This Week in Springfield – 99-20

In This Issue:

CONSUMER FRAUD & PROTECTION
CREDIT & FINANCE
ENVIRONMENT & UTILITIES
FOOD & LIQUOR
LABOR
LOSS PREVENTION
PHARMACY

With no deal in place on a Fiscal Year 2016 budget, both chambers of the Illinois General Assembly have been meeting during the summer with no agreement and little progress. Despite the budget impasse some legislation made it to the Governor’s desk and was signed into law. The following is a list of bills by subject matter of potential consequence to retail that passed the Assembly and have been signed into law or the Governor’s veto has been overridden. For your convenience, each bill number is hyper-linked so TWIS readers can access the new law. Additionally, the effective dates in which the laws begin are listed at the end of each summary.

As always, should you require additional information or assistance, please do not hesitate to contact IRMA.

CONSUMER FRAUD AND PROTECTION

Powdered Caffeine—SB 9 (Sen. Jennifer Bertino-Tarrant, D-Plainfield/Rep. Stephanie A. Kifowit, D-Aurora) creates the Powdered Caffeine Control and Education Act. It prohibits any person from selling, offering to sell, giving away, or providing free samples of powdered pure caffeine to any person under age 18 located in the State or to any person under age 18 making the purchase from within the State.  While IRMA is generally opposed to most product bans as consumers can just make the choice not to purchase a product and the FDA should be the ultimate arbiter of which food products are safe, IRMA was neutral on this bill as the product in question was not sold by IRMA members.The law becomes effective January 1, 2016.

Powdered Alcohol—SB 67 (Sen. Ira Silverstein, D-Chicago/Rep. Laura Fine, D-Glenview) prohibits the sale of powdered alcohol in Illinois.  While IRMA is generally opposed to most product bans, IRMA was neutral on this bill as it bans a product that is currently not available for sale in Illinois. The law becomes effective January 1, 2016.

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CREDIT AND FINANCE

Private Label Credit Cards—In the 98th General Assembly both the Senate and House unanimously passed an IRMA-initiative that allowed for a refund on bad debt established through a Private Label Credit Card (PLCC) administered by a third party. Former Governor Pat Quinn decided to use the bill, and a few others, as a vehicle for unrelated amendatory vetoes in his final moments in office effectively killing the bill. The initiative was reintroduced in the form of SB 507 (Sen. Daniel Biss, D-Skokie/Rep. Anthony DeLuca, D-Chicago Heights).

If a consumer does not pay for the merchandise they purchase on credit, and efforts to collect fail, a bad debt is declared and the sales tax is refunded to the retailer. This happens because in the eyes of the law, a sale is deemed not to have occurred. However, several years ago, the Illinois Department of Revenue (IDOR) issued a controversial opinion that a bad debt refund did not apply to PLCC’s administered by a third party. SB 507 takes into consideration this modernization and corrects this inequity by allowing a refund of sales tax on the bad debt created by consumer using a store branded PLCC. Over the course of last year and again this year, IRMA worked with IDOR to address their procedural concerns to ensure proper documentation would be available; limited the transactions that are available for a bad debt refund; and provided a clear line of accountability. As in the 98th General Assembly, the legislation passed with a near unanimous vote. The law became effective July 31, 2015.

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ENVIRONMENT AND UTILITIES

Telecom Modernization and 9-1-1 FundingSB 96 (Sen. John Sullivan, D-Quincy/Rep. Brandon Phelps, D-Harrisburg) funds the deteriorating 9-1-1 infrastructure and contains important changes to modernize Illinois telecommunications and the video competition laws. Currently, there are three surcharges that help fund the current 9-1-1 systems and network. One of these charges includes a 1.5% tax that is collected by a retailer on the sale of any prepaid wireless telecommunications service.  The retailer must include a line item on the receipt to show the surcharge. The retailer remits the surcharge to the Illinois Department of Revenue where they place it in the Wireless Service Emergency Fund. In order to fund the Illinois Telecommunications Access Corporation (“ITAC”), which provides equipment for hard of hearing and deaf people, SB 96 adds an additional 1.5% surcharge on the purchase of any prepaid wireless telecommunications service. Similar to current law, the retailer will collect the 3.0% surcharge from the consumer. To remain consistent with current law the retailer may combine both surcharges in one line item on the receipt. The 3.0% tax will be remitted to the Illinois Department of Revenue where it will be divided between the Illinois Telecommunications Access Fund and the Wireless Service Emergency Fund. SB 96 also implements a statewide $0.87 tax per landline, wireless, VOIP, and cable provided telecommunications which will be collected by telecommunication carriers and remitted to the Illinois Department of Revenue.  The law becomes effective January 1, 2016.

