Illinois Administrative Code › Title 86 - REVENUE › Part 100 - INCOME TAX › Subpart D - ILLINOIS NET LOSS DEDUCTIONS FOR LOSSES OCCURRING ON OR AFTER DECEMBER 31, 1986 › Section 100.2320 - Determination of the Amount of Illinois Net Loss for Losses Occurring On or After December 31, 1986

Current through Register Vol. 48, No. 28, July 12, 2024
a) Add back
				of federal net operating loss deduction. The starting point in calculating
				Illinois net income or loss is taxable income. IITA Section 203(e)(1) provides
				that taxable income shall mean the amount of taxable income properly reportable
				for federal income tax purposes, and that taxable income may be less than zero.
				The IITA requires that certain addition and subtraction modifications be made
				to taxable income to arrive at base income. In order to avoid the recognition
				of a federal net operating loss in more than one taxable year, IITA Sections
				203(b)(2)(E) and 203(c)(2)(E) require an addition modification for
				corporations, trusts and estates. Thus, the amount of any federal net operating
				loss deduction (arising from a loss incurred in a taxable year ending on or
				after December 31, 1986), taken in arriving at federal taxable income must be
				added back in the computation of Illinois base income. Since partnership and S
				corporations are not allowed a net operating loss deduction for federal
				purposes, this type of add back does not apply to them. The add back is
				illustrated by the following Example.
EXAMPLE: In 1986, Corporation A reported a ($100) federal net
				  operating loss. Corporation A carried this loss back for federal purposes and
				  claimed a federal NOL deduction in 1983 of $100. On its Illinois amended return
				  for 1983, since the federal NOL deduction taken on its amended 1983 U.S. return
				  relates to an NOL incurred in a tax year ending on or after December 31, 1986,
				  the $100 federal NOLD must be treated as an addition modification on
				  Corporation A's amended 1983 Illinois return.
b) Other modifications, allocation and
				apportionment. The other addition and subtraction modifications provided in
				IITA Sections 203(b)(2), 203(c)(2), and 203(d)(2) must be taken into account
				before an Illinois net loss can be determined. Also, the allocation ad
				apportionment provisions of IITA Article 3 must be applied before an Illinois
				net loss can be determined. This is illustrated in the following Example.
EXAMPLE: In 1987, Corporation A has federal taxable income of
				  $200, less a $100 federal NOLD relating to a NOL incurred in 1986. In 1987,
				  Corporation A also has $300 of Illinois addition modifications relating to
				  income from State obligations, $200 of subtraction modifications relating to
				  income from U.S. obligations, $400 of nonbusiness loss allocable to Illinois,
				  and a 50% apportionment factor in Illinois. Corporation A would compute its
				  1987 Illinois net loss as follows:
Line 1
-
taxable income
100
Plus
-
addition modification for federal NOLD relating to
							 1986 loss
100
Plus
-
other addition modification
300
Minus
-
subtraction modification
(200)
Equals
-
base income
$300
Minus
-
nonbusiness loss
(400)
Equals
-
business income
700
Times
-
50% apportionment factor
350
Plus
-
nonbusiness loss allocable to Illinois
(400)
Equals
-
Illinois net loss
( 50)
c)
				Net operating losses occurring prior to December 31, 1986, carried into tax
				years ending on or after December 31, 1986
1)
				Effect on taxable income in the carryforward year. Any federal net operating
				losses occurring prior to December 31, 1986 and carried into tax years ending
				on or after December 31, 1986, will be treated as an adjustment to federal
				taxable income (an adjustment before apportionment), and any such federal net
				operating loss deduction will not be required to be added back in computing
				Illinois base income unless such loss has already been used for Illinois
				purposes (see paragraph 3, below).
2) Effect on excess addition modifications in
				the carryforward year. Furthermore, IITA Section 203(e)(1), as amended by P.A.
				84-1400, permits net operating loss carryforwards from pre- December 31,1986,
				tax years to tax years ending on or after December 31, 1986, to offset the
				excess of Illinois addition modifications over subtraction modifications in
				such years. This is illustrated in the following Example.
EXAMPLE: Corporation A had a $1,000 federal net operating
				  loss in 1985. The loss could not be carried back to a prior year and none of it
				  was absorbed in 1986. In 1987, Corporation A had federal taxable income before
				  special deductions of $200, and it had $100 of excess Illinois addition
				  modifications over subtraction modifications. As a result, the $1,000 federal
				  net operating loss will offset the $200 of taxable income before special
				  deductions and the $100 of excess addition modifications. For Illinois income
				  tax purposes, Illinois base income and Illinois net income will be zero for
				  1987, and there will remain a $700 federal net operating loss carryforward for
				  1988 and later years.
3)
				NOL addition modification in carryforward years. For taxable years in which a
				net operating loss carryforward from a taxable year ending prior to December
				31, 1986, is an element of taxable income, IITA Sections 203(b)(2)(F) and
				203(c)(2)(F) provide a special addition modification if that loss carryforward
				originated in a loss year in which it was used to offset excess Illinois
				addition modifications in calculating Illinois base income. See Schedule NL or
				NL-1 (for members of unitary business groups) of the IL-1120.