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 100.2340 - Illinois Net Losses and Illinois Net Loss Deductions for Losses Occurring On or After December 31, 1986, of Corporations that are Members of a Unitary Business Group: Separate Unitary Versus Combined Unitary Returns

Current through Register Vol. 48, No. 28, July 12, 2024
a) In general. IITA
				Section 502(f) allows corporations (other than Subchapter S corporations) that
				are members of the same unitary business group to elect to be treated as one
				taxpayer for certain purposes including the filing of returns (combined
				returns) and the determination of the group's tax liability. Consequently, if
				an election under Section 502(f) is in effect, any Illinois net loss and
				Illinois net loss deduction of the unitary business group shall be determined
				as if the group were one taxpayer. If such an election is not in effect, any
				Illinois net loss and Illinois net loss deduction shall be determined
				separately on the facts shown on the separate corporate returns of each member
				of the group. In general, the Section 502(f) election will not affect total
				amount of net loss or net loss deduction that is available, but it may affect
				how quickly the loss is absorbed. In general, if an election is in effect, net
				losses are absorbed more quickly. The rules for determining a net loss or net
				loss deduction set forth in Sections
				100.2310
				through
				100.2330
				apply in the same manner whether or not such an election is in effect. If the
				business income of a unitary business group results in a loss, the amount of
				that loss will be the same whether or not a combined return is filed. If a
				combined return is not filed, any such loss will be apportioned among all
				members of the group based on each member's apportionment factors in Illinois
				as compared to their combined apportionment factors everywhere. This is
				illustrated by the following Example:
EXAMPLE: Assume that Corporation A and Corporation B
				  constitute a unitary business group and there is no nonbusiness income or loss.
				  Under the facts given below, if A and B file separate returns in 1986, using
				  combined apportionment, A will have an Illinois net loss of $100 and B will
				  have an Illinois net loss of $400, and if a combined return is filed, the group
				  will report a combined Illinois net loss of $500.
Corp A.
Corp. B
Combined
Base Income (loss)
200
(1,200)
(1,000)
Business Income
(1,000)
Apport. % (sep. Ill./comb. everywhere)
10%
40%
Apport. % (comb. Ill./comb. everywhere)
50%
Apportioned income (loss)
(100)
(400)
(500)
Illinois Net Income (loss)
(100)
(400)
(500)
b)
				Determination of the amount of Illinois net loss. The election provided under
				IITA Section 502(f) may affect whether or not an Illinois net loss is incurred
				by particular members of the unitary business group if some members have
				nonunitary income or loss. This is illustrated in the following Example.
EXAMPLE: Assume that Corporation A and Corporation B
				  constitute a unitary business group in 1986. Under the facts given below, if A
				  and B file separate returns in 1986, using the combined apportionment method, A
				  will have an Illinois net loss of $170 and B will report Illinois net income of
				  $520. If a combined return is filed, the group will report combined Illinois
				  net income of $350.
Corp. A
Corp. B
Combined
Base income
1,000
Nonbusiness loss
(300)
(300)
Business income
1,300
Apport. % (sep.Ill./comb. everywhere)
10%
40%
Apport. % (comb. Ill./comb. everywhere
50%
Apportioned income
130
520
650
Nonbusiness loss allocable to Illinois
(300)
(300)
Illinois Net income (loss)
(170)
520
350
c)
				Illinois net loss carrybacks and carryovers. The election provided in IITA
				Section 502(f) may affect the amount of Illinois net loss deduction that can be
				absorbed in a particular year. If a combined return is filed, any Illinois net
				loss deductions are combined and subtracted from combined Illinois net income,
				whereas if a separate return is filed, the Illinois net loss deduction of that
				member only would be subtracted from that member's separate Illinois net
				income. This is illustrated in the following Example.
EXAMPLE: Assume that Corporation A and Corporation B
				  constitute a unitary business group, that in 1986 there is a $170 Illinois net
				  loss entirely attributable to Corporation A because Corporation B had no
				  property, payroll, or sales in Illinois, and that the loss must be carried
				  forward because of losses in prior years. Assume further that in 1987 both A
				  and B have property, payroll and sales in Illinois. The separate and combined
				  absorption of the loss in 1987 is illustrated below. Under the facts given, if
				  A and B file separate returns, the $170 Illinois net loss deduction will be
				  recognized on A's return only, and A will have a $70 net loss carryover to
				  1988. B will have to pay tax on net income of $400. If a combined return is
				  filed in 1987, the $170 Illinois net loss from 1986 will be fully absorbed in
				  1987, and the combined group will pay tax on combined net income of
				  $330.
Corp. A
Corp. B
Combined
Base income
1,000
Business income
1,000
Apport. % (sep. Ill./comb. everywhere
10%
40%
Apport. % (comb. Ill./comb. everywhere)
50%
Apportioned income
100
400
500
Net loss deduction
(170)
(170)
Net income (loss)
(70)
400
330