Electronics Recycling—Public Act 97-0287 created the Electronic Products Recycling & Reuse Act (“Act”) that established a statewide system for recycling and/or reusing certain electronic devices discarded from residences by requiring electronic manufacturers to participate in the management of discarded and unwanted electronic products. The Act does not require local government funding or participation, instead requiring manufacturers to set up and pay for the collection, transportation, recycling and or reuse of obsolete electronic products.  As manufacturers were reaching their statutory goals earlier in the year, and municipalities were not budgeting for this unforeseen reality, the municipalities were not able to keep open their operation because they are not self-sustaining. In response, the municipal waste facilities wanted to renegotiate for more funds and higher collection goals.  In HB 1455 (Rep. Emily McCasey, D-Romeoville/Sen. Pamela Althoff, R-McHenry) the manufacturers and waste facilities reached an agreement that would: (1) divide the collection goals up between two different groups of manufacturers at two different rates including television and monitors (80%) and all other electronics (50%); (2)the goals would be based on market share of TV/monitor and electronic sales; (3) the overall goal would not exceed 50 million pounds; and (4) a pilot program for a 25% credit carry over for one year.  These changes become effective July 10, 2015.

Prohibition on Mixing Sharps—SB 793 (Sen. Linda Holmes, D-Aurora/Rep. Ann Williams, D-Chicago) prohibits a person from knowingly mixing sharps, including, but not limited to, hypodermic, intravenous, or other medical needles or syringes or other medical household waste with other material intended for collection as a recyclable material by a residential hauler.  The bill was passed to protect sanitation workers from inadvertent injuries, infections, and diseases from syringes found in the garbage. Residents are encouraged to drop the needles off at voluntary drop off sites. These changes became effective July 20, 2015.

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FOOD AND LIQUOR

Food Handling—Last legislative session, after a couple of years of negotiations, changes were made to the Illinois Food Code to ensure that every person who is preparing food in Illinois has training in food handling and safety procedures.  As part of that initiative, persons seeking Food Service Sanitation Managers Certifications (FSSMC) have to take a nationally accredited exam with a passing score of at least 75%.  SB 46 (Sen. Iris Martinez, D-Chicago/Rep. Kelly Burke, D-Oak Lawn) changes that language to allow FSSMC exam takers to receive whatever passing score is recommended by the test preparers.  These minimum scores are set nationally.  This change preserves the integrity of the certification while giving FSSMC seekers the flexibility that they need to get certified and transfer certification from another state.  These changes became effective July 16, 2015.

Brew PubsHB 3237 (Rep. Sara Feigenholtz, D-Chicago/ Sen. Antonio Munoz, D-Chicago)  provides clear guidance on the use of social media for advertising alcohol as well as increases the number of gallons a brew pub may sell directly to the public. These changes became effective August 24, 2015.

Liquor “Of Value” ProvisionsHB 4018 (Rep. Frank Mautino, D-Spring Valley/Sen. Antonio Munoz, D-Chicago) clarifies that manufacturers and distributors can furnish non-alcoholic merchandise to retailers for free as long as the merchandise is not tied to an alcoholic product.  The Illinois Liquor Control Commission had previously taken the heavy-handed position that furnishing items such as coolers to promote non-alcoholic products (e.g. sports drinks, bottled water, etc.) violated the Act.  Therefore this change was sought to clarify that such practices will not be considered as violating the prohibition of giving something “of value” to retailers to sell or promote the sale of alcoholic products. These changes became effective August 5, 2015.

Happy Hour, 100ft Rule Exemptions and Sunday SalesSB 398 (Sen. Antonio Munoz, D-Chicago/Rep. Sara Feigenholtz, D-Chicago) will give businesses some flexibility to have traditional happy hours and will clarify that meal and party packages with unlimited drinks for a set price are allowed by law.  The city of Chicago wrote tickets to hotels and restaurants on New Year’s Eve for violating Trade Practice Policies (TPP) written by the Illinois Liquor Control Commission (ILCC).  The TPPs have always been issued to describe “best practices” and have never been given the force of law.  A number of the restaurants and hotels that were cited for the practice have since sued the city and all of the cases that have reached a final decision have been decided in favor of the business.  SB 398 was written to address this issue and to allow licensees to serve discounted drinks for up to 4 hours/day for no more than 15 hours/week.  The bill will also include the following measures: (1) prohibits TPPs; (2) allows hotel restaurants under the same ownership to have one license and transfer liquor from one location to the other as long as the restaurants are in the same hotel; (3) deletes the Sunday sales prohibition, but will allow local jurisdictions to prohibit Sunday sales through local ordinances; (4) grants the local liquor commissioner the authority to provide an exemption to the 100 ft. rule so that businesses don’t have to seek the exemption from the state legislature, but preserves the business’ right to seek the exemption from the General Assembly if desired; (5) requires that all servers of alcohol be BASSET certified; (6) prohibits licensees from selling drinks “2 for 1”, from increasing the volume of a drink without proportionately increasing the price and from allowing drinking games. The changes to this bill represent agreements made between everyone involved in the 3-tier system.  They are common sense changes that allow retailers and restaurants to have flexibility and certainty in the sale of alcohol and, most importantly, to sell and serve it responsibly. These changes became effective July 15, 2015.

