Current through Register Vol. 48, No. 38, September 20, 2024
a) In
General. IITA Section 303 provides rules for the allocation by any person other
than a resident of Illinois of any item of capital gain or loss, and any item
of income from rents or royalties from real or tangible personal property,
interest, dividends, and patent or copyright royalties, together with any item
of deduction directly allocable thereto, to the extent the item constitutes
nonbusiness income. For the tests as to whether any item constitutes business
or nonbusiness income, see Section
100.3010.
b)
Capital Gains and Losses
1)
Real Property. Capital gains and
losses from sales or exchanges of real property are allocated to Illinois if
the property is located in Illinois. (IITA Section 303(b)(1)) Economic
interests in minerals in place, such as oil or gas, are real property under
IITA Section 303. Examples of these interests are royalties, overriding
royalties, participating interests, production payments and working
interests.
2)
Tangible
Personal Property. Capital gains and losses from sales or exchanges of tangible
personal property are allocated to Illinois, if at the time of the sale or
exchange:A)
the property has
its situs in Illinois; or
B)
the taxpayer has its commercial
domicile in Illinois and is not taxable in the state in which the property has
its situs. (IITA Section 303(b)(2)) For the tests of taxability in
another state and commercial domicile, see Sections
100.3200 and
100.3210.
3)
Intangible Personal Property.
Capital gains and losses from sales or exchanges of intangible personal
property are allocated to Illinois if the taxpayer has its commercial domicile
in Illinois at the time of the sale or exchange. (IITA Section
303(b)(3)) For the tests of commercial domicile, see Section
100.3210.
c) Rents and
Royalties
1)
Real Property. Rents and
royalties from real property are allocated to Illinois if the property is
located in Illinois. (IITA Section 303(c)(1)) Economic interests in
minerals in place, such as oil or gas, are real property under IITA Section
303. Examples of these interests are royalties, overriding royalties,
participating interests, production payments and working interests.
2)
Tangible Personal Property. Rents
and royalties from tangible personal property are allocated to
Illinois:A)
if and to the
extent that the property is utilized in Illinois; or
B)
in their entirety if, at the time
rents or royalties are paid or accrued, the taxpayer has its commercial
domicile in Illinois and was not organized under the laws of, or is not taxable
with respect to the rents or royalties in, the state in which the property is
utilized. (IITA Section 303(c)(2)) For the tests of taxability in
another state and commercial domicile, see Sections
100.3200 and 100.3210. The
extent of utilization of tangible personal property in a state is determined by
multiplying the rents or royalties derived from the property by a fraction, the
numerator of which is the number of days of physical location of the property
in the state during the rental or royalty period in the taxable year and the
denominator of which is the number of days of physical location of the property
everywhere during all rental or royalty periods in the taxable year. If the
physical location of the property during the rental or royalty period is
unknown or unascertainable by the taxpayer, tangible personal property is
utilized in the state in which the property is located at the time the rental
or royalty payor obtains possession.
3) Examples. Section
100.3220(c) may
be illustrated by the following examples:
A)
EXAMPLE A. A is a resident of Missouri. A purchases an interest in oil royalty
under an oil and gas lease in Illinois. During 1970, A receives $2,000 in
royalty payments. Under Section
100.3010(c)(3),
the royalty income is presumed to be nonbusiness income. As such it is
allocated to Illinois, being derived from real property located in
Illinois.
B) EXAMPLE B. B is a
resident of Iowa, with a summer home in Illinois. B owns a sailboat that he
keeps in Iowa during the winter months and tows to Illinois by trailer for use
in the summer. During 1970, B is unable to visit his summer home, and rents his
sailboat for the months of July through September to C, the owner of the
adjoining property in Illinois. Under Section
100.3010(c)(3),
the rent is presumed to be nonbusiness income. C takes the boat from Iowa to
Illinois and returns it to B in Iowa on October 1, 1970. Although the boat is
physically located in Iowa during the months of January through June and
October through December, the rental period is only the months of July through
September. During the rental period, the boat is located in Illinois. Hence, it
is utilized in Illinois and, accordingly, the rental income is allocated to
Illinois.
