Introduction

In Village of Arlington Heights v. City of Rolling Meadows, 2025 IL 130461 (Ill. Mar. 20, 2025), the Illinois Supreme Court resolved a recurring question that has divided courts and municipalities for two decades: who has authority to adjudicate municipal sales tax misallocation disputes? The Court held that the Illinois Department of Revenue (IDOR) has exclusive jurisdiction over such disputes, with a single, narrow statutory exception for court actions premised on unlawful post–June 1, 2004 sales tax rebate agreements. In doing so, the Court expressly overruled the appellate decision in Village of Itasca v. Village of Lisle, 352 Ill. App. 3d 847 (2004), and clarified that its 2019 decision in City of Chicago v. City of Kankakee governs both sales and use tax misallocation controversies.

The case arose from a nearly decade-long miscoding of a restaurant located in Arlington Heights as being sited in Rolling Meadows, causing more than $1.1 million in local sales taxes to be distributed to the wrong municipality. After IDOR reimbursed Arlington Heights for six months of misallocations pursuant to statute and corrected the coding, Arlington Heights sued Rolling Meadows in the circuit court for the remaining funds on theories including declaratory judgment, unjust enrichment, and conversion. The circuit court dismissed for lack of subject-matter jurisdiction; the appellate court reversed. The Supreme Court granted leave and reinstated the dismissal.

Key issues included (1) whether circuit courts retain general jurisdiction to resolve “straightforward” municipal sales tax allocation disputes; (2) whether City of Chicago’s jurisdictional holding is confined to complex use tax controversies; (3) whether a trial court may entertain equitable or tort claims seeking reallocation; and (4) how the statutory six-month “lookback” remedy interacts with the courts’ constitutional jurisdiction.

Summary of the Opinion

• IDOR possesses exclusive jurisdiction to adjudicate and correct misallocations of sales tax revenues under the comprehensive tax statutory scheme (Department of Revenue Law; Retailers’ Occupation Tax Act; State Finance Act; and Illinois Municipal Code).
• The only judicial carveout is a suit authorized under 65 ILCS 5/8-11-21(a) for municipalities claiming lost revenue due to unlawful post–June 1, 2004 sales tax rebate agreements. Absent such an agreement, a circuit court lacks subject-matter jurisdiction.
• City of Chicago v. City of Kankakee, 2019 IL 122878, controls and is not limited to use tax disputes; it establishes a bright-line rule that courts are divested of jurisdiction over tax misallocation claims except as expressly allowed by statute.
• The complexity or simplicity of the dispute does not determine jurisdiction; conflating “primary jurisdiction” (a prudential doctrine) with “subject-matter jurisdiction” (a constitutional/statutory power) is error.
• The statutory remedy for sales tax misallocations not involving unlawful rebate agreements—a six-month offset/lookback (30 ILCS 105/6z-18; 65 ILCS 5/8-11-16)—is exclusive; equitable remedies cannot circumvent it.
• Village of Itasca v. Village of Lisle is overruled. The legislature’s comprehensive scheme implicitly divests circuit courts of jurisdiction; no explicit divestiture language is required.
• Because IDOR already afforded the six-month remedy and no rebate agreement was alleged, Arlington Heights’ complaint was properly dismissed with prejudice for lack of subject-matter jurisdiction.

Analysis

A. Statutory Framework and Its Central Role

The Court’s reasoning begins and ends with the statutory architecture:

• Collection and administration: IDOR is empowered to administer, enforce, collect, examine, correct, and assess under the Retailers’ Occupation Tax Act (35 ILCS 120/3, 4, 8) and to “administer and enforce all the rights, powers, and duties” necessary to collect revenues (20 ILCS 2505/2505-25).
• Disbursement and correction: The State Finance Act requires IDOR to distribute local shares and to “increase or decrease” monthly disbursements to “offset any misallocation of previous disbursements,” capped at the amount “erroneously disbursed within the 6 months preceding the time a misallocation is discovered” (30 ILCS 105/6z-18). Parallel language appears in the Municipal Code (65 ILCS 5/8-11-16).
• Judicial path—narrow exception: A separate Municipal Code provision authorizes direct court actions between municipalities only where a municipality “has lost revenue because of an unlawful rebate agreement” (65 ILCS 5/8-11-21(a)).