Food Establishment Self-InspectionsSB 1800 (Sen. Heather Steans, D-Chicago/Rep. Sara Feigenholtz, D-Chicago) will allow the City of Chicago to implement a self-inspection program for low-risk food establishments.  Qualifying food establishments would perform their own health inspections every two years which would then be randomly audited by the Department of Public Health.  The Department will develop the inspection form and fines for noncompliance will be assessed.  The city has run a successful pilot program for the past couple of years, so this bill would make the program permanent and allow them to expand beyond current program participants.  Allowing low-risk food establishments to perform their own inspections allows the city to use its limited inspection resources wisely and cover more ground to ensure the safety of the food residents consume.  IRMA members have participated in the pilot program and we look forward to having more members qualify for the expanded program. This change became August 24, 2015.

Snap EligibilitySB 1847 (Sen. Daniel Biss, D-Skokie/Rep. Robyn Gabel, D-Evanston) will allow more people in Illinois to qualify for SNAP benefits.  It is estimated that the bill will add 40,000 more SNAP cases (cases include individuals and families) to the program. Prior to 2013, Illinois had one of the most favorable SNAP distribution schedules in the country because it distributed benefits throughout the month.  After making some software changes in 2013 that were allegedly necessitated by the Affordable Care Act (ACA), the Department of Human Services (Department) elected to change SNAP distribution to the first 10 days of the month. Having a SNAP distribution system that is not spread throughout the month creates substantial difficulties for grocers in high-SNAP areas, their employees, and customers. This change was particularly baffling because it was made after the USDA (the federal Department that issues SNAP benefits to the states) wrote a letter to all of the states encouraging them to distribute benefits throughout the month.  In response to the letter, a number of states began expanding their distribution beyond the first few days of the month.  Illinois was the only state to move in the opposite direction.  If the state were operating with a SNAP distribution system that worked for everyone involved, IRMA would not be opposed to adding more cases to the program.  Considering the present way that the Department is choosing to distribute benefits, IRMA opposed adding more cases until a permanent solution to distribution is adopted. This change becomes effective January 1, 2016.

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LABOR

Veterans Employment Preference—HB 3122 (Rep. Robert Pritchard, R-Sycamore/Sen. Michael Hastings, D-Matteson) creates the Veterans Preference in Private Employment Act. A private employer may adopt and apply a voluntary veterans’ preference employment policy if: (1) the veterans’ preference employment policy is in writing; (2) the veterans’ preference employment policy is publicly posted by the private employer at the place of employment or on any website maintained by the private employer; (3) the private employer’s job application informs all applicants of the veterans’ preference employment policy and where the policy may be obtained; and (4) the private employer applies the veterans’ preference employment policy uniformly for all employment decisions regarding the hiring or promotion of veterans or the retention of veterans during a reduction in force. A private employer who maintains a veterans’ preference employment policy may require and rely on an applicant’s or employee’s Department of Defense DD214/DD215 forms or their predecessor or successor forms, an applicant’s or employee’s NGB-22 discharge form or its predecessor or successor forms (if a member of the National Guard), and a U.S. Department of Veterans Affairs award letter (if the applicant or employee is claiming a service-connected disability) to establish eligibility for such policy.  These changes become effective January 1, 2016.

Equal Pay—The Equal Pay Act of 2003 (“Act”)prohibits employers with four or more employees from paying unequal wages to men and women for doing the same or substantially similar work, requiring equal skill, effort, and responsibility, under similar working conditions.  HB 3619 (Rep. Cynthia Soto, D-Chicago/Sen. Michael Noland, D-Elgin) would extend the requirements of the Act to include all employers. It also creates a two-tiered civil penalty that would subject employers with fewer than 4 employees that violates the Act are subject to penalties of $500 for a first offense; $2,500 for a second offense; and $5,000 for a third or subsequent offense. An employer with 4 or more employees is subject to penalties of $2,500 for a first offense; $3,000 for a second offense; and $5,000 for a third or subsequent offense. These changes becomes effective January 1, 2016.

