{ "id": 4306899, "name": "DTCT, INC., et al., Plaintiffs-Appellants, v. THE CITY OF CHICAGO DEPARTMENT OF REVENUE et al., Defendants-Appellees", "name_abbreviation": "DTCT, Inc. v. City of Chicago Department of Revenue", "decision_date": "2011-02-18", "docket_number": "Nos. 1\u201409\u20142272, 1\u201409\u20142274, 1\u201409\u20142275 cons.", "first_page": "945", "last_page": "956", "citations": [ { "type": "official", "cite": "407 Ill. App. 3d 945" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "511 U.S. 244", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 1147362 ], "year": 1994, "pin_cites": [ { "page": "271-72" } ], "opinion_index": 0, "case_paths": [ "/us/511/0244-01" ] }, { "cite": "797 N.E.2d 596", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 2003, "opinion_index": 0 }, { "cite": "207 Ill. 2d 82", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 974980 ], "year": 2003, "pin_cites": [ { "page": "95" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/207/0082-01" ] }, { "cite": "532 N.E.2d 322", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1988, "opinion_index": 0 }, { "cite": "177 Ill. App. 3d 305", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3620927 ], "year": 1988, "pin_cites": [ { "page": "311-12" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/177/0305-01" ] }, { "cite": "750 N.E.2d 260", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 2001, "opinion_index": 0 }, { "cite": "322 Ill. App. 3d 499", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 126350 ], "year": 2001, "pin_cites": [ { "page": "506" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/322/0499-01" ] }, { "cite": "733 N.E.2d 393", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 2000, "opinion_index": 0 }, { "cite": "315 Ill. App. 3d 259", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 980650 ], "year": 2000, "pin_cites": [ { "page": "265" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/315/0259-01" ] }, { "cite": "919 N.E.2d 300", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 2009, "opinion_index": 0 }, { "cite": "235 Ill. 2d 1", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3625191 ], "weight": 3, "year": 2009, "pin_cites": [ { "page": "7" }, { "page": "6" }, { "page": "6-7" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/235/0001-01" ] }, { "cite": "811 N.E.2d 220", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 2004, "opinion_index": 0 }, { "cite": "349 Ill. App. 3d 46", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5436248 ], "weight": 4, "year": 2004, "pin_cites": [ { "page": "49" }, { "page": "49" }, { "page": "49" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/349/0046-01" ] }, { "cite": "417 N.E.2d 1343", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1981, "pin_cites": [ { "parenthetical": "the unitary business group concept is used in accounting methods by states \"to determine net taxable income in such a way as to avoid the constitutional problems\"" } ], "opinion_index": 1 }, { "cite": "84 Ill. 2d 102", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3046664 ], "year": 1981, "pin_cites": [ { "page": "115", "parenthetical": "the unitary business group concept is used in accounting methods by states \"to determine net taxable income in such a way as to avoid the constitutional problems\"" } ], "opinion_index": 1, "case_paths": [ "/ill-2d/84/0102-01" ] }, { "cite": "541 N.E.2d 1385", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1989, "pin_cites": [ { "parenthetical": "\"The finding of a unitaiy business group is necessary before a State may apportion the income of two or more corporations for tax purposes.\"" } ], "opinion_index": 1 }, { "cite": "186 Ill. App. 3d 208", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2658629 ], "year": 1989, "pin_cites": [ { "page": "213", "parenthetical": "\"The finding of a unitaiy business group is necessary before a State may apportion the income of two or more corporations for tax purposes.\"" } ], "opinion_index": 1, "case_paths": [ "/ill-app-3d/186/0208-01" ] } ], "analysis": { "cardinality": 972, "char_count": 28905, "ocr_confidence": 0.778, "pagerank": { "raw": 4.643594115661138e-08, "percentile": 0.2913706552003611 }, "sha256": "14b08cb9f7e353dc4a698fd7bebb44b95a5557e4371395b87e36ca082002bcbf", "simhash": "1:b6824d85d5cd54cb", "word_count": 4611 }, "last_updated": "2023-07-14T15:37:05.247121+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "DTCT, INC., et al., Plaintiffs-Appellants, v. THE CITY OF CHICAGO DEPARTMENT OF REVENUE et al., Defendants-Appellees." ], "opinions": [ { "text": "JUSTICE CAHILL\ndelivered the judgment of the court, with opinion.