By Greg Bishop/Illinois Radio Network

SPRINGFIELD – The state’s retailers are coming out strong against a measure at the statehouse they say could mean confidential business information ends up in the hands of competitors. 

State Rep. Chris Welch, D-Westchester, said to help local governments capture all the sales tax revenue they’re owed, he wants to change state law with House Bill 2717. 

“What the bill does,” Welch said, “is it amends the Retailers Occupation Tax Act by providing that the [Illinois] Department of Revenue may disclose confidential information to a municipality, or a county, and also disclose that information to an independent third party.” 

He described it as a tool for municipalities to make sure local businesses are remitting the correct amount of sales tax dollars. 

“At a time when everyone is looking under pillow cushions and whatnot for extra revenue, we believe that this is an avenue for local governments; it’s an additional tool for them,” Welch said during a committee hearing on the bill. 

Illinois Retail Merchants Association President and CEO Rob Karr said giving confidential sales tax data to a third party is a horrible idea. He said that information can provide insight into how a business is doing financially and even what kind of margins a business is operating on. 

“That’s damning information in the hands of a competitor,” Karr said. “We have no comfort level with what these third parties are doing They’re not accountable. Even the local governments today who are accountable have admitted they’re sharing information outside and in violation of state law. That’s concerning.” 

Supporters of the bill included Paul Rosenfeld from the Illinois Coalition of Local Governments. He said the bill would make the confidential information of businesses even more confidential. 

“If an employee of the city makes copies of that information, loses the CD ROM or otherwise inadvertently breaks the chain of custody, the mayor could be prosecuted with a Class II misdemeanor and subject to a $7,500 fine,” Rosenfeld said. “If [a city employee] deliberately leaks or sells that information, the mayor could be convicted of the crime today. [House Bill] 2717 will change that.” 

Welch said the bill would “decriminalize” certain behavior of local elected officials. 

“Our mayors who are charged with the duty of running their towns shouldn’t risk being prosecuted for trying to do what they believe is in the best interest of their towns,” Welch said. 

“This information is provided today in violation of the confidentiality agreements in state law,” Karr said. “So essentially what we’re looking to do here is legalize illegal behavior on parts of local government.” 

The Illinois Department of Revenue is opposed to Welch’s bill. 

IDOR Legislative Office Manager Richard Sgro said state officials worry the bill will be an undue burden on the department because of increased requests from local governments, or third party auditors. 

“Emails are asking us to look at dentists’ offices, credit unions, banks, real estate agents, entities that we all know are not retailers,” Sgro said, “yet the department still has to go through the mechanics to verify that these are in fact not retailers and should be remitting sales taxes to the department. So we’re concerned of that proliferating and obviously creating an undue administrative burden on the department.” 

Another aspect of the bill would allow the third-party auditors to get paid a contingency fee for their work in tracking down sales tax revenue owed to a muncipality. 

Welch said that would save taxpayers money because auditors charge by the hour. 

“The contingency fee is only paid if these independent parties find money, for which they should be paid for,” he said. 

Karr said such incentives pollutes the system. 

“The contingency fee, the only way you get paid is the more money you find,” Karr said. “So the incentive is to cast a wide net, throw the spaghetti against the wall, and hope that something sticks. That’s just counter to what the current auditing practices are.” 

IRMA, which represents 23,000 retailers in the state, said HB 2717 would mostly benefit a private company called Azavar and put businesses’ sensitive tax information at risk. 

Chicago-based Azavar Technologies has pushed for similar legislation in the past, but it hasn’t been successful. Jason Perry, the president of Azavar Technologies and Azavar Government Solutions, declined to comment on the bill. 

IRMA said the tax information local governments get from the Department of Revenue is protected by strict confidentiality requirements. The group said that allowing access to such information outside a strict chain-of-custody would endanger taxpayer information. Karr said municipal officials can already get all the information they need to track sales from the Department of Revenue. 

A number of municipalities and government groups such as the McHenry County Council of Governments, Lake County Municipal League and the Will County Governmental League support the bill. Business groups such as the Illinois Chamber of Commerce, Associated Beer Distributors of Illinois and Illinois Lumber and Material Dealers Association oppose the measure. 

A similar proposal was introduced in 2016 in the Senate. It was opposed by business groups, the IDOR, the CPA Society, Council on State Taxation and National Conference of State Legislators, according to IRMA. 

Despite objectors’ concerns, the measure advanced to the House floor.