Small Business Regulatory Review—HB 3887 (Rep. Keith Wheeler, R-Aurora/Sen. Jennifer Bertino-Tarrant, D-Plainfield) requires each State executive agency to scrutinize its rules, administrative regulations, and permitting processes as they pertain to small businesses in order to identify those rules, regulations, and processes that are unreasonable, unduly burdensome, duplicative, or onerous to small businesses. Each State agency must submit its reports containing the results of its review to the Office of Business Permits and Regulatory Assistance, the Governor, and the General Assembly. This law becomes effective January 1, 2016.

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LOSS PREVENTION

Accelerated Court Resolution—IRMA supported and worked with the Sheriff Dart’s office to introduce the concept of a “Rocket Docket” system into the Cook County Court.  Cook County Sheriff Tom Dart has been dealing with a jail population that has been bursting at the seams for many years.  After collecting data on who is in the jail, for what crime, and for how long, Sheriff Dart noticed that there were about 600 people in the jail who were awaiting final adjudication of either a misdemeanor retail theft or criminal trespass case.  Many of the accused had been awaiting trial longer than 100 days both because the court system is backed up and because they are unable to post bond.  In order to free up space in the jail, save taxpayer money, and give people a speedy trial, under SB 202 (Sen. Bill Cunningham, D-Chicago/Rep. Michael Zalewski, D-Riverside) the Court will institute a pilot rocket docket program to adjudicate misdemeanor retail theft and criminal trespass cases within 30 days of the arrest.  These changes became effect August 21, 2015. It may take some time for the program to begin implementing the changes.

IRMA supported this initiative and was able to stall other retail theft initiatives in favor of this collaborative effort with the Cook County Sheriff. In particular, two bills were introduced that would have weakened the current civil and criminal remedies available to retailers.  HB 2496 (Rep. Will Guzzardi, D-Chicago) and HB 354 (Rep. Michael Zalewski, D-Chicago) would have made retailers choose between seeking a civil or criminal remedy while they are currently allowed to pursue both if they choose.  IRMA had several conversations and convinced Rep. Zalewski to not pursue his initiative and instead sponsor Sen. Cunningham’s ‘rocket docket’ bill. After discussions with the Chairman of the Judiciary – Criminal Law Committee, the chairman agreed to place Rep. Guzzardi’s HB 2496 in sub-committee where it never received a hearing.  In response to IRMA’s procedural request, Rep. Guzzardi convinced Sen. Iris Martinez, D-Chicago to pass a Senate “shell” bill over to the House to help him revive his retail theft bill.  After IRMA had discussions with the Senate Judiciary Committee, Sen. Iris Martinez decided to place her bill in sub-committee as well.

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PHARMACY

HeroinHB 1 (Rep. Lou Lang, D- Chicago/Sen. Dan Kotowski (D- Park Ridge) creates the nation’s most comprehensive approach to combating heroin and prescription drug abuse. HB 1 includes, but is not limited to, the following provisions: allows pharmacists to dispense opioid antagonists to someone claiming a heroin overdose pursuant to policies and procedures developed by the Illinois Department of Public Health; expands authority of the Illinois EPA to distribute grants for drug take-back programs; provides training for law enforcement, school officials, fire fighters, and others to administer opioid antagonists; IEPA shall establish a statewide medicine take-back program; the Department shall develop a poster and brochures for display and distribution in pharmacies regarding take-back information/events; expands utilization of the Prescription Monitoring Program (PMP); creates a peer review committee for prescribers and dispensers; and lowers the threshold where someone is potentially considered to be shopping for medicine from six prescribers or six pharmacies in one month to three prescribers or three pharmacies in one month. The legislation passed both Chambers unanimously.

The legislation initially required pharmacies to serve as take back locations for all prescription drugs. IRMA was instrumental in explaining that this requirement would be financially impracticable and legally impossible due to federal regulations. Due to IRMA’s advocacy, these provisions and many other burdensome requirements were removed from the legislation.

Governor Rauner amendatorily vetoed the legislation by arguing that HB 1 mandates that fee-for-service and medical assistance Medicaid programs cover all forms of medication assisted treatment of alcohol or opioid dependence, and it removes utilization controls and prior authorization requirements. These changes would limit the State’s ability to contain rising costs at a time when the State is facing unprecedented fiscal difficulties. Additionally, he argued that the legislation undermines a doctor’s ability to manage the treatment.  Both Chambers overrode the Governor’s veto.

