Illinois Administrative Code › Title 86 - REVENUE › Part 100 - INCOME TAX › Subpart EE - DEFINITIONS › Section 100.9700 - Unitary Business Group Defined (IITA Section 1501)

Current through Register Vol. 48, No. 28, July 12, 2024
a) Scope
This Section is designed to clarify the meaning of IITA
				  Section 1501(a)(27), defining "unitary business group". This definition became
				  effective for tax years ending on or after December 31, 1982.
b) Persons Required to Use Combined
				Apportionment
Any person subject to Illinois income taxation may be a
				  member of a unitary business group and required to use combined apportionment
				  under IITA Section 304(e). Only corporations (other than subchapter S
				  corporations) who are members of a unitary business group are required to file
				  combined returns under IITA Section 502(e). For the treatment of certain
				  partners and partnerships engaged in a unitary business, see Section
				  100.3380(d).
				  Every member of a unitary business group who is neither a corporation required
				  to join in a combined return nor a partnership excluded from combined
				  apportionment under Section
				  100.3380
				  shall determine the Illinois portion of its business income pursuant to IITA
				  Section 304(e) by computing the combined business income of the unitary
				  business group in the manner prescribed in Section
				  100.5270(a),
				  and apportioning that unitary business income to Illinois using the combined
				  everywhere apportionment factors of the unitary business group and that
				  person's own Illinois apportionment factors. If one or more other members of
				  the unitary business group have taxable years different from the taxable year
				  of the taxpayer filing the return, that taxpayer shall compute the combined
				  business income of the group for its taxable year by including the incomes of
				  the members using a different taxable year in the manner prescribed by Section
				  100.5265.
c) The 80/20 U.S. Business
				Activity Test for Prospective Members of a Unitary Business Group
The factors to be used in determining whether 80% or more of
				  a person's business activity is conducted outside the United States shall be
				  gross figures without eliminations premised on the person's membership in any
				  unitary business group. However, the factors should relate to the common
				  taxable year, as defined in Section 100.5265, of the unitary business group of
				  which the person being tested could become a member were the person's business
				  activity found to be less than 80% outside the United States. The factors to be
				  used are as follows:
1) persons who
				apportion business income under IITA Section 304(a) shall use property and
				payroll;
2) persons who apportion
				business income under IITA Section 304(b), (c) or (d) will use the respective
				factors prescribed in those provisions.
A)
				For taxable years ending prior to December 31, 2017,
the phrase "United
				States" as used in IITA Section 1501(a)(27) includes only the 50 states and the
				District of Columbia
,
but does not include any territory or
				possession of the United States or any area over which the United States has
				asserted jurisdiction or claimed exclusive rights with respect to the
				exploration for or exploitation of natural resources. For taxable years ending
				on or after December 31, 2017, the phrase "United States", as used in IITA
				Section 1501(a)(27), means only the 50 states, the District of Columbia, and
				any area over which the United States has asserted jurisdiction or claimed
				exclusive rights with respect to the exploration for or exploitation of natural
				resources, but does not include any territory or possession of the United
				States
. (IITA Section 1501(a)(27)(B)) Areas over which the United
				States has asserted jurisdiction and claimed exclusive rights with respect to
				the exploration for or exploitation of natural resources include the outer
				continental shelf. (See IRC section 638 and
				43
				USC 1331.)
B) Mechanically, the computation of the 80/20
				U.S. business activity test involves the formation of one or two fractions, as
				the case may be, and the subsequent averaging of those fractions to arrive at
				an overall U.S. business activity in relation to world-wide business activity.
				The numerators of the fractions shall represent U.S. property, U.S. payroll,
				U.S. revenue miles or other transportation company factors, insurance premiums
				on property or risk in the U.S., or financial organization business income from
				sources within the U.S.; the respective denominators shall be world-wide
				figures.
C) In the case of a person
				who would be a member of a unitary business group for only part of a taxable
				year if less than 80% of its business activities were conducted outside the
				United States, the 80/20 U.S. business activity test shall be applied only to
				that part of the person's taxable year for which the prospective member
				otherwise qualifies for membership in the unitary business group. If that
				person is a corporation and is a prospective member of a unitary business group
				required to file combined returns under IITA Section 502(f), the 80/20 U.S.
				business activity test shall be applied only to that part of the combined
				group's common taxable year for which that person otherwise qualifies for
				membership in the combined group.