C) EXAMPLE C. The facts
are the same as in Example B, except that B rents the boat through a want ad
and does not know C, nor where he uses the boat during the months of July
through September. In this case, since C takes possession of the boat in Iowa,
it is utilized in Iowa and, accordingly, the rental income is not allocated to
Illinois.
d)
Patent and Copyright Royalties
1)
Allocation. Patent and copyright
royalties are allocated to Illinois:
A)
if and to the extent that the
patent or copyright is utilized by the payor of the royalties in Illinois;
or
B)
if and to
the extent that the patent or copyright is utilized by the payor of the
royalties in a state in which the taxpayer is not taxable with respect to the
royalties and, at the time the royalties are paid or accrued, the taxpayer has
its commercial domicile in Illinois. (IITA Section 303(d)(1)) For the
tests of taxability in another state and commercial domicile, see Sections
100.3200 and 100.3210.
2)
Utilization
A) Patents. A patent is utilized in a
state to the extent that it is employed in production, fabrication,
manufacturing or other processing in the state or to the extent that a patented
product is produced in the state. If the basis of receipts from patent
royalties does not permit allocation to states or if the accounting procedures
of the royalty payor do not reflect states of utilization, the patent is
utilized in Illinois if the taxpayer has its commercial domicile in
Illinois. (IITA Section 303(d)(2)(A))
B) Copyrights. A copyright is
utilized in a state to the extent that printing or other publication originates
in that state. If the basis of receipts from copyright royalties does not
permit allocation to states or if the accounting procedures of the royalty
payor do not reflect states of utilization, the copyright is utilized in
Illinois if the taxpayer has its commercial domicile in Illinois.
(IITA Section 303(d)(2)(B))
3) Example. A, a resident of New York, is not
in the business of being an inventor, but owns a patent on a single invention,
which he licenses to a manufacturer of automatic garage door openers. Royalties
are a percentage of the manufacturer's sales. The manufacturer has plants
situated in Missouri, Illinois and Indiana. Under Section
100.3050(c)(6),
the royalty income is presumed to be nonbusiness income. If A's royalties can
be allocated to Missouri, Illinois and Indiana on the basis of sales from the
manufacturer's plants in each of those states, those royalties attributable to
sales from the Illinois plant are allocated to Illinois. If, however, the
manufacturer's accounting procedures do not reflect sales from the specific
plants, but royalties are paid on the basis of total sales not broken down by
plant, then, since A is not a resident of Illinois, the patent is not utilized
in Illinois and none of the royalties are allocated to Illinois.
e) Taxability in another state.
For the test of taxability in another state, see Section 100.3200.
f) Interest and dividends. For allocation of
interest and dividends, see Section
100.3300(b)(2).
g)
Illinois Lottery Prizes. Prizes
awarded under the Illinois Lottery Law [20 ILCS 1605
] are allocable to this State. Payments received in taxable years
ending on or after December 31, 2013, from the assignment of a prize under
Section 13.1 of the Illinois Lottery
Law, are allocable to this State. (IITA Section 303(e))
h)
Wagering and Gambling Winnings.
Payments, received in taxable years ending on or after December 31, 2019, of
winnings from pari-mutuel wagering conducted at a wagering facility licensed
under the Illinois Horse Racing Act of 1975 [230 ILCS
5 ] and from gambling games conducted on a
riverboat or in a casino or organization gaming facility licensed under the
Illinois Gambling Act [230 ILCS 10 ] are
allocable to this State. (IITA Section 303(e-1))
i)
Sports Wagering and Winnings.
Payments received in taxable years ending on or after December 31, 2021 of
winnings from sports wagering conducted in accordance with the Sports Wagering
Act [230 ILCS 45 ] are
allocable to this State. (IITA Section 303(e-2))
j) Unemployment Compensation. Unemployment
compensation paid by this State is allocated to this State. (See IITA Section
303(e-5))