Due to the extensive changes included in the legislation, there are different effective dates included within the legislation. The majority of the changes became effective September 9, 2015, the day of the Senate override. The Department of Human Services has until January 1, 2019 to adopt rules establishing pilot initiatives involving a cross-section of hospitals in this State to increase electronic integration of a hospital’s electronic health record with the Prescription Monitoring Program to ensure all providers have timely access to relevant prescription information during the treatment of their patients

BiosimilarsSB 455 (Sen. Tony Munoz, D- Chicago/Rep. Edward Acevedo, D- Chicago) regulates how and when biosimilars are substituted and notification provided to prescribers and patients. In short, a biologic can only be substituted with a biosimilar if the FDA has approved the biosimilar for substitution, the prescriber has not indicated “do not substitute’, and the patient is informed of the substitution. Additionally, within five business days of dispensing a prescribed biologic, the pharmacy must input the information into an interoperable electronic medical records system, an electronic prescribing technology, a pharmacy benefit management system, or a pharmacy record that can be electronically accessed by a prescriber. Entry into one of these systems is presumed to be notice to the prescriber. If the prescriber does not have electronic access, he/she must notify the pharmacy and the pharmacy must then transmit by other means.  This change becomes effective January 1, 2016.

Prescription Locking Devices—IRMA removed a provision from HB 3219 (Rep. Mike Zalewski, D-Riverside) that would have required every new or refilled Schedule II prescription that contains hydrocodone to be dispensed in a non-reusable locking device. This package is defined as having an alphanumeric combination lock. The bill was pushed to create a market for locking devices manufactured by one company despite any proof of the efficacy of the product.IRMA pointed out that there was no funding mechanism to cover the costs of the mandate that imposed costs of $39 million on pharmacies since they are prohibited from charging the patient for the bottle under their contracts with private insurers and government benefit programs (e.g. Medicare Part D, Medicaid, and prescriptions for individuals in nursing homes) would be exempt from the legislation. Moreover, this would provide an advantage for mail order prescription providers because the mandate would not apply to out of state vendors and the state would hold no enforcement value. Finally, pharmacies were not provided protection from liability if the product failed.

IRMA’s advocacy forced the proponents to amend their bill to make participation completely voluntary on the part of pharmacies. Additionally, the bill is predicated on funding from within the Department of Human Services. With these changes, IRMA removed its opposition. The changes became effective August 27, 2015, but the implementation of the changes are dependent on available funding.

Pharmacy Transfer to Physician Assistant—SB 689 (Sen. Matt Murphy, R-Palatine/Rep. Grant Wehrli, R-Naperville) allows a pharmacy or pharmacist to deliver prescription drugs to a licensed physician assistant who provides hospice services to a hospice patient or who provides home health services to a person, at the residence or place of employment of the person for whom the prescription was issued or at the hospital or medical care facility in which the patient is confined, or may drop off the prescription at a designated area determined by the patient or the patient’s agent. The physician assistant may possess controlled substances prescribed for an ultimate user if the physician assistant provides hospice services to a hospice patient who is the ultimate user or provides home health services to a person who is the ultimate user. This change becomes January 1, 2016.

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REGULATION AND LICENSING

Data Security—Building on a long history of excellent communication and cooperation, the Attorney General’s office reached out to IRMA in early February to begin discussion on legislation amending Illinois’ data breach law ultimately filed as SB 1833 (Sen. Daniel Biss, D-Skokie and Rep. Ann Williams, D-Chicago). After the highly publicized breaches over the past couple of years, Attorneys General all over the country found a new issue on which to flex some muscle.  While most industries are allowed to collect and store data on customers and system users, according to the language currently in SB 1833, certain breaches of data would  have had to be reported to not only the individual, but to the Attorney General for posting on her website.  This bill would have expanded what is considered “personal information” for purposes of notification in the event of a breach to include web searches, the contents of a person’s online shopping basket, geolocation information and other information that can be commonly found by a simple web search.

