Illinois Administrative Code › Title 86 - REVENUE › Part 100 - INCOME TAX › Subpart AA - DEFICIENCIES AND OVERPAYMENTS › Section 100.9320 - Limitations on Notices of Deficiency (IITA Section 905)

Current through Register Vol. 48, No. 28, July 12, 2024
a) In General
1) Except as otherwise provided in this
				Section, no notice of deficiency for a taxable year may be issued later than 3
				years after the date the return for that taxable year was filed or deemed filed
				under subsection (h) (see IITA Section 905(a)).
2) Consequences of Failure to Issue a Timely
				Notice of Deficiency. Failure by the Department to issue a timely notice of
				deficiency with respect to a taxable year precludes assessment of any
				additional tax for that taxable year, together with any related penalty or
				interest, that is required to be shown in a notice of deficiency. The
				expiration of the period for issuing a notice of deficiency for a taxable year:
A) does not preclude the Department from
				asserting any adjustments to net income or credits reported by a taxpayer, to
				the extent the adjustments would reduce or eliminate a refund claimed by the
				taxpayer for that taxable year. (See Lewis v. Reynolds,
				284 U.S.
				281 (1932).)
B) does not preclude the Department from
				asserting any adjustments to the amount of net loss incurred under IITA Section
				207 (except as provided in subsection (l) of this Section for losses incurred
				in taxable years ending prior to December 31, 2002) or of any credit earned in
				that taxable year, or the amount of net loss deduction under IITA Section 207
				or of any credit carryforward that is properly taken in that taxable year, in
				order to compute the amount of net loss deduction or credit carryforward
				allowable in another taxable year, so that a timely notice of deficiency may be
				issued for that other taxable year or a claim for refund for that other taxable
				year may be denied in whole or in part. (See Springfield Street Railway Co. v.
				U.S., 312 F.2d 754 (Ct. Cl. 1963).)
EXAMPLE:
Corporation A and its wholly-owned subsidiary Corporation B
				  are members of a unitary business group, but filed separate returns for
				  calendar years 2005 through 2009. Corporation A reported positive net income
				  every year, and Corporation B reported net losses under IITA Section 207 for
				  every year. For 2010, the corporations filed a combined return, and used losses
				  incurred by Corporation B in 2010 and carryforwards of losses reported by
				  Corporation B in prior years to reduce combined net income to zero. The
				  corporations also filed refund claims for 2007, 2008 and 2009, computing their
				  liability on a combined basis, and reporting net losses carried to 2010. The
				  limitations periods for issuing notices of deficiency have expired for 2005 and
				  2006, but not for the later years.
The Department may examine the returns for 2005 and 2006 and
				  may adjust the combined net income or loss of the corporations for those years
				  and for each subsequent year in order to determine the correct amount of any
				  combined net income or loss for each year, and the correct amount of any net
				  loss deduction to be used in each year, so that the correct liabilities for
				  2007, 2008, 2009 and 2010 can be determined and any deficiency for the later
				  years can be assessed and any excessive refund claim denied.
If the limitations period for issuing a notice of deficiency
				  for 2007 expires before the Department begins its examination of the
				  corporations' returns, but before any refund is paid, the Department may
				  nevertheless make any adjustment to the net income or net loss of either
				  corporation for 2007, as well as to any net loss carryforwards from 2005 and
				  2006, in order to reduce the allowable refund for that year or to reduce the
				  net losses available to carry to subsequent years.