\nJustice McBride concurred in the judgment and opinion.\nPresiding Justice Garcia dissented, with opinion.\nOPINION\nThis consolidated appeal arises from three actions for administrative review of a tax assessment imposed by the City of Chicago department of revenue (Department) against a group of corporations under the employer\u2019s expense tax (employer\u2019s tax) (Chicago Municipal Code \u00a73\u201420\u2014030 (eff. July 1, 1995)). In each case, the assessment was based on the Department\u2019s finding that, under the language of the tax ordinance, it could combine the employees of commonly owned though separately incorporated McDonald\u2019s restaurants. The tax applies only to businesses with 50 or more full-time employees and charges the employer $4 per month for each such employee. The City of Chicago department of administrative hearings upheld the assessment, finding that the corporations were properly combined. The circuit court affirmed that decision. Plaintiffs appeal, contending the ordinance does not permit the corporations to be combined to calculate the tax. We affirm.\nSection 3\u201420\u2014030(A) of the Code imposes a tax on:\n\u201cevery employer who, in connection with the employer\u2019s business, engages, hires, employs, or contracts with 50 or more individuals as commission merchants and full-time employees, or any combination thereof, to perform work or render services in whole or in part within the city of Chicago.\u201d Chicago Municipal Code \u00a73\u201420\u2014 030(A) (eff. July 1, 1995).\nThe ordinance defines \u201cemployer\u201d as \u201cany person that employs one or more employees performing services in whole or in part within the city of Chicago.\u201d Chicago Municipal Code \u00a73\u201420\u2014020(1) (eff. July 1, 1995). The term \u201cbusiness\u201d is defined in the ordinance as:\n\u201cany activity, enterprise, profession, trade or undertaking of any nature conducted or engaged in, or ordinarily conducted or engaged in, with the object of gain, benefit or advantages, whether direct or indirect, to the employer or to another or others. The term shall include entities which are subsidiary or independent, conducting operations for the benefit of others and at no benefit to themselves, nonprofit businesses and trade associations.\u201d Chicago Municipal Code \u00a73\u201420\u2014020(B) (eff July 1, 1995).\nOn February 7, 2005, the Department issued a tax assessment against three separate corporations, DTCT, Inc., Taylor MCD, Inc., and BDJK Taylor, Inc. (collectively DTCT), each operating a McDonald\u2019s restaurant in different locations. The corporations are wholly owned by Derrick and Cheryl Taylor. The Taylors control every aspect of the operation of each restaurant, including the payment of employees\u2019 wages. The tax assessment showed DTCT owed $17,411.57 in tax, penalties and interest for failure to pay the employer\u2019s tax for the period of October 2001 through June 2004. The assessment was based on the Department\u2019s finding that under the language of section 3\u201420\u2014030(A) of the Chicago Municipal Code (Code) (Chicago Municipal Code \u00a73\u201420\u2014030(A) (eff. July 1, 1995)), it could combine employees working at the three franchises.\nOn the same date, the Department made a similar finding with respect to Lofton & Lofton Management, Inc., Lofton & Lofton Management II, Inc., Lofton Management Four, Inc., and Lofton & Lofton Management V, Inc. (collectively Lofton), each of which also operates a McDonald\u2019s restaurant in different locations. The corporations are wholly owned by Ronnie and Lillian Lofton. The Loftons control every significant aspect of the operation of each restaurant, including the payment of employees\u2019 wages. The assessment alleged that Lofton owed $44,934.66 in tax, penalties and interest for failure to pay the tax for the period of July 1997 through June 2004.\nOn April 4, 2005, the Department made a similar finding with respect to V Oviedo, Inc., Midan, Inc., and Lote, Inc. (collectively Oviedo), each of which also operates a McDonald\u2019s restaurant in different locations. The corporations are wholly owned by Virginia Ojeda and her son. Ojeda controls every significant aspect of the operation of each of the restaurants, including the payment of employees\u2019 wages. The assessment alleged that Oviedo owed $38,856.43 in tax, penalties and interest for failure to pay the employer\u2019s tax for the period of January 1999 through June 2004.