Reading these provisions together, the Court concludes the legislature created a comprehensive, agency-centered remedial scheme for tax disputes, with one—and only one—express authorization for judicial actions: suits over unlawful post-2004 rebate agreements. That design signals exclusive IDOR jurisdiction for all other tax misallocation disputes.

B. Precedents Cited and Their Influence

• City of Chicago v. City of Kankakee, 2019 IL 122878.

  The Court treats City of Chicago as controlling. There, municipalities alleged “sales tax-use tax swaps” deprived them of revenue. The Supreme Court held that, except for a narrow statutory exception concerning unlawful rebate agreements entered after June 1, 2004, the legislature vested IDOR with exclusive authority to resolve tax revenue distribution issues, including reallocations and audits. Importantly, City of Chicago discussed both sales and use taxes (¶¶ 30–38) and underscored that courts may not conduct a “full-scale audit and redistribution of state taxes” (¶ 42).

• J&J Ventures Gaming, LLC v. Wild, Inc., 2016 IL 119870.

  The Court relies on J&J Ventures for two propositions: (1) divestiture of circuit court jurisdiction need not be explicit; it may be inferred from a comprehensive statutory scheme and legislative intent discerned from the statute as a whole (¶¶ 31–32); and (2) the commonness of a task (e.g., contract interpretation) does not itself confer jurisdiction (¶¶ 24–25).

• Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 199 Ill. 2d 325 (2002); Ill. Const. 1970, art. VI, § 9.

  These authorities frame subject-matter jurisdiction: circuit courts have original jurisdiction over all justiciable matters except where the constitution or a statute provides otherwise—most notably in the realm of administrative review or where a comprehensive statutory scheme implies divestiture.

• Board of Education of Warren Township High School District 121 v. Warren Township High School Federation of Teachers, Local 504, 128 Ill. 2d 155 (1989); West Bend Mutual Ins. Co. v. TRRS Corp., 2020 IL 124690.

  These cases clarify the doctrine of primary jurisdiction—a prudential stay-and-refer mechanism available only when a court already has jurisdiction. They bolster the Court’s point that “expertise” may inform primary jurisdiction, not subject-matter jurisdiction; where the legislature has divested judicial power, there is no room for primary jurisdiction.

• Employers Mutual Cos. v. Skilling, 163 Ill. 2d 284 (1994); People v. NL Industries, 152 Ill. 2d 82 (1992).

  Cited to trace and then refine jurisdictional doctrine. While Skilling had suggested concurrent jurisdiction absent explicit divestiture, J&J Ventures clarified that explicit terms are unnecessary; intent is gleaned from the statutory whole. The Court reads NL Industries as implicitly supporting inference of divestiture from comprehensive schemes.

• Village of Itasca v. Village of Lisle, 352 Ill. App. 3d 847 (2004)—Overruled.

  The Court disapproves Itasca’s core premises: that courts retain jurisdiction over “straightforward” sales tax disputes and that divestiture must be explicit. Because Itasca addressed a rebate agreement dispute (for which the statute expressly allows a court action), its broader jurisdictional reasoning was both unnecessary and incorrect. The Court now expressly overrules Itasca to eliminate confusion and to align appellate authority with City of Chicago and J&J Ventures.

• Kosicki v. S.A. Healy Co., 380 Ill. 298 (1942); People ex rel. Shirk v. Glass, 9 Ill. 2d 302 (1956); Independent Voters of Illinois v. Illinois Commerce Commission, 117 Ill. 2d 90 (1987).

  These authorities inform the Court’s remedy analysis. Where statutes create rights and remedies unknown at common law (tax levy, assessment, distribution), the statutory remedy is exclusive. The legislature’s silence after City of Chicago is treated as acquiescence in that construction.

