Current through Register Vol. 48, No. 38, September 20, 2024
a) In general. If a combined return is filed
for two consecutive taxable years, payments of estimated tax must be made on a
combined basis for each subsequent taxable year, until such time as separate
returns are properly filed. For the taxable years in which combined estimated
payments are required, the combined group shall be treated as one taxpayer for
purposes of IITA Section 803 (relating to payment of estimated tax). If
separate returns are properly filed in a year after a combined return year, the
amount of any estimated tax payments made on a combined basis for such year
shall be credited against the separate tax liabilities of the former members of
the combined group in the manner allocated by the designated agent which is
satisfactory to the Department. The manner of allocation will be satisfactory
to the Department if it does not jeopardize the collection of any liability and
does not conflict with any allocation made under Section
100.5250(d)(2)
of this Part.
b) First two combined return years. For the
first two years for which a combined return is filed, payments of estimated tax
may be made on either a combined or separate basis. The amount of any separate
estimated tax payments made for such year shall be credited against the
combined tax liability. The designated agent shall give notice, in the manner
and form prescribed by the Department in the instructions to Illinois Schedule
UB, of any estimated payments made on a separate basis for any such
year.
c) Penalty for underpayment
of estimated tax
1) In general. If a combined
return is filed, the amount of any penalty for underpayment of estimated tax
shall be computed as if the combined group were one taxpayer.
2) Penalty in the first combined return year.
In the first combined return year, the determination of any penalty due under
IITA Section 804 (including, for taxable years ending prior to December 31,
1990 the application of the exceptions under former IITA Section 804(d)(1) and
(2) shall be made using the aggregate of the tax and income shown on the
returns filed by members of the combined group for the previous year.
3) Combined payments made but separate
returns filed for a tax year following a combined return year. If a combined
group makes payments of estimated tax on a combined basis for all or any part
of a taxable year, and its members properly file separate returns for the
taxable year, the payments made shall be allocated in the manner provided by
subsection (a). The determination of any penalty due from any of the members of
the combined group making the estimated payments, as imposed under IITA Section
804 (including, for taxable years ending prior to December 31, 1990, the
application of the exceptions under prior IITA Section 804(d)(1) and (2), shall
be made using each former member's separate company items from the combined
return filed for the previous year and such member's allocated share of the
combined estimated payments for the current year. The allocated shares shall be
reported to the Department by the designated agent in the manner prescribed in
the instructions to Schedule UB.
4)
Combined payments made but separate returns filed for a tax year not following
a combined return year. If combined estimated payments are made for a tax year
but no combined return is filed for that year and no combined return was filed
in the previous year, the estimated tax shall be a credit only for the
corporation that made the payment.
d) Change in membership
1) Entering. If a corporation becomes a
member of a new or existing combined group during a common taxable year (the
"entry year"):
A) for purposes of applying
IITA Section 804 for the entry year, such corporation's separate company items
shown on its return for its taxable year preceding the entry year shall be
included with the corresponding items of the members of the combined group for
the common taxable year preceding the entry year;
B) if such corporation is not a member of the
combined group for the entire entry year, for purposes of applying IITA Section
804 to the common taxable year immediately following the entry year, such
corporation's separate company items for that portion of the entry year prior
to the date of entry shall be included with the corresponding items of the
combined group for that taxable year; and
C) if a corporation was a member of another
combined group during any portion of the entry year in which it becomes a
member of a second combined group or during any portion of the preceding
taxable year, for purposes of applying subsections (d)(1)(A) and (B) of this
Section, such corporation's separate company item shall include the items
attributed to such corporation by the designated agent of the first combined
group under subsection (d)(2) below.
2) Leaving
A) If a corporation leaves a combined group
during a common taxable year (the "departure year"):
i) for purposes of applying IITA Section 804
to the combined group for the departure year, the separate company items
attributed to such corporation by the designated agent for the common taxable
year preceding the departure year shall be excluded from the corresponding
items of the combined group as if such corporation had not been a member of the
combined group during the common taxable year preceding the departure
year;
ii) in the case of a
corporation departing a combined group after the beginning of the departure
year, for purposes of applying IITA Section 804 to the combined group in the
common taxable year beginning after the departure year, separate company items
attributed to such corporation by the designated agent for the portion of the
departure year prior to its departure shall be excluded from the corresponding
items of the combined group as if such corporation had not been a member of the
group during that portion of the departure year; and
iii) for purposes of applying IITA Section
804 to such corporation, for the first taxable year of the corporation
beginning after the date of departure, and, in the case of a corporation that
leaves a group prior to the end of such corporation's taxable year, for the
portion of its separate taxable year remaining after the date of departure,
such corporation shall take into account the separate company items attributed
to it by the designated agent under subsections (d)(2)(A)(i) and (ii) of this
Section.