\nDTCT, Lofton and Oviedo (collectively plaintiffs) separately filed protests to the assessments with the City of Chicago department of administrative hearings. After hearings, the administrative law judge (ALJ) entered a written order in each case, finding that consolidation was proper under the ordinance. The ALJ rejected the argument that the ordinance\u2019s use of the word \u201cemployer\u201d in the singular showed a legislative intent that the corporations could not be combined. The ALJ relied instead on the term \u201cbusiness\u201d used and defined in the ordinance as \u201centities which are subsidiary or independent, conducting operations for the benefit of others and at no benefit to themselves\u201d (Chicago Municipal Code \u00a73\u201420\u2014020(B) (eff. July 1, 1995)). The ALJ then concluded that because the corporations were a \u201cunitary business group,\u201d under the Department\u2019s 2005 Employer\u2019s Expense Tax Ruling No. 2 (2005 ruling), they were properly consolidated. The ALJ rejected the argument that a 1997 information bulletin issued by the Department stated that the corporations could not be consolidated. The ALJ upheld the assessment against DTCT and Lofton and corrected Oviedo\u2019s liability to $13,428.\nDTCT, Lofton and Oviedo filed separate complaints for administrative review in the circuit court. Following hearings, the court affirmed the decisions of the ALJ. DTCT (No. 1\u201409\u20142272), Lofton (No. 1\u201409\u20142274) and Oviedo (No. 1\u201409\u20142275) separately appealed and we consolidated the actions for review.\nUnder the Administrative Review Law (735 ILCS 5/3\u2014101 et seq. (West 2004)), we review the administrative decision and not the circuit court\u2019s ruling. West Belmont, L.L.C. v. City of Chicago, 349 Ill. App. 3d 46, 49, 811 N.E.2d 220 (2004). Because the Department\u2019s interpretation of a municipal ordinance is a question of law, our review is de novo. West Belmont, 349 Ill. App. 3d at 49. A taxpayer bears the burden of proving it is entitled to an exemption from a tax. West Belmont, 349 Ill. App. 3d at 49.\nPlaintiffs contend that the plain language of section 3\u201420\u2014030(A) of the Code (Chicago Municipal Code \u00a73\u201420\u2014030(A) (eff. July 1, 1995)) prohibits consolidation of separate corporate entities. They claim that the ordinance identifies \u201cemployer\u201d in the singular, evidence that the city did not intend to combine employers to reach the 50-employee threshold. Plaintiffs maintain that the ALJ erred in relying on the term \u201cbusiness\u201d as used and defined in the ordinance because the term is overly broad and leads to absurd results. Plaintiffs argue that \u201cany businesses that enter into mutually beneficial contracts would be considered to be acting in connection with each other\u201d and would be subject to the tax.\nThe Department responds that when \u201cemployer\u201d and \u201cbusiness\u201d are read together, independent entities may be consolidated to calculate the employer\u2019s tax. The Department argues that the definition of \u201cbusiness\u201d in the ordinance, which includes \u201csubsidiary or independent\u201d entities, justifies this interpretation. The Department maintains that plaintiffs\u2019 reading would allow large employers to circumvent the tax through the creation of subsidiaries.\nMunicipal ordinances are interpreted under the rules governing statutory interpretation. Landis v. Marc Realty, L.L.C., 235 Ill. 2d 1, 7, 919 N.E.2d 300 (2009). The fundamental rule is to give effect to the intent of the legislature. Landis, 235 Ill. 2d at 6. In interpreting a municipal ordinance, we give effect to the intent of the municipality as shown by the plain and ordinary language of the ordinance. Antler v. Classic Residence Management Ltd. Partnership, 315 Ill. App. 3d 259, 265, 733 N.E.2d 393 (2000); Monat v. County of Cook, 322 Ill. App. 3d 499, 506, 750 N.E.2d 260 (2001). If the language in the ordinance is clear and unambiguous, we do not resort to extrinsic aids of construction. Landis, 235 Ill. 2d at 6-7.