Illinois Administrative Code › Title 86 - REVENUE › Part 100 - INCOME TAX › Subpart M - BUSINESS INCOME OF PERSONS OTHER THAN RESIDENTS › Section 100.3420 - Apportionment of Business Income of Insurance Companies (IITA Section 304(b))

Current through Register Vol. 48, No. 28, July 12, 2024
a) In General.
				Except as otherwise provided in this Section,
business income of an
				insurance company for a taxable year shall be apportioned to this State by
				multiplying such income by a fraction, the numerator of which is the direct
				premiums written for insurance upon property or risk in this State, and the
				denominator of which is the direct premiums written for insurance upon property
				or risk everywhere.
[IITA Section 304(b)(1)]
b) Insurance Company. For purposes of the
				IITA, an "insurance company" means any taxpayer properly treated as an
				insurance company for purposes of federal income taxation under subchapter L of
				the Internal Revenue Code (IRC sections 801 through 848). (See IITA Section
				102.) No other taxpayer may be treated as an insurance company for purposes of
				the IITA.
c) Direct Premiums
				Written.
"Direct premiums written" means the total amount of direct
				premiums written, assessments and annuity considerations as reported for the
				taxable year on the annual statement filed by the company with the Illinois
				Director of Insurance in the form approved by the National Convention of
				Insurance Commissioners
(currently known as the National Association
				of Insurance Commissioners)
or such other form as may be prescribed in
				lieu
of the National Association of Insurance Commissioners form.
1) The apportionment factor shall take into
				account only those receipts that are included in either "gross premiums
				written" under IRC section 832(b)(4)(A) or "gross amount of premiums" under IRC
				section 803(a)(1)(A). Only receipts that are included in federal taxable income
				of the taxpayer, and that are not subtracted in the computation of base income
				under a provision of Section 203 of the IITA, may be included in the
				apportionment factor. (See Continental Illinois National Bank and Trust Company
				of Chicago v. Lenckos, 102 Ill.2d 210 (1984).)
2) Only direct premiums written for
				insurance, assessments against mutual policyholders and consideration for
				annuity contracts that include elements of insurance are included in the
				apportionment factor. Other receipts are excluded from the apportionment
				factor, even if included in net income.
3) Examples of receipts that are excluded
				from the apportionment factor include:
A)
				Interest, dividends and other income from investments.
B) Gains or losses from the adjustment of
				reserves, salvage or subrogation.
C) Deposit-type funds. This is due to the
				fact that deposit-type funds involve no insurance risk and are therefore
				reported separately from premiums, assessments and annuity considerations on
				the annual report.
D) Premiums on
				which State income taxes are prohibited by federal law.
4) Premiums rebated or repaid to
				policyholders and reported as negative amounts on the annual statement are
				treated as negative amounts in the computation of the apportionment factor.
				However, neither the numerator nor the denominator of the apportionment factor
				may be reduced below zero.