As this bill sets a new standard for notification by including the highly controversial areas of consumer marketing and geolocation information, IRMA proceeded negotiated this language with an abundance of caution.  As the landscape for how retailers interact with customers changes, IRMA tried to ensure that retailers could continue to compete in a world where information is a commodity.  To that end, we attempted to unite with other interested parties to see if there was a willingness in the larger business community to defeat or amend the bill.  Surprisingly, it seemed that some at the meeting were very close to being neutral as a result of engaging in their own discussions with the AG.  It was clear that the other groups were happy to work their own deals and were willing to hide behind what they believed would be IRMA’s permanent opposition.  As a result of constant communication with IRMA members, it was decided that it was best to negotiate the best deal that we could get for the retail community.  The AG did get IRMA’s neutrality after giving up many concessions which included:  increasing the threshold and timeframe for breach notification, narrowing the definitions of consumer marketing and geolocation information to target some of the harms that gave her the most concern and narrowing other parts of the definition of personal information. The legislation subsequently passed both Chambers of the General Assembly without a veto-proof majority.

The Governor subsequently amendatorily vetoed the legislation. His veto included no reference to consumer marketing information or geolocation information in the IL Personal Information Protection Act (PIPA); adds definitions for “health insurance information” and “medical information” and limits such information to policy numbers, ID numbers unique identifiers, medical history, treatment and diagnosis, as well as mental/physical condition; adds medical information, health insurance information and biometric data as categories of “Personal Information” that qualify for breach notification; limits biometric data to data actually used by the holder for authentication purposes; deletes home address, phone number and email address in combination with either the mother’s maiden name or a person’s date of birth as categories for “Personal Information”; deletes the requirement for persons that maintain or store data, but that do not own it, from having to notify the AG’s office of a breach; and deletes the requirement to post a privacy policy and certifies that entities that have to comply with the notification requirements of HIPAA are in compliance with the Act.

The AG’s office will let the bill “die” and re-introduce a similar bill incorporating Governor Rauner’s changes.  They indicated that accepting the Governor’s changes moves the issue in the direction in which they want to go concerning the collection of data and sets the stage for more changes to the law in the future.

Tobacco Retail Licensing Trailer Bill—In early 2014, the Senate President informed IRMA that he intended on passing legislation that would require retailers to obtain a license from the state to sell tobacco and that the Speaker’s office was supportive of the idea as well. IRMA’s due diligence discovered this to be true. The stated goal of the initiative was to attack the growing problem of the sale of counterfeit tobacco products in Illinois. Counterfeit includes unstamped cigarettes. The argument was bolstered by claims that recent licensing efforts in California produced a significant spike in the collection of cigarette taxes with the theory being that retailers who were willing to risk fines are not willing to risk losing their right to sell tobacco. Although the great majority of seizures in Illinois have involved very small stores the legislation impacts all retailers. The Speaker and President requested IRMA to work with both chambers to make the legislation as workable as possible for IRMA and its members, while designing an effective deterrent for problem retailers.

With the continuous input of impacted members, House Bill 2494 (P.A. 98-1055) was passed to reduce the sales of cigarettes to minors, illegal sales of contraband tobacco, and the illegal smuggling of cigarettes in Illinois. The license includes an annual $75 fee that is intended to help fund the interdiction of smuggling and retail inspections—the Senate President initially requested a $250 fee. It increases violations for the illegal sale, purchases and distribution of cigarettes. The legislation also requires retailers to train their clerks—which almost all IRMA members do anyway. It also allows the mitigation of any penalties if the retailer can show it has a training program in place for their clerks.

Additionally, HB 2494 passed with the understanding that a trailer bill was required to fine tune the legislation to remove administrative hurdles for retailers.  HB 2513 (Rep. Marcus Evans, D-Chicago/ Sen. Julie Morrison, D-Deerfield) is a trailer bill that clarifies the provisions passed in P.A. 98-1055. Specifically, the legislation: (1) allows a waiver for records to be kept out of state; (2) broadens the employee training requirements; (3) allows the employee training to be conducted electronically; (4) provides an avenue to mitigate retail tobacco citations; and (5) provides a waiver for closed loop distribution invoice record keeping requirements.  These changes become effective January 1, 2016.

Contraband CigarettesSB 509 (Sen. Antonio Munoz, D-Chicago/Rep. John Cabello, R-Loves Park) will allow cigarettes without the tax stamp of the local jurisdiction to be considered contraband and thus make retailers subject to penalties outlined in the Cigarette Tax Act.  The City of Chicago sought the change because the sale of cigarettes without the Chicago/Cook County tax stamp is on the rise and they wanted the option to impose stronger fines on retailers who are caught selling such unstamped packs of cigarettes.  The rise in the illegal sale of cigarettes is not only relegated to bad actors in the retail community, but increasingly, such sales are occurring in person-to-person sales controlled by local gangs.  The rise in the illegal sale of cigarettes seems to correspond to the tax increases that have occurred at the state and local levels over the past couple of years.  These tax increases have made the price of cigarettes more expensive than any other city in the country; a fact that is not lost on the growing underground market for unstamped cigarettes. This change became effective August 13, 2015.

