Shakman v. Dep't of Revenue
| Citation | 146 N.E.3d 640,438 Ill.Dec. 571,2019 IL App (1st) 182197 |
| Decision Date | 12 December 2019 |
| Docket Number | No. 1-18-2197,1-18-2197 |
| Parties | Michael L. SHAKMAN, Individually and as Trustee of the Michael L. Shakman Revocable Trust, Plaintiff-Appellant, v. The DEPARTMENT OF REVENUE and Michael Frerichs, in His Official Capacity as Treasurer of the State of Illinois, Defendants-Appellees. |
| Court | United States Appellate Court of Illinois |
Michael L. Shakman and Diane F. Klotnia, of Miller Shakman & Beem LLP, of Chicago, for appellant.
Kwame Raoul, Attorney General, of Chicago (Jane Elinor Notz, Solicitor General, and Carl J. Elitz, Assistant Attorney General, of counsel), for appellees.
¶ 1 This appeal concerns Illinois's Aircraft Use Tax Law ( 35 ILCS 157/10-1 et seq. (West 2018)), which imposes a 6.25% tax "on the privilege of using" an aircraft in Illinois "acquired by gift, transfer, or purchase" unless certain statutory exemptions apply.
¶ 2 In 2008, Michael L. Shakman bought an aircraft and paid a corresponding general use tax. Several years later, using a bill of sale, he changed the legal ownership of that aircraft to himself as trustee of his revocable trust and filed the bill of sale with the Federal Aviation Administration (FAA). Shakman, however, did not pay a use tax. The Department of Revenue (Department) monitors FAA's records, noticed the change in legal ownership, and sent Shakman a notice of tax liability under the Aircraft Use Tax Law. Shakman paid the tax under protest and sued the Department and Michael Frerichs, as Treasurer of the State of Illinois, for a declaratory judgment that the second use tax was improper. On the parties' cross-motions for summary judgment, the circuit court found that the Department properly imposed the tax pursuant to the Aircraft Use Tax Law. The court accordingly granted the Department and Frerichs's motion for summary judgment and denied Shakman's motion.
¶ 3 The sole issue on appeal is whether the Department properly imposed the tax pursuant to the Aircraft Use Tax Law after Shakman changed the legal ownership of the aircraft from himself individually to himself as trustee of his revocable trust. Because we find Shakman's change of ownership is a taxable event under the broad language of the Aircraft Use Tax Law and he has not contended any of the statutory exemptions apply, we affirm the judgments of the circuit court.
¶ 5 In 1990, Shakman created the Michael L. Shakman Revocable Trust. In 2007, Shakman amended and restated the trust in its entirety. In the restatement, in addition to being the trust's settlor, he named himself trustee and was the beneficiary during his lifetime. Upon his death, however, his trust property would pass to a marital trust benefitting his wife and a bypass trust benefitting his children. Additionally, Shakman's trust expressly provided him the power to revoke or amend the instrument at any time.
¶ 6 In 2008, Shakman individually purchased a Schleicher glider aircraft. Afterward, he registered the aircraft with the Department of Transportation and filed a general use tax return with the Department for $7370.
¶ 7 In 2014, as part of Shakman's estate planning, he sought to change ownership of the aircraft from himself individually to himself as trustee of his trust. To do so, he completed an aircraft bill of sale using a preprinted form from the FAA. According to the bill of sale, Shakman individually did "hereby sell, grant, transfer and deliver all rights, title and interests in and to such aircraft unto" himself "as trustee of Michael L. Shakman Revocable Trust * * * for and in consideration of $1 + OVC," with OVC apparently meaning other valuable consideration. Shakman subsequently filed the bill of sale with the FAA. According to a declaration that Shakman filed in conjunction with the eventual litigation in this case, after the change in legal ownership, he personally paid all costs associated with the maintenance and operation of the aircraft just as he did before the change of ownership.
¶ 8 At some point after filing the bill of sale with the FAA, the Department, which monitors aircraft title records of the FAA, noticed the change of ownership to Shakman's aircraft. Because the Department believed that the change was a taxable event under the Aircraft Use Tax Law, it sent Shakman's trust a notice of tax liability of $7511.01, a figure that included the aircraft use tax as well as a penalty for the nonpayment and interest. Shakman, on behalf of his trust, paid the Department $7511.63 under protest, a number slightly higher because Shakman believed the Department made an error in calculating the interest.
¶ 9 In March 2018, Shakman, individually and as trustee of his trust, filed a two-count complaint against the Department and Frerichs (collectively, defendants). In count I, Shakman sought a declaration that the Department's imposition of an aircraft use tax was improper and a declaration to have the Department refund him the amount he paid under protest with interest. In count II, Shakman sought a preliminary and permanent injunction barring the Department from transferring the amount he paid under protest from a protest fund. Shakman also separately filed a motion for a preliminary injunction. Later that month, the circuit court granted Shakman's motion for a preliminary injunction and ordered that defendants maintain the amount Shakman paid under protest in a protest fund pending resolution of the litigation.
