Illinois Administrative Code › Title 86 - REVENUE › Part 100 - INCOME TAX › Subpart Q - COMBINED RETURNS › Section 100.5215 - Filing of Separate Unitary Returns (IITA Section 304(e))

Current through Register Vol. 48, No. 28, July 12, 2024
a) Not every member
				of a unitary business group is eligible to join in the filing of a combined
				return and, for taxable years ending prior to December 31, 1993, joining in the
				filing of a combined return was elective.
b) Each member of a unitary business group
				who is subject to Illinois income tax and who properly does not join in the
				filing of a combined return must file a separate return, and compute its
				business income apportionable to Illinois by computing the base income of the
				unitary business group in accordance with Section
				100.5270(a)(1)
				and by multiplying the business income included in the base income by an
				apportionment fraction computed by using the Illinois apportionment factor or
				factors applicable to the return filer under IITA Section 304 and the
				everywhere factor or factors of the entire unitary business group.
c) Each member of a unitary business group
				who is subject to Illinois income tax and who properly does not join in the
				filing of a combined return shall separately determine the amount of its
				nonbusiness income allocable to Illinois, the amount of the exemption allowed
				to it under IITA Section 204, the amounts of net loss carryovers, and the
				amounts of any credits and credit carryforwards to which it is entitled,
				without regard to the income, deductions, credits and other tax items of other
				members of the unitary business group, except to the extent those items enter
				into the computation of business income of the member apportioned to Illinois
				under subsection (b).
d) Examples.
				The following examples illustrate the provisions of this Section.
1) EXAMPLE 1: Individual A is a nonresident
				and is the sole shareholder of Corporation S, a subchapter S corporation, and
				Corporation C, a subchapter C corporation. Corporation S and Corporation C are
				engaged in a unitary business within the meaning of IITA Section 1501(a)(27).
				Corporation S' taxable year is the calendar year. Corporation C's taxable year
				is the fiscal year ending June 30. For its taxable year ending 12/31/14,
				Corporation S has business income (as defined in Section
				100.3010(a)(2)
				) of $125,000, Illinois sales of $750,000, and total sales of $1,000,000. For
				its taxable year ending 6/30/14, Corporation C has business income of $75,000,
				Illinois sales of $40,000, and total sales of $500,000. Under subsection (b),
				Corporation S must file a separate return using the combined apportionment
				method to determine its business income apportionable to Illinois. Combined
				apportionment must be computed on the basis of Corporation S' taxable year.
				Because Corporation C's taxable year differs, Corporation S may elect to apply
				any of the methods available under Section
				100.5265 by
				treating S' taxable year as the common taxable year. Assume S elects to use
				method 3 to determine combined business income for the common taxable year
				ending 12/31/14. S' business income apportionable to Illinois is computed as
				follows: $200,000 x ($750,000/$1,500,000) = $100,000. Corporation C must also
				file a separate return computing its business income apportionable to Illinois
				by applying the combined apportionment method. Corporation C may elect to apply
				any of the methods available under Section
				100.5265 to
				determine the amount of business income and apportionment factors of
				Corporation S to be used in computing Corporation C's business income
				apportioned to Illinois.
2) EXAMPLE
				2: Assume that Corporation A owns a 91% interest, Corporation B a 4% interest
				and nonresident Individual Y a 5% interest, in P, a partnership. Corporation A
				and P are engaged in a unitary business within the meaning of IITA Section
				1501(a)(27). Because Corporation A owns more than 90% of P, the alternative
				apportionment provisions for unitary partners and partnerships in Section
				100.3380(d)(2)
				do not apply and P shall be treated as a member of Corporation A's unitary
				business group for all purposes. (See Section
				100.3380(d)(4).)
				Corporation A, Corporation B, Individual Y, and P all use the calendar year as
				their taxable year. For taxable year 12/31/14, Corporation A has business
				income of $300,000 (not including any business income from P), Illinois sales
				of $450,000, and total sales of $600,000. P has business income of $100,000,
				Illinois sales of $30,000, and total sales of $400,000. There are no
				intercompany sales. Under Section
				100.3380(d)(4),
				substantially all of the interests in P are owned or controlled by members of
				the same unitary business group, so that P is treated as a member of the
				unitary business group for all purposes. Because Corporation A's share of the
				business income of P will be eliminated in combination, combined business
				income is $400,000. Under subsection (b), Corporation A and P are required to
				file separate returns in which business income apportionable to Illinois is
				computed by applying the combined apportionment method under IITA Section
				304(e). Under the combined apportionment method, P's business income
				apportionable to Illinois is computed by combining its business income and
				total sales everywhere with the business income and total sales everywhere of
				A. P's business income apportioned to Illinois is thus $12,000, computed as
				follows: $400,000 in combined business income x ($30,000 of P's Illinois
				sales/$1,000,000 of combined total sales) = $12,000. Under IITA Section 304(e),
				Corporation A's business income apportionable to Illinois is $180,000, computed
				as follows: $400,000 in combined business income x ($450,000 of Corporation A's
				Illinois sales/$1,000,000 of combined total sales) = $180,000. In addition,
				under IITA Section 305(a), Corporation A must include its $10,920 distributive
				share (i.e., 91% x $12,000) of the business income of P apportioned to Illinois
				in its Illinois net income. Also, Individual Y must include her $600
				distributable share of the business income of P apportioned to Illinois in her
				Illinois net income (i.e., 5% x $12,000), and Corporation B must include its
				$480 distributable share of the business income of P apportioned to Illinois in
				its Illinois net income (i.e., 4% of $12,000). Finally, P computes Illinois
				personal property tax replacement income tax on net income of $600, computed as
				follows: $400,000 - $380,000 (95% of its base income distributable to partners
				subject to replacement tax) = $20,000, and $20,000 x ($30,000/$1,000,000) =
				$600.
3) EXAMPLE 3: Assume the same
				facts as Example 2, except that P's business income is a loss of ($100,000).
				Under the combined apportionment method, P's business income apportionable to
				Illinois is computed by combining its business loss and total sales everywhere
				with the business income and total sales everywhere of A. P's business income
				apportioned to Illinois is thus $6,000, computed as follows: $200,000 x
				($30,000/$1,000,000) = $6,000. Under IITA Section 304(e), Corporation A's
				business income apportionable to Illinois is $90,000, computed as follows:
				$200,000 x ($450,000/$1,000,000) = $90,000. In addition, Corporation A must
				include its $5,460 distributive share of the business income of P apportioned
				to Illinois in its Illinois net income. Individual Y must include her $300
				distributable share of the business income of P apportioned to Illinois in her
				Illinois net income (i.e., 5% x $6,000), and Corporation B must include its
				$240 distributable share. P computes Illinois personal property tax replacement
				income tax of $300, computed as follows: $200,000 - $190,000 = $10,000, and
				$10,000 x ($30,000/$1,000,000) = $300.