Smart Phone Anti-Theft ActSB 66 (Sen. Ira Silverstein, D-Chicago) creates the Smart Phone Theft Protection Act and requires wireless communications device dealers to maintain a written record of every purchase or acquisition of a used wireless communications device for resale. The legislation provides that a law enforcement agency that has probable cause to believe a device has been stolen or is evidence of a crime may place an investigative hold on or confiscate the device. Additionally, the legislation requires the installation of video security cameras at a dealer’s physical location. IRMA was able to secure an exemption for their members. Specifically the legislation exempts, retailers with 25 or more locations who have a repair, refurbishment or trade-in program are exempted from the requirements of this legislation. The Act becomes effective January 1, 2016.

Drone Taskforce—As drones make their way from military application to commercial and personal uses, some foresee the need to plan for their widespread adoption. SB 44 (Sen. Julie Morrison, D-Deerfield/Rep. Brandon Phelps, D- Harrisburg) Creates the Unmanned Aerial System Oversight Task Force Act. The purpose of the Task Force is to “provide oversight and input into creating comprehensive laws and rules for the operation and use of drone technology within this State subject to federal oversight and regulation”. Currently, 17 people will serve on the Task Force including a representative of IRMA. The members of the Task Force must ‘consider commercial and private uses of drones, landowner and privacy rights, as well as general rules and regulations for the safe operation of drone, and prepare comprehensive recommendations for the safe and lawful operation of [drones] in this State.  The Task Force must issue a report no later than July 1, 2016.

Conceal CarrySB 836 (Sen. John Sullivan, D-Quincy/Rep. Brandon Phelps, D-Harrisburg) amends the conceal carry law which went into effect last year.  Since the bill was signed into law, there have been a number of interested parties on both sides of the issue looking to amend the bill in any number of directions.  While it did not seem that there was much desire to actually change the law this soon after passage, SB 836 will make two changes that should be noted. First, the bill allows a person to purchase a firearm with a conceal carry license instead of the FOID card. We can expect the Illinois State Police to promulgate administrative rules implementing this new provision. Second, it also allows a person to transfer a loaded firearm from their person or inside the vehicle to the trunk while in a parking lot. Currently, the weapon must be unloaded prior to exiting the vehicle for placement into the trunk. These changes became effective July 10, 2015.

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Warning: Big Problems Could Be Ahead With Your New Credit Card

Currently, U.S. concredit cardsumers’ personal and financial information is protected by a credit card system that was instituted in the late 1960s.  The magnetic stripe on the back of the credit card contains all of the consumer’s information.  If the information is stolen, it can be replicated on a counterfeit card and used until the consumer or bank notices the fraudulent activity. Due to the unsecure nature of these credit cards, American consumers have been targeted by thieves more than any other country in the world. In fact, the U.S. processes only about one-quarter of the world’s credit card transactions, yet accounts for roughly 50 percent of all credit card fraud.

While the U.S. uses this unsecure payment method to protect consumers, every other G-20 nation has replaced the magnetic stripe cards with “chip-and-PIN” cards within the last 12 years. Chip-and-PIN cards are credit or debit cards with an embedded microcomputer chip that holds a cardholder’s personal identification number (PIN) data. To use a card, a customer must enter a PIN number instead of a signature to complete a transaction. Each transaction generates a new code, making the information difficult to intercept and cards almost impossible to counterfeit.  Requiring a PIN number for every transaction eliminates fraud based on forgery and renders a stolen credit card useless to a thief who attempts to make a purchase at a local store.

Chip-and-PIN technology was first implemented in the United Kingdom in 2003. After it was introduced, credit card fraud in the U.K. plummeted 67 percent within six years due to banks and merchants using chip-and-PIN cards. During a similar period in France, fraud from in-person card use fell 35 percent. Since it has been more difficult to compromise the chip-and-PIN cards, criminal elements have focused their attention on the only developed country in the world that does not use chip-and-PIN technology. During this same period as fraud decreased in Europe, data breaches that included credit card fraud in the U.S. increased.  In 2012, U.S. consumers accounted for 47.3 percent of worldwide payment card fraud losses.

On October 1, 2015, consumers will be issued new credit and debit cards. Instead of issuing the more secure chip-and-PIN cards, many card issuers and financial institutions are replacing the old legacy system with a “chip-and-signature” card. The chip-and-signature cards require a signature like the old legacy system, but therefore, face the same issues as the old legacy cards such as forgery and replication. According to the Federal Reserve, chip-and-PIN cards are 700 percent more secure than chip-and-signature. Despite these concerns, card issuers and financial institutions have chosen the less secure chip-and-signature cards that put U.S. consumers at continued risk.