\nWe believe the plain language of section 3-20\u2014030(A) of the Code is compatible with an intent to tax \u201cevery employer\u201d who has 50 or more full-time employees in the employer\u2019s \u201cbusiness.\u201d An \u201cemployer\u201d is \u201cany person that employs one or more employees performing services in whole or in part within the city of Chicago.\u201d Chicago Municipal Code \u00a73\u201420\u2014020(1) (eff. July 1, 1995). A \u201cperson\u201d includes a corporation. See Chicago Municipal Code \u00a71\u20144\u2014090(e) (amended Nov. 13, 2007). The term \u201cbusiness\u201d is broadly defined in the ordinance as \u201cany activity, enterprise, profession, trade or undertaking of any nature conducted *** with the object of gain *** whether direct or indirect, to the employer.\u201d Chicago Municipal Code \u00a73\u201420\u2014020(B) (eff. July 1, 1995). A \u201cbusiness,\u201d the key to this analysis, includes \u201centities which are subsidiary or independent.\u201d Chicago Municipal Code \u00a73\u201420\u2014020(B) (eff. July 1, 1995). Similarly, an \u201cemployee\u201d is defined as \u201cany individual\u201d who works for the employer in \u201cany activity *** with the object of gain, benefit, or advantages, whether direct or indirect, to the taxpayer.\u201d Chicago Municipal Code \u00a73\u201420\u2014020(G) (eff. July 1, 1995). Given the definition of \u201cbusiness\u201d in the ordinance, and that an \u201cemployee\u201d may provide a \u201cdirect or indirect\u201d benefit to the taxpayer, we believe the city intended the employer\u2019s tax to apply to plaintiffs\u2019 business arrangements.\nWe are unpersuaded by plaintiffs\u2019 argument that because the word \u201cemployer\u201d in the ordinance is used in the singular, the city did not intend to combine multiple corporations in calculating the tax. The Code includes the universal rule of statutory construction: \u201c[w]henever any words in any section of this Code import the plural number, the singular shall be deemed to be included, and whenever the singular shall be used, it shall be deemed to include the plural.\u201d Chicago Municipal Code \u00a71\u20144\u2014100 (added June 27, 1990).\nPlaintiffs alternatively assert a more persuasive argument: that the ALJ erred in upholding the tax assessment because the officer improperly found they satisfied the test for a \u201cunitary business group\u201d as set out in the 2005 ruling. Plaintiffs claim the determination of whether separate corporate entities may be consolidated to calculate the tax cannot be based on the concept of a \u201cunitary business group\u201d because the 2005 ruling was not in effect for the tax period at issue here. Plaintiffs maintain that this court should instead consider a 1997 information bulletin issued by the Department, interpreting the employer\u2019s tax ordinance to not require consolidation of separate corporate entities. That bulletin provides the following guidance:\n\u201cIf I have more than one location do I file a separate [Employer\u2019s] Expense Tax return for each location?\nNo, you should include on your return all the individuals who perform any service, of whatever nature for your company, or for whom you have control of the payment of their wages.\nExample 1: ABC Company has 60 employees located in their 3 Chicago offices. Each office has 20 employees which consist of one office manager and 19 staff personnel. Each office manager is responsible for the services performed by the personnel in their respective location. ABC Company is responsible for payment of wages to all the employees. All of the employees earned or accrued over $900 during the calendar quarter. All of the employees worked 50% or more of the time in that calendar quarter within the city of Chicago. ABC Company would file one [Employer\u2019s] Expense Tax return for the 60 employees located in their 3 Chicago officers because they had control of the payment of the wages of all 60 employees.\nExample 2: XYC Corp. and ABC Inc. are affiliated companies. XYC Corp. has 100 employees and is responsible for the work performed by their employees as well as the payment of their wages. ABC Inc. has 150 employees and is responsible for the work performed by their employees as well as the payment of their wages. [XYC] Corp. and ABC Inc. should each file an [Employer\u2019s] Expense Tax return because they are two separate entities which control the work performed by their employees and each has control of the payment of their employees wages. If you are unsure if your company should file a consolidated return please request an opinion from our Law Department. A detailed explanation of the relationship and structure of your company as well as any supporting documents should be included with your request.