C. The Court’s Legal Reasoning

1. Statutory Text and Structure Control: The Court undertakes de novo interpretation and reads the tax statutes as a cohesive scheme that centralizes tax administration in IDOR. The power to collect, audit, correct, and redistribute—including correcting misallocations—resides solely with IDOR (20 ILCS 2505/2505-25; 35 ILCS 120/3, 4, 8; 30 ILCS 105/6z-18; 65 ILCS 5/8-11-16).
2. Narrow Judicial Exception Confirmed: Only disputes alleging unlawful post–June 1, 2004 sales tax rebate agreements are authorized in circuit court (65 ILCS 5/8-11-21(a)). Arlington Heights’ complaint alleged no rebate agreement, and Rolling Meadows submitted an affidavit confirming none existed; this “affirmative matter” (735 ILCS 5/2-619) defeated jurisdiction in the circuit court.
3. City of Chicago Applies Beyond Use Taxes: The Court rejects the appellate court’s attempt to confine City of Chicago to use tax or “complex” disputes. City of Chicago’s jurisdictional holding addresses sales and use tax allocation alike and announces a bright-line jurisdictional rule (¶¶ 30–38, 42, 44).
4. Complexity Is Irrelevant to Subject-Matter Jurisdiction: The “expertise needed” rationale bears on primary jurisdiction only when courts already have jurisdiction. Here, the legislature’s scheme divests circuit courts of original jurisdiction for tax misallocation disputes, leaving no space for primary jurisdiction.
5. No Explicit Divestiture Required: Reaffirming J&J Ventures, the Court stresses that a comprehensive statutory scheme creating rights and duties unknown at common law may implicitly displace circuit court jurisdiction. The tax code’s remedial design—centralized correction by IDOR with a six-month cap, and a single, specified judicial cause of action—reflects such intent.
6. Exclusive Statutory Remedy and Legislative Acquiescence: Because tax allocation rights and remedies are creatures of statute, the six-month offset is exclusive in non-rebate scenarios. Equitable theories (unjust enrichment, conversion) cannot expand the remedy. The lack of legislative amendment after City of Chicago confirms this reading.
7. Equities Don’t Expand Jurisdiction: While acknowledging the perceived unfairness of a decade of misallocated revenue, the Court emphasizes municipal obligations to review IDOR’s monthly, triannual, and annual reports. The six-month limit encourages diligence; both municipalities received ample notice opportunities and failed to correct the miscoding.

D. Practical Impact and Prospective Effects

• Municipal Litigation Pathways Narrowed: Municipalities alleging sales tax misallocations (absent unlawful rebate agreements) must proceed exclusively through IDOR’s administrative processes. Circuit court actions—whether framed as declaratory judgment, unjust enrichment, conversion, or otherwise—are jurisdictionally barred.
• Six-Month Cap Is Firm: The six-month lookback in 30 ILCS 105/6z-18 and 65 ILCS 5/8-11-16 is the maximal non-judicial remedy. Attempts to recover beyond six months in court will be dismissed for lack of subject-matter jurisdiction unless the case fits the rebate exception.
• Village of Itasca Displaced Statewide: Any reliance on Itasca’s broader judicial role in “straightforward” sales tax site disputes is no longer good law. City of Chicago and this case now govern.
• Incentives for Administrative Diligence: Municipal finance teams must implement robust processes to review IDOR’s monthly updates, triannual allocation remittances, and annual taxpayer listings. Silence operates as acquiescence in IDOR’s coding, and failure to correct promptly forfeits recovery beyond six months.
• No End-Run via Equitable or Tort Claims: Recasting misallocation grievances as unjust enrichment or conversion cannot circumvent exclusive administrative jurisdiction and the statutory cap.
• Legislative Consideration: If broader recovery or court oversight is desired, the General Assembly must amend the statutory scheme. The Court notes that its City of Chicago construction has stood unaltered by the legislature since 2019.
• Pending and Future Cases: Expect motions to dismiss on jurisdictional grounds where plaintiffs seek reallocations outside rebate-agreement claims. Existing suits premised on Itasca’s reasoning will likely fail.
• Intergovernmental Dynamics: Although IDOR is the gatekeeper, municipalities can still seek voluntary repayments through negotiation; this opinion does not prohibit voluntary inter-municipal adjustments—it simply bars judicial compulsion beyond the statutory framework.