In response to consumer safety concerns, retailers nationwide have spent billions to replace point of sale machines with new chip-and-PIN terminals. Retailers are not the only industry who has recognized that a shift to a chip-and-PIN system is imperative to consumer safety. The U.S. federal government has implemented chip-and-PIN for all new and existing government credit and debit cards. As the government and retailers invest in new and more secure terminals at registers, so too must the card issuers and financial institutions provide more safety for consumers.

Card issuers and financial institutions have made conflicting statements as to why they are issuing more fraud-prone credit cards to their American customers.  In a recent Wall Street Journal article, a senior executive at MasterCard said many consumers find it difficult to remember a four-digit PIN number. Anecdotally, this argument seems hard to swallow given that millions of Americans regularly enter a four-digit code to use an ATM machine or to unlock their smartphone.

Chip-and-signature cards do not go far enough to protect American consumers and will continue to make the U.S. an attractive target for criminals who can no longer be successful in compromising credit card data elsewhere. Card issuers and financial institutions need to join the U.S. government and retailers in adopting the chip-and-PIN model to better protect U.S. consumers.

AlecLairdAlec Laird is IRMA’s manager of government affairs.

Contact Information:
Alec Laird
217-544-1003
alaird@irma.org

Illinois This Week in Springfield – 99-19

ILLINOIS’ FALSE CLAIMS HEARING

This Week in Springfield the Senate Revenue Committee held a brief subject-matter hearing to address the concerns over several hundred frivolous lawsuits that have been filed to date against businesses who are following the Illinois Department of Revenue’s regulations and guidance regarding the collection of sales taxes on shipping/delivery charges. Illinois’ False Claims Act allows private individuals/entities to bring lawsuits as relators in instances where they have tangible inside knowledge and evidence that a fraud of some kind has occurred. Income tax is exempt from the False Claims Act. Through an oversight, sales tax is not. As a result, Illinois businesses are facing inventive lawsuits from contingency fee attorneys who allege the improper collection of sales tax on shipping/delivery charges even though the businesses are following the laws, regulations, and guidance of the Illinois Department of Revenue.

jonespapeTwo IRMA small business members traveled to Springfield to testify before the committee. One small business owner testified he was audited by the Department of Revenue regarding the collection of sales taxes. His company followed the rules and regulations promulgated and implemented by the Department on how to collect and remit the sales taxes on shipping and delivering charges. He testified that a day after he cleared the Department’s audit which stated that was in compliance with collection and remittance rules, he was sued for not collecting sales tax on shipping and delivery charges by a private litigation firm utilizing the loophole in the False Claims Act. It was cheaper to settle the lawsuit for $30,000 than defend the lawsuit for upwards of $100,000.

During the hearing, Connie Beard, Director of the Illinois Department of Revenue, testified against the abuse of the False Claims Act. The Director alluded that the litigation firm was not a true whistleblower the False Claims Act was created to encourage or protect. The litigation firm was purchasing items from businesses and using the lawsuit to gather private information through legal “discovery” rather than having true insider knowledge on any fraud. Additionally, because of the whistleblower statute, businesses as taxpayers are not receiving the same legal and procedural rights guaranteed to taxpayers when they are audited by the Department. This includes appeals, prehearing consultations with the Department, protection of private and sensitive tax information, mitigation provisions and payment plans. Finally, the Department noted that these frivolous lawsuits were not saving taxpayers money, but actually costing taxpayers more money.

Many industry professionals have noted that these actions are no more than legally permissible extortion of businesses. Under the Illinois statute, a “whistleblower” is entitled to at least 25 percent of the proceeds recovered by the government either through settlement or litigation. Additionally, under Illinois law the civil penalty per false claims can be up to $11,000. Also, businesses are liable for the law firms’ attorney’s fees as well as those of their own attorney.

The Senate Revenue Committee plans to hold additional hearings so that more companies and industry groups can testify to the detrimental effects of the abuse of the Illinois False Claims Act on law abiding taxpayers.

IRMA would like to thank the members of the Senate Revenue Committee, and in particular Chairman Toi Hutchinson (D- Chicago Heights) and Republican Spokesperson Pamela Althoff (R- McHenry) for their interest in trying to stop these lawsuits and restore some sense of sanity to Illinois’ tax codes and reputation.

CONTACT INFORMATION:

robtanyaalec