\u201d\nAfter plaintiffs\u2019 audit, the Department issued the 2005 ruling, which introduced the concept of a \u201cunitary business group.\u201d The ruling requires that a taxpayer doing business as a \u201cunitary business group\u201d must combine the persons employed by the members of the group. Section 5 of the ruling defines the term \u201cunitary business group\u201d as:\n\u201ca group of persons related through common ownership or control, whose business activities are in the same general fine (such as *** food service ***), and whose members are functionally integrated through the exercise of centralized management (where, for example, authority over such matter as purchasing, financing, tax compliance, product line, personnel, marketing and/or capital investment is not left to each member). Common ownership in the case of corporations is the direct or indirect control or ownership of more than 50% of the outstanding voting stock of the persons carrying on unitary business activity.\u201d Chicago Department of Revenue Employer\u2019s Expense Tax Ruling No. 2, \u00a75 (eff. Sept. 15, 2005).\nImportantly, section 7 of the ruling states that \u201c[t]his ruling is intended to clarify rather than change existing law.\u201d Chicago Department of Revenue Employer\u2019s Expense Tax Ruling No. 2, \u00a77 (eff. Sept. 15, 2005).\nPlaintiffs do not dispute that they are each a unitary business group as that term is defined in the 2005 ruling. Rather, plaintiffs argue that the 1997 information bulletin, which was the only pronouncement on consolidation available to them during their audit, supports their position that separate entities should not be consolidated. They claim that example 2 in the information bulletin shows that \u201cregardless how entities are affiliated, if they in fact are separate and pay and control their own employees, they are not to be consolidated.\u201d\nWe do not believe that either example in the 1997 information bulletin is analogous to plaintiffs\u2019 business arrangements. Example 1 involves a single corporation with multiple locations. Example 2 involves two affiliated corporations but under separate control with each corporation paying its own employees\u2019 wages. Neither example fits the case here. Plaintiffs\u2019 business arrangements involve separately incorporated but affiliated corporations under the same ownership, control and central management. The owner is responsible for paying the employees\u2019 wages at the different locations. The record shows the corporate entities comprising DTCT, Lofton, and Oviedo, respectively, are not separate nor do they pay their own employees. The record shows Derrick and Cheryl Taylor, as owners of DTCT, control every aspect of the operation of each of the three McDonald\u2019s restaurants that make up DTCT, including the payment of wages. Similarly, Ronnie and Lillian Lofton, as owners of Lofton, control every significant aspect of the operation of each of the four McDonald\u2019s restaurants that make up Lofton, including the payment of wages. The same holds true for Virginia Ojeda as the owner of Oviedo.\nWe are unpersuaded by plaintiffs\u2019 argument that the Department\u2019s 2005 ruling is a \u201ccompletely new taxation method\u201d beyond the scope of the Department\u2019s authority to enact in a ruling without the approval of the city council. The Department is \u201cempowered to adopt and promulgate, and to enforce, rules and regulations relating to any matter or thing pertaining to the administration\u201d of the employer\u2019s tax ordinance. See Chicago Municipal Code \u00a73\u201420\u2014070 (2004). We give deference to the Department\u2019s interpretation of an ordinance it administers and will follow that interpretation unless it is clearly erroneous. Katz v. City of Chicago, 177 Ill. App. 3d 305, 311-12, 532 N.E.2d 322 (1988). Here, based on the plain language of the employer\u2019s tax ordinance, which seeks to tax \u201centities which are subsidiary or independent,\u201d we cannot say that the Department\u2019s ruling incorporating a \u201cunitary business group\u201d as one such entity is clearly erroneous.