d 501 (1988) (invalidating legislation that provided different tax treatment for wine coolers and low-alcohol beverages made with spirits)) or the types of bonds they purchase (Continental, 102 Ill. 2d 210, 464 N.E.2d 1064). Thus, as previously stated by the supreme court, \u201c[t]hough a given taxpayer may therefore enjoy no tax benefit from a particular loss, we cannot say that the scheme adopted by the General Assembly is an improper exercise of its taxing authority.\u201d Bodine, 81 Ill. 2d at 512, 410 N.E.2d at 833.\nB\nIn the taxation context, due process requires that the taxpayer have \u201csome minimum connection\u201d with the taxing body and that the tax is \u201crationally related to \u2018values connected with the taxing [s\u00edtate.\u2019 \u201d Quill Corp. v. North Dakota, 504 U.S. 298, 306, 119 L. Ed. 2d 91, 102, 112 S. Ct. 1904, 1909-10 (1992), quoting Moorman Manufacturing Co. v. Bair, 437 U.S. 267, 273, 57 L. Ed. 2d 197, 204, 98 S. Ct. 2340, 2344 (1978). Plaintiff claims that since the overstated income did not exist, \u201cIllinois cannot claim that it has nexus with it.\u201d The case it cites in support of this proposition, Allied-Signal, Inc. v. Director, Division of Taxation, 504 U.S. 768, 119 L. Ed. 2d 533, 112 S. Ct. 2251 (1992), is not applicable to the case at bar because it addressed the principle that a state may not tax value earned outside its borders. As stated in the Department\u2019s brief, plaintiff has not made an argument on this basis. Instead, in one paragraph containing two sentences, it offers a few citations and concludes that the application of the Act was unconstitutional. A reviewing court such as this one deserves the benefit of cohesive legal argument and is not a dumping ground for argument and research. See In re Marriage of Auriemma, 271 Ill. App. 3d 68, 72, 648 N.E.2d 118, 120 (1994). Accordingly, we also reject plaintiffs due process argument.\nV\nPlaintiffs final contention on appeal is that it should not have to pay $350,076 in penalties and interest. In support of this position, plaintiff states that it had \u201creasonable cause\u201d not to pay the tax at issue here. See Ill. Rev. Stat. 1985, ch. 120, par. 10 \u2014 1005(a).\nUnlike the other issues, this presents a mixed question of law and fact that may only be overturned if found to be clearly erroneous. See City of Belvidere v. Illinois State Labor Relations Board, 181 Ill. 2d 191, 205, 692 N.E.2d 295, 302 (1998).\nPlaintiff asserts that it relied on the work of its accountants and honestly believed that it would not be liable for additional taxes. However, in Miller Brewing Co. v. Korshak, 35 Ill. 2d 86, 219 N.E.2d 494 (1966), the Illinois Supreme Court determined that a taxpayer\u2019s asserted belief that it is not liable to pay certain taxes is an insufficient basis to set aside a penalty for nonpayment. Therefore, we find that plaintiff did not have reasonable cause to avoid payment of taxes and it should have to pay both penalties and interest.\nCONCLUSION\nFor the aforementioned reasons, we affirm the judgment of the circuit court of Cook County requiring plaintiff to pay $596,737 in unpaid taxes, interest and penalties.\nAffirmed.\nZWICK, PJ., and O\u2019BRIEN, J., concur.\nIn accordance with accounting convention, losses will be indicated by the use of parentheses.\nIneome and taxes for 1985 are not at issue in this case.\nThis provision is currently codified at 35 ILCS 5/201(a) (West 1992). However, because this case concerns tax years ending prior to December 31, 1986, we will rely on the 1985 version of the Act unless otherwise noted.\nBefore reaching a final base income figure, the Act requires modifications called \u201caddition modifications\u201d and \u201csubtraction modifications.\u201d Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 203(b)(2). /\nApportionment is the method used by the statute to describe the process of dividing business income earned in Illinois and at least one other state. In this process, the income attributable to Illinois is determined by multiplying the taxpayer\u2019s total business income by a percentage representing the taxpayer\u2019s presence in the state. See Ill. Rev. Stat. 1985, ch. 120, par. 3 \u2014 304. Allocation, on the other hand, looks at where income was generated.", "type": "majority", "author": "JUSTICE BUCKLEY" } ], "attorneys": [ "Diane M. Anderson, of Neal, Gerber & Eisenberg, of Chicago, for appellant.", "James E. Ryan, Attorney General, of Chicago (Joel D. Bertocchi, Solicitor General, of counsel), for appellee." ], "corrections": "", "head_matter": "ROCKWOOD HOLDING COMPANY, Plaintiff-Appellant, v. THE DEPARTMENT OF REVENUE, Defendant-Appellee.\nFirst District (6th Division)\nNo. 1 \u2014 98 \u2014 4081\nOpinion filed March 24, 2000.\nDiane M. Anderson, of Neal, Gerber & Eisenberg, of Chicago, for appellant.\nJames E. Ryan, Attorney General, of Chicago (Joel D. Bertocchi, Solicitor General, of counsel), for appellee." }, "file_name": "1120-01", "first_page_order": 1140, "last_page_order": 1152 }