Current through Register Vol. 48, No. 38, September 20, 2024
a) Not every member
of a unitary business group is eligible to join in the filing of a combined
return and, for taxable years ending prior to December 31, 1993, joining in the
filing of a combined return was elective.
b) Each member of a unitary business group
who is subject to Illinois income tax and who properly does not join in the
filing of a combined return must file a separate return, and compute its
business income apportionable to Illinois by computing the base income of the
unitary business group in accordance with Section
100.5270(a)(1)
and by multiplying the business income included in the base income by an
apportionment fraction computed by using the Illinois apportionment factor or
factors applicable to the return filer under IITA Section 304 and the
everywhere factor or factors of the entire unitary business group.
c) Each member of a unitary business group
who is subject to Illinois income tax and who properly does not join in the
filing of a combined return shall separately determine the amount of its
nonbusiness income allocable to Illinois, the amount of the exemption allowed
to it under IITA Section 204, the amounts of net loss carryovers, and the
amounts of any credits and credit carryforwards to which it is entitled,
without regard to the income, deductions, credits and other tax items of other
members of the unitary business group, except to the extent those items enter
into the computation of business income of the member apportioned to Illinois
under subsection (b).
d) Examples.
The following examples illustrate the provisions of this Section.
1) EXAMPLE 1: Individual A is a nonresident
and is the sole shareholder of Corporation S, a subchapter S corporation, and
Corporation C, a subchapter C corporation. Corporation S and Corporation C are
engaged in a unitary business within the meaning of IITA Section 1501(a)(27).
Corporation S' taxable year is the calendar year. Corporation C's taxable year
is the fiscal year ending June 30. For its taxable year ending 12/31/14,
Corporation S has business income (as defined in Section
100.3010(a)(2)
) of $125,000, Illinois sales of $750,000, and total sales of $1,000,000. For
its taxable year ending 6/30/14, Corporation C has business income of $75,000,
Illinois sales of $40,000, and total sales of $500,000. Under subsection (b),
Corporation S must file a separate return using the combined apportionment
method to determine its business income apportionable to Illinois. Combined
apportionment must be computed on the basis of Corporation S' taxable year.
Because Corporation C's taxable year differs, Corporation S may elect to apply
any of the methods available under Section
100.5265 by
treating S' taxable year as the common taxable year. Assume S elects to use
method 3 to determine combined business income for the common taxable year
ending 12/31/14. S' business income apportionable to Illinois is computed as
follows: $200,000 x ($750,000/$1,500,000) = $100,000. Corporation C must also
file a separate return computing its business income apportionable to Illinois
by applying the combined apportionment method. Corporation C may elect to apply
any of the methods available under Section
100.5265 to
determine the amount of business income and apportionment factors of
Corporation S to be used in computing Corporation C's business income
apportioned to Illinois.
2) EXAMPLE
2: Assume that Corporation A owns a 91% interest, Corporation B a 4% interest
and nonresident Individual Y a 5% interest, in P, a partnership. Corporation A
and P are engaged in a unitary business within the meaning of IITA Section
1501(a)(27). Because Corporation A owns more than 90% of P, the alternative
apportionment provisions for unitary partners and partnerships in Section
100.3380(d)(2)
do not apply and P shall be treated as a member of Corporation A's unitary
business group for all purposes. (See Section
100.3380(d)(4).)
Corporation A, Corporation B, Individual Y, and P all use the calendar year as
their taxable year. For taxable year 12/31/14, Corporation A has business
income of $300,000 (not including any business income from P), Illinois sales
of $450,000, and total sales of $600,000. P has business income of $100,000,
Illinois sales of $30,000, and total sales of $400,000. There are no
intercompany sales. Under Section
100.3380(d)(4),
substantially all of the interests in P are owned or controlled by members of
the same unitary business group, so that P is treated as a member of the
unitary business group for all purposes. Because Corporation A's share of the
business income of P will be eliminated in combination, combined business
income is $400,000. Under subsection (b), Corporation A and P are required to
file separate returns in which business income apportionable to Illinois is
computed by applying the combined apportionment method under IITA Section
304(e). Under the combined apportionment method, P's business income
apportionable to Illinois is computed by combining its business income and
total sales everywhere with the business income and total sales everywhere of
A. P's business income apportioned to Illinois is thus $12,000, computed as
follows: $400,000 in combined business income x ($30,000 of P's Illinois
sales/$1,000,000 of combined total sales) = $12,000. Under IITA Section 304(e),
Corporation A's business income apportionable to Illinois is $180,000, computed
as follows: $400,000 in combined business income x ($450,000 of Corporation A's
Illinois sales/$1,000,000 of combined total sales) = $180,000. In addition,
under IITA Section 305(a), Corporation A must include its $10,920 distributive
share (i.e., 91% x $12,000) of the business income of P apportioned to Illinois
in its Illinois net income. Also, Individual Y must include her $600
distributable share of the business income of P apportioned to Illinois in her
Illinois net income (i.e., 5% x $12,000), and Corporation B must include its
$480 distributable share of the business income of P apportioned to Illinois in
its Illinois net income (i.e., 4% of $12,000). Finally, P computes Illinois
personal property tax replacement income tax on net income of $600, computed as
follows: $400,000 - $380,000 (95% of its base income distributable to partners
subject to replacement tax) = $20,000, and $20,000 x ($30,000/$1,000,000) =
$600.
3) EXAMPLE 3: Assume the same
facts as Example 2, except that P's business income is a loss of ($100,000).
Under the combined apportionment method, P's business income apportionable to
Illinois is computed by combining its business loss and total sales everywhere
with the business income and total sales everywhere of A. P's business income
apportioned to Illinois is thus $6,000, computed as follows: $200,000 x
($30,000/$1,000,000) = $6,000. Under IITA Section 304(e), Corporation A's
business income apportionable to Illinois is $90,000, computed as follows:
$200,000 x ($450,000/$1,000,000) = $90,000. In addition, Corporation A must
include its $5,460 distributive share of the business income of P apportioned
to Illinois in its Illinois net income. Individual Y must include her $300
distributable share of the business income of P apportioned to Illinois in her
Illinois net income (i.e., 5% x $6,000), and Corporation B must include its
$240 distributable share. P computes Illinois personal property tax replacement
income tax of $300, computed as follows: $200,000 - $190,000 = $10,000, and
$10,000 x ($30,000/$1,000,000) = $300.