\nWe are also unpersuaded by plaintiffs\u2019 argument that the 2005 ruling cannot be applied retroactively because the employer\u2019s tax ordinance does not include a provision permitting retroactive application. See Caveney v. Bower, 207 Ill. 2d 82, 95, 797 N.E.2d 596 (2003); Landgraf v. USI Film Products, 511 U.S. 244, 271-72 (1994). Section 7 of the 2005 tax ruling provides that \u201c[t]his ruling is intended to clarify rather than change existing law.\u201d Chicago Department of Revenue Employer\u2019s Expense Tax Ruling No. 2, \u00a77 (eff. Sept. 15, 2005). Because the ruling did not create a new taxation method but explained how the employer\u2019s tax should be assessed it may be applied retroactively. See West Belmont, 349 Ill. App. 3d 46 (this court deferred to the Department\u2019s 1999 interpretation of a tax ordinance to affirm a 1998 tax assessment).\nWe confirm the decision and order of the ALJ.\nConfirmed.", "type": "majority", "author": "JUSTICE CAHILL" }, { "text": "PRESIDING JUSTICE GARCIA,\ndissenting:\nBefore the audits that gave rise to this consolidated appeal, the City of Chicago department of revenue (the Department) had never before treated the employees of distinct, but affiliated, corporate entities (owning separate McDonald\u2019s franchises) as working for a single employer under the Chicago Employer\u2019s Expense Tax Ordinance (EETO) as enacted by the Chicago city council. Chicago Municipal Code \u00a73 \u2014 20\u2014010 et seq. (eff. July 1, 1995). Under the EETO, an employer is required to pay the expense tax only if it has \u201c50 or more *** full-time employees *** within the city of Chicago.\u201d Chicago Municipal Code \u00a73\u201420\u2014030(A) (eff. July 1, 1995).\nFollowing the audits in 2004, the Department issued assessments in early 2005 against the corporate plaintiffs for unpaid EETO taxes, penalties and interest from January 1, 1999, to June 20, 2004. Liability under the EETO stems from the Department\u2019s calculations that the combined employees of the affiliated corporations met the ordinance threshold of 50.\nOn August 25, 2005, the Department issued \u201cTax Ruling No. 2,\u201d effective September 15, 2005, introducing the concept of \u201cunitary business group,\u201d which the Department contends supports its earlier tax assessments against the corporate plaintiffs. The Department\u2019s Tax Ruling No. 2 provides in pertinent part:\n\u201cSection 4. For the purpose of calculating the 50-employee threshold contained in Section 3\u201420\u2014030(A), employees will be combined if they are employed by members of a single \u2018unitary business group,\u2019 as that term is defined below.\nSection 5. The term \u2018unitary business group\u2019 means a group of persons related through common ownership or control, whose business activities are in the same general line (such as *** food service ***), and whose members are functionally integrated through the exercise of centralized management (where, for example, authority over such matter as purchasing, financing, tax compliance, product line, personnel, marketing and/or capital investment is not left to each member). Common ownership in the case of corporations is the direct or indirect control or ownership of more than 50% of the outstanding voting stock of the persons carrying on unitary business activity.\nSection 6. In accordance with Section 3\u20144\u2014189 of the Code, a consolidated employer\u2019s expense tax return shall be filed on behalf of all members of the unitary business group.\nSection 7. This ruling is intended to clarify rather than change existing law.\u201d Chicago Department of Revenue Employer\u2019s Expense Tax Ruling No. 2, \u00a7\u00a74, 5, 6, 7 (eff. Sept. 15, 2005).\nThe majority finds it important that section 7 is included in the tax ruling. 407 Ill. App. 3d at 951. I do as well, but for an entirely contrary reason. I find the Chicago department of revenue \u201cdoth protest too much.\u201d William Shakespeare, Hamlet, act 2, sc. 2. Unless the Department means to suggest that it has the authority to \u201cchange existing law,\u201d I find its avowal that it is not doing that to suggest the opposite. Tax Ruling No. 2 clarified nothing, but it changed the law under the EETO as it applied to the corporate plaintiffs before us.