¶ 10 After defendants answered Shakman's complaint, the parties filed cross-motions for summary judgment. Ultimately, the circuit court concluded that whenever an aircraft owner in Illinois filed a bill of sale with the FAA, the owner would incur a tax under the Aircraft Use Tax Law unless a statutory exemption applied. According to the court, the bright-line rule was consistent with the language of the Aircraft Use Tax Law and would lead to predictability in taxation. Based on the rule, the court found that the Department's imposition of an aircraft use tax for Shakman changing the legal ownership of his aircraft was proper despite him being taxed a second time for the use of the aircraft simply as a result of routine estate planning. The court accordingly granted defendants' motion for summary judgment and denied Shakman's motion.
¶ 11 Shakman timely appealed.
¶ 13 Shakman contends that the circuit court erred in finding that his change of ownership of his aircraft from himself individually to himself as trustee of his revocable trust was a taxable event under the Aircraft Use Tax Law. Shakman therefore argues that the court erred in resolving the parties' cross-motions for summary judgment.
¶ 15 By the parties' filing of cross-motions for summary judgment, they agree that there is only a question of law involved and invite the court to resolve the litigation based solely upon the record. Pielet v. Pielet , 2012 IL 112064, ¶ 28, 365 Ill.Dec. 497, 978 N.E.2d 1000. The circuit court should only grant summary judgment where the pleadings, depositions, admissions, and affidavits on file, when viewed in the light most favorable to the nonmoving party, demonstrate that there is no genuine issue of any material fact and the moving party is entitled to judgment as a matter of law. Id. ¶ 29.
¶ 16 Whether the circuit court properly resolved the parties' cross-motions for summary judgment turns on an issue of statutory construction. When interpreting a statute, our primary objective is to determine and effectuate the intent of our legislature, "the surest and most reliable indicator of which is the statutory language itself, given its plain and ordinary meaning." Board of Education of Springfield School District No. 186 v. Attorney General , 2017 IL 120343, ¶ 24, 413 Ill.Dec. 20, 77 N.E.3d 625. When construing statutes related "to the collection of taxes, the policy of this court has been to give them a common sense meaning so as to avoid making collection difficult or impossible." Department of Revenue v. Joseph Bublick & Sons, Inc. , 68 Ill. 2d 568, 575, 12 Ill.Dec. 265, 369 N.E.2d 1279 (1977). But also "[a] tax statute must be strictly construed against the government and in favor of the taxpayer." Kankakee County Board of Review v. Property Tax Appeal Board , 226 Ill. 2d 36, 52, 312 Ill.Dec. 638, 871 N.E.2d 38 (2007). If the statutory language is unambiguous, we must apply the statute as written without resorting to external aids of statutory construction. Board of Education of Springfield , 2017 IL 120343, ¶ 24, 413 Ill.Dec. 20, 77 N.E.3d 625. If, however, the statutory language is ambiguous, we may utilize extrinsic aids of statutory construction to determine the intent of our legislature. Id. ¶ 25.
¶ 17 We review the circuit court's ruling on cross-motions for summary judgment de novo . Pielet , 2012 IL 112064, ¶ 30, 365 Ill.Dec. 497, 978 N.E.2d 1000. Similarly, when tasked with interpreting and construing the meaning of a statute, we do so de novo . Id. As this case involves the intersection of tax law and trusts law, we must provide some initial background about both in order to provide the necessary context for the parties' arguments. We begin by discussing Illinois's sales tax system.
¶ 19 First, we must discuss two different, but interrelated, taxation schemes in Illinois. Illinois has enacted the Retailers' Occupation Tax Act (ROTA) ( 35 ILCS 120/1 et seq. (West 2018)), which authorizes the imposition of a retailers' occupation tax. City of Chicago v. City of Kankakee , 2019 IL 122878, ¶ 3, 433 Ill.Dec. 73, 131 N.E.3d 112. This tax is imposed on the sale of tangible personal property purchased in Illinois ( id. ), the selling of which must be done by "persons engaged in the business of selling at retail tangible personal property." 35 ILCS 120/2 (West 2018). Additionally, Illinois has enacted the Use Tax...
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...into the trust, the trustee holds legal title to the property while the beneficiary holds the equitable title. Shakman v. Department of Revenue , 2019 IL App (1st) 182197, ¶ 26, 438 Ill.Dec. 571, 146 N.E.3d 640. However, the trustee's holding of legal title to the property and his actions w......