Attorney General Opinions
Advantage to foreign
corporations?
Swingline, a manufacturer of office
equipment, formed a wholly-owned subsidiary corporation in December 1975 called
the Wilson Jones Company and "spun-off
approximately $84 million of its paid-in
surplus to the new subsidiary. This effectively divided franchise tax payments
between the two firms. Although that "spin-
off might not have been permissible under
Illinois law, Scott said in his opinion that the
secretary of state must accept a report
submitted under the Business Corporation
Act (///. Rev. Stat. 1975, Ch. 32, sec. 157.119) from the subsidiary corporation
and could not instead require Swingline to
pay franchise taxes on its original paid-in
surplus figure of $200 million.
Dale Reynolds of the corporation division
of the Secretary of State's Office said, "We
have given the opinion to our counsel and as
of now we don't expect to comply with it. We
feel it would give foreign corporations an
unfair advantage." Legal counsel Bob Brodt
explained further that "the attorney general
may have overlooked a section of the
Business Corporation Act which says that
foreign corporations may not have greater
rights or privileges than a domestic corporation" (///. Rev. Stat. 1975, Ch. 32, sec.
157.103).
Shawn Denny of the Attorney General's
Office — and the lawyer who drafted the
Swingline opinion — stood by it. Denny said
he did not believe that section 103 of the
Business Corporation Act, which says that
foreign corporations shall "enjoy the same,
but no greater, rights and privileges as a
domestic corporation," applies to internal
management of foreign corporations.
Denny says he interprets a reduction of paid-
in surpluses to be an "internal affair," which
the state may not regulate.
Spokesmen in the Secretary of State's
Office estimate the attorney general's interpretation could cost the state upwards of $l
million in franchise taxes annually (S-1287).
The bad news and good news
Board members say the problem of
authorization arose because of an unpopular
amendment that was tacked on to a grant
rate bill in the House. When the Senate
refused to concur in the amendment —
which would have allowed districts to levy
certain taxes without referendum — the bill
died. Yet there is no cause for alarm,
according to Jim Howard, deputy director
of the Illinois Community College Board,
"I'm quite sure there will be a rate bill and it
will pass," said Howard, in reference to the
fall veto session of the General Assembly.
The good news for community colleges is
that the minimum average grants for fiscal
1977 are $17.61 per semester hour, and all
districts are entitled to this amount regardless of last year's appropriation since a
$17.61 minimum grant for fiscal 1977 is
spelled out in the Public Community College
Act (///. Rev. Stat. 1976 Supp., Ch. 122, sec.
102-16) (S-1293).
Opinions in brief
Auctioneers aren't exempt from sections 24-3
and 24-4 of the Criminal Code, which sets
restrictions upon the sale and delivery of firearms
and requires sellers of concealable firearms to
keep gun registry records. Under Illinois statutes
auctioneers qualify both as "sellers" and "deliverers" when auctioning weapons, therefore they
must comply with provisions designed "to insure
that firearms do not fall into the hands of persons
not competent to handle them" (S-1291).
The lease of a county building to a not-for-
profit corporation for use as a dormitory for a
junior college is all right under the Illinois
Constitution since such use qualifies as a "public
purpose." "This public purpose is served whether
done directly by the community college board or
indirectly through a not-for-profit foundation,"
said the attorney general (S-1288).
Income tax case files may properly be examined
by outside consultants to the Illinois Department
of Revenue for the purpose of improving
operations of the department's Conference and
Hearings Division. Although examination by
such consultants for an "official purpose within
the Department" is allowed by the confidentiality
provision of the Illinois Income Tax Act, the
consultants must be carefully supervised to insure
that they do not misuse the information (S-1289).
Records of soil and water conservation districts
are under the jurisdiction of the appropriate local
records commission. "Such districts are municipal
corporations as contemplated by the Local
Records Act (///. Rev. Stat. 1975, Ch. 116, sec.
43.103)," said the opinion (S-1290).
Fees collected by a clerk of the circuit court are
to be deposited with the county treasurer. This
requirement is rooted in statutory law, not
constitutional, since circuit court clerks aren't
covered by the Illinois Constitution of 1970 under
provisions dealing with local government fees--
section 9(a) of Article VII. In addition, clerks of
circuit courts are mandated to collect fees for
marriages in court (S-1292).ž
30 / November 1977 / Illinois Issues
A FOREIGN [to Illinois] corporation is
not required to reduce its paid-in surplus in
the same manner as prescribed for Illinois
corporations under section 60a of the
Business Corporation Act, according to
Atty. Gen. William J. Scott. ["Paid-in
surplus" means a surplus received by a
corporation from capitalization of stock. It
is basically a technical accounting term used
for computing fees and franchise taxes.]
Foreign corporations may reduce their paid-
in surplus in any manner permitted by the
laws of the state or country under which they
are organized, according to the attorney
general. The August 18 opinion was given in
reply to a query from Secy. of State Alan J.
Dixon in regard to the Swingline Corporation of Delaware, which is authorized to do
business in Illinois.
Somebody goofed. Because the legislature
failed last spring to specify rates, Illinois
community colleges may not receive credit
hour grants for fiscal 1978, which began last
July 1. The attorney general ruled that unless
the legislature acts to establish a grant rate for fiscal 1978, the Illinois Community
College Board will have no authority to
distribute money appropriated for local
districts by H.B. 2417 — now P.A. 80-59.