E. Complex Concepts Simplified

• Subject-matter jurisdiction: The court’s legal power to hear a type of case. Here, the Supreme Court held circuit courts lack this power for sales tax misallocation disputes, except for suits alleging unlawful rebate agreements after June 1, 2004.
• Primary jurisdiction: A prudential doctrine permitting courts that already have jurisdiction to pause and refer technical issues to an agency with special expertise. It is irrelevant when the legislature has eliminated court jurisdiction, as in this tax context.
• Misallocation (or “missourcing”): When tax receipts are credited to the wrong local government due to coding or situs errors (e.g., listing a business in Rolling Meadows instead of Arlington Heights).
• Six-month lookback/offset: IDOR’s statutory authority to correct misallocations by adjusting future distributions, limited to amounts erroneously disbursed in the six months before the error was discovered. This is the exclusive remedy for non-rebate cases.
• Unlawful rebate agreements (65 ILCS 5/8-11-21(a)): Arrangements whereby a municipality shares its local sales tax revenue with a retailer to influence sales situs in violation of statutory restrictions. The statute uniquely authorizes municipalities harmed by such agreements to sue for damages, interest, fees, and a 50% penalty—providing the lone judicial path for tax reallocation disputes.
• Affirmative matter (735 ILCS 5/2-619): A defendant’s showing of facts that defeat a claim as a matter of law. Here, an affidavit proving no rebate agreement existed foreclosed the only statutory basis for court jurisdiction.
• Legislative acquiescence: When courts interpret a statute and the legislature does not amend it thereafter, courts may infer that the legislature accepts that construction. The Court invokes this principle to reinforce City of Chicago’s jurisdictional holding.

F. Practice Pointers for Municipalities

• Implement a monthly verification checklist for IDOR’s updates and reconcile against local business licensing, building permits, and known store openings/closures.
• Designate a trained staff liaison to respond promptly to IDOR location verification letters, triannual remittance reports, and annual taxpayer lists; document corrections in writing.
• Establish interdepartmental protocols among finance, economic development, and legal to catch “miscoding” upon business registration and at store opening.
• If a misallocation is discovered, notify IDOR immediately to preserve the maximum six-month recovery window.
• Reserve litigation only for qualifying post–June 1, 2004 unlawful rebate agreement claims and assemble evidence of the agreement and its impact on situs and revenue.
• Consider voluntary intergovernmental adjustments where equities are compelling, recognizing courts cannot compel repayment beyond the statutory remedy absent a viable rebate-claim basis.

Conclusion

The Illinois Supreme Court’s decision in Village of Arlington Heights v. City of Rolling Meadows cements a bright-line rule: IDOR has exclusive jurisdiction over municipal sales tax misallocation disputes, and circuit courts are divested of subject-matter jurisdiction except in the narrow circumstance of suits based on unlawful post–June 1, 2004 rebate agreements. The Court applies and extends its City of Chicago precedent to sales taxes, clarifies that complexity does not determine jurisdiction, rejects the need for explicit divestiture language, and holds that the six-month statutory lookback is the exclusive remedy in non-rebate cases. By expressly overruling Village of Itasca, the Court eliminates conflicting appellate guidance and places the onus on municipalities to exercise rigorous administrative oversight of IDOR’s reports. The implications are immediate and practical: litigants must route misallocation claims through IDOR, manage expectations to the six-month cap, and reserve judicial actions for the statute’s defined rebate-agreement remedy. If broader relief is warranted as a matter of policy, it will require legislative change, not judicial invention.

Bottom line: The Court reversed the appellate court and affirmed the circuit court’s dismissal with prejudice. Going forward, administrative diligence and a clear understanding of the statutory scheme—not equitable pleading in the circuit courts—will govern the recovery of misallocated local sales tax revenues in Illinois.