Illinois Administrative Code › Title 86 - REVENUE › Part 100 - INCOME TAX › Subpart Q - COMBINED RETURNS › Section 100.5270 - Computation of Combined Net Income and Tax (IITA Section 304(e))

Current through Register Vol. 48, No. 28, July 12, 2024
a) Determination of
				Base Income. The combined base income shall be determined by first computing
				the combined group's combined taxable income and then modifying this amount by
				the combined group's combined Illinois addition and subtraction modification
				amounts.
1) Combined Net Income. Combined
				base income shall be determined by treating all members of the unitary business
				group (including ineligible members) as if they constituted a federal
				consolidated group and by applying the federal regulations for determining
				consolidated taxable income, except that the separate return limitation year
				provisions and the limitations on consolidation of life and non-life companies
				in
				26 CFR
				1.1502-47 do not apply. (See
				26 CFR
				1.1502-11.) A consolidated net operating loss
				deduction, as defined in
				26 CFR
				1.1502-21 shall be added back to taxable
				income, in whole or in part, in accordance with subsections (a)(2), (a)(4) and
				(a)(5). Pursuant to IITA Section 203(e)(2)(E), combined base income shall be
				determined as if the election provided by IRC section 243(b)(2) had been in
				effect.
EXAMPLE 1: Corporations A and B properly make an election
				  under IITA Section 502(e), or are properly required to file a combined return
				  under IITA Section 502(e). On a separate return basis, A's federal taxable
				  income would be a loss of ($500). This amount does not include an excess
				  capital loss of $75 pursuant to IRC section 1211(a). B's federal taxable income
				  is $1,000 of which $100 is capital gain. As a result of applying
				  26 CFR
				  1.1502-11 and 26 CFR 1.1502 -22, the combined
				  federal taxable income for A and B is $425.
2) Combined Illinois Net Loss. The combined
				group's current year combined taxable income may be less than zero, in which
				case combined taxable income shall be determined by applying the provisions of
				26 CFR
				1.1502-21(f) (consolidated
				net operating loss) to the unitary business group.
EXAMPLE 2: Same facts as Example 1 in subsection (a)(1)
				  except that Corporation C has also properly joined in the election, or is
				  properly required to join in the combined return filing, and its federal
				  taxable income is a loss of ($800). If there are no addition or subtraction
				  modifications and all of the group's base income is apportioned to Illinois,
				  the group's combined Illinois net loss for the taxable year is ($375).
3) Carrybacks and Carryovers.
				Carrybacks and carryovers, if any, shall be determined for each member and not
				for the group. A pro rata share of the loss is attributable to each of the loss
				members. For Illinois net losses that occurred in taxable years ending on or
				after December 31, 1986, the amount of any carryback or carryover shall be
				determined by applying Sections
				100.2340
				and
				100.2350(c)(3)
				and (c)(4). For federal net operating losses
				that occurred in taxable years ending prior to December 31, 1986, the amount of
				any carryback or carryforward shall be determined by applying Section
				100.2230.
EXAMPLE 3: Same facts as Example 2 in subsection (a)(2).
				  Assuming the taxable year ends prior to December 31, 1986, the group's combined
				  net operating loss of ($375) shall be divided between A and C as follows for
				  purposes of carryback and carryover:
Corp. A: 500/1,300 x (375) = 144
Corp. C: 800/1,300 x (375) = 231
4) Addition Modification of Federal Net
				Operating Loss (NOL) Deductions from a Loss Incurred in a Taxable Year Ending
				on or after December 31, 1986. IITA Section 203(b)(2)(D) requires that the
				amount of any federal net operating loss deduction taken in arriving at taxable
				income for federal tax purposes, other than from a loss in a taxable year
				ending prior to December 31, 1986, shall be added back to taxable income in the
				computation of base income. (See Section
				100.2320(a).)
5) Addition Modification of Pre-December 31,
				1986 Federal Losses. IITA Section 203(b)(2)(E) requires an addition
				modification subject to two limitations for taxable years in which a federal
				net operating loss carryforward from a taxable year ending prior to December
				31, 1986 is an element of taxable income. Consequently, each member allowed to
				carryback or forward a portion of the group's combined net operating loss from
				a year in which that combined loss was used to offset a portion of the group's
				combined excess addition modifications shall take as an addition modification
				in the carryback or carryover year its respective share of the NOL addition
				modification required by IITA Section 203(b)(2)(E). In accordance with Section
				100.2240,
				the respective shares shall be determined in the same manner as the
				determination of the amount of NOL carryback or carryover.
EXAMPLE 4: Same facts as Example 2 in subsection (a)(2)
				  except that the group had combined excess addition modifications of $100. This
				  amount will be divided among the loss members as follows:
Corp. A: 500/1,300 x 100 = 38
Corp. C: 800/1,300 x 100 = 62