Illinois Administrative Code › Title 86 - REVENUE › Part 100 - INCOME TAX › Subpart A - TAX IMPOSED › Section 100.2060 - Compassionate Use of Medical Cannabis Pilot Program Act Surcharge (IITA Section 201(o))

Current through Register Vol. 48, No. 28, July 12, 2024
a) In general.
				For each taxable year beginning or ending during the Compassionate Use of
				Medical Cannabis Pilot Program, a surcharge is imposed on all taxpayers on
				income arising from the sale or exchange of capital assets, depreciable
				business property, real property used in the trade or business, and Section 197
				intangibles of an organization registrant under the Compassionate Use of
				Medical Cannabis Pilot Program Act [410 ILCS 130 ]. (IITA Section
				201(o))
b) Definitions. For
				purposes of this Section:
"Act" means the Compassionate Use of Medical Cannabis Pilot
				  Program Act [410 ILCS 130].
"Organization Registrant" means a corporation, partnership,
				  trust, limited liability company, or other organization, but not an individual,
				  that holds either a medical cannabis cultivation center registration issued by
				  the Department of Agriculture under Section 85 of the Act or a medical cannabis
				  dispensary registration issued by the Department of Financial and Professional
				  Regulation under Section 115 of the Act.
"Transactions Subject to the Surcharge" means sales and
				  exchanges of capital assets, depreciable business property, real property used
				  in the trade or business, and Section 197 intangibles of an organization
				  registrant. (IITA Section 201(o)) Although a unitary business group filing
				  combined Illinois returns under IITA Section 502(f) is treated as a single
				  taxpayer and its members are jointly and severally liable for any surcharge
				  imposed on the group, the group itself is not an organization registrant and
				  transactions of any member that is not itself an organization registrant are
				  not subject to the surcharge.
c) Imposition of the Surcharge. The surcharge
				is imposed on any taxpayer who incurs a federal income tax liability on the
				income realized on a transaction subject to the surcharge, including
				individuals and other taxpayers who are not themselves the organization
				registrant that engaged in the transaction. An entity that is exempt from
				federal income tax and therefore incurs no liability with respect to a
				transaction otherwise subject to the surcharge will incur no surcharge. For
				example:
1) A disregarded entity, whose
				existence separate from that of its owner is disregarded under
				26 CFR
				301.7701-3, and a grantor trust will incur no
				federal income tax liability because income of these entities is taxed to the
				owner or the grantor. The disregarded entity or grantor trust will therefore
				incur no surcharge. Rather, the surcharge is imposed on the owner of the
				entity, or the grantor of the trust, who is taxable on the income from a
				transaction subject to the surcharge.
2) A partnership incurs no federal income tax
				liability because its income is taxed to its partners, and so will incur no
				surcharge. In the case of an organization registrant that is a partnership, the
				surcharge is imposed on each partner who is taxable on the income from a
				transaction of the partnership that is subject to the surcharge.
3) A Subchapter S corporation will generally
				incur no federal income tax liability because its income is taxed to its
				shareholders, and so will generally incur no surcharge. However, a Subchapter S
				corporation subject to federal income tax on built-in gains or passive income
				from transactions subject to the surcharge is subject to the surcharge. The
				surcharge is imposed on a shareholder for income from transactions of the
				Subchapter S corporation that are subject to the surcharge, including
				transactions on which the surcharge is also imposed on the Subchapter S
				corporation.
4) A trust will incur
				no federal income tax liability for transactions subject to the surcharge if
				the income from a transaction subject to the surcharge is distributed or deemed
				distributed to its beneficiaries, who are then taxed on the income. In those
				situations, the trust will incur no surcharge, but the beneficiary to whom the
				income is taxable will incur the surcharge.