B) If the
designated agent fails to make reasonable attributions of separate company
items, as described in subsections (d)(2)(A)(i) and (ii) of this Section, prior
to the date on which the first Illinois Income Tax return for the departure
year is filed by either the combined group or such corporation, no items shall
be attributed to such corporation for purposes of applying Section 804 to the
combined group or to such corporation.
e) Examples. The provisions of this Section
may be illustrated by the following examples:
1) Example 1. Corporations P and S-1 file a
combined return for the first time for calendar year 1985. P and S-1 also file
combined returns for 1986 and 1987. For 1985 and 1986, P and S-1 may make
payments of estimated tax on either a separate or combined basis. For 1987,
however, the group must pay its estimated tax on a combined basis. In
determining whether P and S-1 come within the exception provided in IITA
Section 804(d)(1) (as in effect for 1985), the "tax shown on the return" is the
aggregate amount of tax shown on the separate returns of each member for
1984.
2) Example 2. Corporations X
and Y filed combined returns for the calendar years 1985 and 1986 and separate
returns for 1987. In determining whether X or Y comes within the exception
provided in IITA Section 804(d)(2) (as in effect for 1987), the "facts shown on
the return" are the facts shown on the combined return for 1986 attributable to
X and to Y by the designated agent.
3) Example 3. Assume the same facts as in
Example 1. Assume further that corporation S-2 becomes a member of the group on
July 1, 1987, and joins in the filing of the combined return for 1987. In
determining whether the group (which now includes S-2) comes within the
exception provided in IITA Section 804(d)(1) (as in effect for 1987), the "tax
shown on the return" is the tax shown on the combined return for 1986 plus any
tax of S-2 on its separate return for 1986. In addition, for purposes of
applying IITA Section 804(d)(2) (as in effect for 1987), the "facts shown on
the return" for 1986 shall include the facts shown on the combined return plus
the separate company items of S-2 for 1986.
In applying IITA Section 804(d) for 1988, the "tax shown on
the return" and the "facts shown on the return" for 1987 shall include the
separate company items of S-2 for the period prior to the July 1, 1987 date of
its entry into the combined group.
4) Example 4. Assume the same facts as in
Example 1. Assume further that corporation S-2 is a member of the group during
1986, and joins in the filing of the combined return for such year, but ceases
to be a member of the group on September 15, 1987. In determining whether the
group (which no longer includes S-2) comes within the exception provided in
IITA Section 804(d)(1) (as in effect for 1987), the "tax shown on the return"
is the tax shown on the combined return for 1986 less the amount attributed to
S-2 by the designated agent. In applying IITA Section 804(d)(2), the "facts
shown on the return" for 1986 will exclude the separate company items
attributed to S-2 by the designated agent. Likewise, with regard to S-2's
return, the "tax shown on the return" and the "facts shown on the return" for
1986 shall be the amounts attributed to S-2 by the designated agent.
5) Example 5. Assume that, on July 1, 1996,
S-3 becomes a member of a combined group. Both S-3 and the combined group use a
calendar taxable year. For purposes of applying IITA Section 804(c)(1)(B)(ii)
for 1996, the "tax shown on the return of the taxpayer for the preceding
taxable year" shall include the tax shown on the combined return for 1995 plus
the tax shown on S-2's separate return for 1995. If S-3 was a member of another
combined group during 1995, the tax attributed to it for 1995 by the designated
agent of its former combined group shall be added to the tax shown on the
combined return of its new group for 1995. For purposes of applying IITA
Section 804(c)(1)(B)(ii) for 1997, the "tax shown on the return of the taxpayer
for the preceding taxable year" shall include the tax reported by S-3 on its
separate company return for the period ending prior to its July 1, 1996 entry
into the group or any tax liability of its former combined group for 1996
attributed to it by the designated agent of the former combined
group.
f) For tax years
ending on and after December 31, 1990, IITA Section 804(e) provides that the
penalty imposed by Section 804(a) will not be imposed "if the taxpayer was not
required to file an Illinois income tax return for the preceding year." Because
a combined group is treated as a single taxpayer, this exception to the Section
804 penalty shall apply to a combined group only if none of its members were
required to file an Illinois income tax return for the preceding
year.
g) If a designated agent
makes estimated payments on the erroneous premise that a corporation is an
eligible member of the combined group, and discovers the error prior to the
time the combined group and the corporation file their respective returns, the
designated agent of the combined group may allocate some or all of the
estimated payments made on behalf of the combined group to such corporation,
and the combined group and the corporation will each compute their penalties as
if the estimated payments allocated to such corporation had actually been paid
by it rather than by the combined group. The amount of estimated tax payments
allocated to such corporation pursuant to this subsection (g) must be
consistent with the amounts allocated to such corporation under Section
100.5250(d)(2)
of this Part.
