An Illinois Supreme Court ruling Thursday means Arlington Heights may not get back more than $1 million in sales tax revenues from a Cooper’s Hawk restaurant in the village that were erroneously disbursed to neighboring Rolling Meadows over nearly a decade.
Arlington Heights had filed a complaint against Rolling Meadows in Cook County circuit court seeking to get its money back from Rolling Meadows with interest. But Thursday’s ruling found that under state law the Illinois Department of Revenue, not trial courts, has “exclusive” authority over sales tax misallocation disputes.
The decision upholds a ruling by the circuit court that had dismissed the case in part because the court found it did not have jurisdiction. It reverses an appellate court decision that ruled in favor of Arlington Heights and directed Rolling Meadows to return the funds, which exceeded $1.1 million.
Village Mayor Thomas Hayes responded to the ruling with strong words, saying Rolling Meadows should be “ashamed of this unjust result,” accusing the city of setting a bad precedent for local governments in Illinois.
“This was a case of unjust enrichment, and right versus wrong,” Hayes said in a statement. “It is wrong for Rolling Meadows to keep taxes, or for anyone to keep something, they know does not belong to them.”
The restaurant — which opened in June 2011 — was registered with IDOR that year but was wrongly coded in department records with a Rolling Meadows location. Per its practice, IDOR accepted the information in the reports as accurate because neither municipality reported a correction until March 2020, when Arlington Heights discovered the mistake.
The information was subsequently corrected so all future sales taxes from the restaurant went to the village. Arlington Heights filed the three-count complaint against Rolling Meadows — which it also accused of unjust enrichment and conversion — after the two municipalities couldn’t reach an agreement over the tax dispute.
Justice Mary K. O’Brien notes that the IDOR has already reimbursed Arlington Heights for six months of tax revenue — the maximum allowed under Illinois law — totaling $109,000.
While that may seem unfair, O’Brien writes, that’s the remedy for such cases according to current Illinois statutes and both municipalities had years to correct the error that led to the dispute.
“We acknowledge it may appear unfair that Arlington Heights was deprived of a decade of tax revenues,” O’Brien writes. “Both Arlington Heights and Rolling Meadows were required to regularly review the reports provided by IDOR listing the tax revenue sources within their respective municipal boundaries, and neither municipality did so.”
In a statement, the Village of Arlington Heights said it respected the court’s review of the issue but “remains deeply disappointed” in Rolling Meadows’ “refusal to act fairly and responsibly.” It also partly blamed IDOR for the errors.
Rolling Meadows Mayor Lara Sanoica said in a statement that she was “pleased” to learn of Thursday’s ruling and that the decision would provide clarity for municipalities on how such disputes should be handled under current state law.
“The City of Rolling Meadows will continue to cultivate a positive working relationship with the Village of Arlington Heights to promote the overall well-being and prosperity of our shared community and will continue to work collaboratively with the Village on local and regional projects of significance,” Sanoica said.