\nNotably, the Department fails to inform us how the need for \u201cclarification\u201d arose. What part of the EETO is so ambiguous that a \u201cclarification\u201d was needed? Nor does the Department inform us what triggered its decision to treat the employees of affiliated corporations operating separate McDonald franchises as all working for the same employer. Certainly the Department knows it may only adopt, promulgate, and enforce rules and regulations pertaining to the administration and enforcement of existing municipal ordinances. Chicago Municipal Code \u00a73\u20144\u2014150(A)(1) (amended May 12, 1999). It is axiomatic that the Department may not change existing law.\nThe plaintiffs correctly point out in their main brief that \u201c[t]he term \u2018unitary business group\u2019 is a statutory term used in relation to Illinois corporate income tax since 1982.\u201d See 35 ILCS 5/1501(a) (West 2008). Its statutory origin means the term was recognized in legislation passed by the Illinois legislature. The Department makes no claim of a similar enactment by the Chicago city council. As the plaintiffs state, \u201cThis unitary business group scheme appears nowhere in Chicago\u2019s municipal ordinances.\u201d\nNor does the Department contend it relied on tax returns filed with the Illinois Department of Revenue to support its 2005 tax assessment of the corporate plaintiffs based on the Department\u2019s contention that they constitute a \u201cunitary business group\u201d to warrant combining the employees of affiliated corporations as working for a single employer. See Filtertek, Inc. v. Department of Revenue, 186 Ill. App. 3d 208, 213, 541 N.E.2d 1385 (1989) (\u201cThe finding of a unitaiy business group is necessary before a State may apportion the income of two or more corporations for tax purposes.\u201d).\nOf course, there is a world of difference between the Illinois Department of Revenue\u2019s decision to apportion the income of two or more multistate corporations under the Illinois tax code and the Department\u2019s decision to combine the employees of distinct, but affiliated, corporations for the purpose of imposing the Chicago employer\u2019s expense tax. In the former situation, earned income is apportioned between states to avoid states taxing the same income. In the latter situation, no taxes would be due unless the employees of distinct corporate entities are combined. The Department\u2019s use of the concept \u201cunitary business group\u201d only serves to enlarge the definition of employer under the EETO; its aim is not to avoid duplicate taxation. See Caterpillar Tractor Co. v. Lenckos, 84 Ill. 2d 102, 115, 417 N.E.2d 1343 (1981) (the unitary business group concept is used in accounting methods by states \u201cto determine net taxable income in such a way as to avoid the constitutional problems\u201d). Under the guise of \u201cunitary business group,\u201d the Department pierces the corporate veil to examine shareholder ownership of affiliated corporations to determine whom it believes is the \u201cemployer\u201d under the EETO.\nBased on its determination of shareholder ownership, the Department imposes a new obligation on the group of employers deemed to be part of a \u201cunitary business group.\u201d That group of employers must now file \u201ca consolidated employer\u2019s expense tax return.\u201d The corporate plaintiffs correctly point out that nothing in the ordinance that gave rise to the employer\u2019s expense tax refers to more than one employer; nor is there a provision in the ordinance that provides for consolidation of affiliated corporations to require the filing of a \u201cconsolidated\u201d expense tax return.\nOf course, it is likely true that each McDonald\u2019s restaurant was incorporated separately, at least in part, to avoid the reach of the EETO. However, when the enabling legislation does not address such tax avoidance schemes, the responsibility to correct a perceived problem lies with the Chicago city council; it does not lie with the Department. The Department cannot arrogate the authority to expand the set of employers that are subject to the EETO so that expense taxes are owed that were not owed before.