Tyson Foods, Inc. v. Dept. of Revenue, No. 1-98-1476

1st District, February 8, 2000 (NUNC PRO TUNC December 28, 1999)

SECOND DIVISION

JUSTICE McBRIDE delivered the opinion of the court:

Defendants, the Illinois Department of Revenue and Douglas Whitley, the Director of Revenue (hereafter collectively referred to as the Department), issued a notice of deficiency to plaintiff Tyson Foods, Inc. (Tyson), assessing Illinois corporate income taxes for tax years ending March 29, 1986, and April 2, 1988. Two actions relating to the deficiencies, one pursuant to the State Officers and Employees Money Disposition Act and another pursuant to the Administrative Review Act, were consolidated before the circuit court. The court, in separate orders, entered judgment in favor of defendants in both cases. Tyson appeals, contending that the circuit court erred in finding that Tyson's activities in Illinois permitted the State to impose an income tax on Tyson, erred by failing to apply proper standards in granting summary judgment in one of the actions, and erred in failing to abate penalties against Tyson.

Tyson is an Arkansas-based corporation whose primary business is producing and selling poultry-based food products. Tyson did not file corporate income tax returns in Illinois for the tax years ending March 29, 1986, and April 2, 1988. In 1990, the Department issued a notice of deficiency to Tyson assessing corporate income tax of $9,827 for the tax year that ended March 29, 1986, and $46,992 for the tax year that ended April 2, 1988, along with penalties of $7,722 and $31,280 for the respective years.

Tyson challenged the notice of deficiency relating to 1986 by filing a complaint in the circuit court pursuant to the State Officers and Employees Money Disposition Act. 30 ILCS 230/1 et seq. (West 1996). Prior to filing, Tyson paid the deficiency for 1986 to the Department under protest. The payment of $22,052.84 represented $17,549.00 of tax and penalties and $4,503.84 of interest.

Tyson also challenged the notice of deficiency for 1988 by filing with the Department a protest and request for an administrative hearing. At the administrative hearing, the parties agreed to a stipulation of facts. Following the hearing, an administrative law judge recommended that the notice of deficiency for the 1988 tax year be upheld in its entirety. The Department adopted the recommendation of the administrative law judge.

Tyson then filed a complaint for administrative review in the circuit court. Tyson's actions before the circuit court under the State Officers and Employees Money Disposition Act and Administrative Review Act were consolidated. The circuit court noted that despite the consolidation, separate judgments would be entered on the two cases.

Public Law 86-272 (the Law), under which Tyson sought protection from taxation, confers immunity from state income taxes on companies whose "only business activities" in a state consist of "solicitation of orders" for interstate sales. See Wisconsin Department of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214, 223, 112 S. Ct. 2447, 120 L. Ed. 2d 174 (1992); 15 U.S.C.