\nWhile it is true the Department\u2019s 1997 bulletin does not precisely address the circumstances present in this case, there can be no dispute that of the two examples in the bulletin, example No. 2 most closely resembles the circumstances present in this case:\n\u201cExample 2: XYC Corp. and ABC Inc. are affiliated companies. XYC Corp. has 100 employees and is responsible for the work performed by their employees as well as the payment of their wages. ABC Inc. has 150 employees and is responsible for the work performed by their employees as well as the payment of their wages. [XYC] Corp. and ABC Inc. should each file an [Employer\u2019s] Expense Tax return because they are two separate entities which control the work performed by their employees and each has control of the payment of their employees wages.\u201d May 1997 Information Bulletin.\nUnder \u201cExample 2,\u201d separate corporations are \u201cseparate entities\u201d because they each exercise control over their respective employees. There is no suggestion in the 1997 bulletin that the corporate veil regarding \u201caffiliated companies\u201d may be pierced to examine whether one shareholder owns more than 50% of each company, which, in turn, means that that shareholder \u201ccontrols\u201d the employees of all affiliated corporations so as to qualify the affiliated corporations as functioning as a single \u201cemployer,\u201d as the Department now argues. There is no suggestion in either example that the percentage ownership of a shareholder has any significance in examining whether affiliate corporations may be combined into a single employer.\nNor does the testimony of the Department auditor, the single witness called by the Department at the administrative hearing, lead me to the conclusion reached by the majority that affiliated corporations should be treated as a single employer under the EETO. The written decision of the administrative hearing officer summarizes the auditor\u2019s testimony. The auditor testified \u201che was told [by the Department] to consolidate these businesses due to the common ownership[;] *** no other factors were considered.\u201d It is clear that the auditor did not consolidate these businesses because of his own understanding of what the EETO mandated. In fact, as the auditor further demonstrated, the City of Chicago treats each affiliated corporate entity as a distinct entity in other regards. The auditor confirmed that each corporate entity within the \u201cunitary business group\u201d had \u201cits own federal tax ID number.\u201d The auditor admitted that each corporation paid separate license fees to the city and that each corporation was considered a taxpayer. According to the auditor, the instructions to the form required to be filed under the EETO \u201cdo not contain a reference to the term \u2018unitary business group\u2019.\u201d The term \u201cunitary business group\u201d did not exist in the Department\u2019s lexicon before it issued Tax Ruling No. 2. In fact, as the hearing officer noted, \u201cTax Ruling #2 did not exist when [the auditor] did his assessment.\u201d The auditor admitted \u201cthat if the entities were not combined there would be no EETO liability and therefore no penalties or interest.\u201d\nI reject as meaningless the Department\u2019s statement that Tax Ruling No. 2 was \u201cintended to clarify rather than change existing law.\u201d In an entirely unprecedented manner, the Department expanded the definition of \u201cemployer\u201d under the EETO in Tax Ruling No. 2 in a transparent effort to capture expense taxes it believes should be paid, though the EETO provides no basis to consolidate affiliated corporate entities into a single \u201cemployer.\u201d\nI respectfully dissent from the contrary decision of my colleagues.", "type": "dissent", "author": "PRESIDING JUSTICE GARCIA," } ], "attorneys": [ "Andrew D. Arons and Joel N. Goldblatt, both of Childress Duffy Goldblatt, Ltd., of Chicago, for appellants.", "Mara S. Georges, Corporation Counsel, of Chicago (Benna Ruth Solomon, Myriam Zreczny Kasper, and Suzanne M. Loose, Assistant Corporation Counsel, of counsel), for appellees." ], "corrections": "", "head_matter": "DTCT, INC., et al., Plaintiffs-Appellants, v. THE CITY OF CHICAGO DEPARTMENT OF REVENUE et al., Defendants-Appellees.\nFirst District (6th Division)\nNos. 1\u201409\u20142272, 1\u201409\u20142274, 1\u201409\u20142275 cons.\nOpinion filed February 18, 2011.\nAndrew D. Arons and Joel N. Goldblatt, both of Childress Duffy Goldblatt, Ltd., of Chicago, for appellants.\nMara S. Georges, Corporation Counsel, of Chicago (Benna Ruth Solomon, Myriam Zreczny Kasper, and Suzanne M. Loose, Assistant Corporation Counsel, of counsel), for appellees." }, "file_name": "0945-01", "first_page_order": 961, "last_page_order": 972 }