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Illinois Corporation Income Taxes (Portfolio 2100)

Product Code: TPOR44
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Illinois Corporation Income Taxes discusses a wide range of issues dealing with the taxation of corporations in Illinois and considers issues for all corporations doing business in Illinois. Written by a team of lawyers from the law firm of Horwood, Marcus & Berk, Chtd., including Jordan M. Goodman, Esq., Fred O. Marcus, Esq., Marilyn A. Wethekam, Esq., and David A. Hughes, Esq., this Portfolio provides a detailed discussion of the computation of Illinois taxable income and explains its similarities to and differences from federal taxable income. This Portfolio focuses on the special treatment of certain entities, including S corporations, limited liability companies, insurance companies, and financial organizations. 

Taxation of multistate business is also analyzed, and the Portfolio includes a discussion on nexus as well as other constitutional limitations, including the Due Process Clause. This Portfolio also provides both a discussion of Pub. L. No. 86-272 and Illinois application of the law.  

Finally, Illinois Corporation Income Taxes explains apportionment and allocation issues and the unitary business doctrine, and it concludes with a discussion of tax procedures and taxpayer remedies. Such issues as filing returns, tax assessments, judicial challenges, and refund claims are analyzed.

Illinois Corporation Income Taxes allows you to benefit from: 

  • Hundreds of hours of original research on specific tax planning topics from leading practitioners in this area.
  • Invaluable practice documents including tables, charts and lists.
  • Plain-English guidance from world-class experts.
  • Real-world and in-depth analysis that lets you explore various options.
  • Time-saving access to relevant sections of tax laws, regulations, court cases, IRS documents and more.
  • Alternative approaches to both common and unique tax scenarios.

This Portfolio is part of the Premier State Tax Library, a comprehensive series, which covers major state tax transactions and issues with expert, in-depth analysis, and offers commentary on a wide range of multi-state and state-specific taxation topics, including Sales and Use, Corporate Income, Individual Income, Property, Gross Receipts, Limitations on States' Authorities to Tax, Credits and Incentives, Electronic Commerce, Mergers and Acquisitions, Procedure and Administration, Special Industries, and more.

Detailed Analysis

2100.01. INTRODUCTION

2100.02. CORPORATIONS SUBJECT TO INCOME TAX

A. Basic Rule, Corporation Income Tax

B. Special Applications of Income Tax

C. Personal Property Replacement Tax

2100.03. SPECIFIC CORPORATIONS EXEMPT FROM TAX

2100.04. ISSUES FOR CORPORATIONS DOING BUSINESS IN ILLINOIS

A. Preliminary Considerations

1. Franchise Tax

2. S Corporations

3. Illinois Net Operating Loss

4. Apportionment of Income of Interstate Business

2100.05. DETERMINATION OF GROSS INCOME AND DEDUCTIONS

A. Comparison of Federal and Illinois Provisions

B. Special Treatment of Certain Entities

1. S Corporations

2. Limited Liability Companies

3. DISCs and FSCs

4. Insurance Companies

5. Financial Organizations

6. Public Utilities

a. Invested Capital Tax

b. Gross Receipts Tax

c. Administrative Assessment Tax

d. Public Utility Fund Base Maintenance Contribution

7. Regulated Investment Companies

8. Real Estate Investment Trusts

9. Cooperatives

10. Personal Holding Company

C. Foreign Source Income

D. Credits

E. Gross Income Additions

1. Starting Point

2. Interest from State and Local Obligations

3. Income and Replacement Tax Deductions

4. Special Entity Adjustments: Regulated Investment Company and Real Estate Investment Trust

5. Depreciation Bonus

6. Addback for Transactions with 80/20 Companies

F. Gross Income Subtractions

1. Foreign Dividend Gross-Up

2. Illinois Income Tax Refunds

3. Federal Obligations Interest

4. Expenses Related to Tax-Exempt Income

5. Tax Exempt Interests Paid By Regulated Investments Companies

6. Dividends From Foreign Subsidiaries

7. Dividends From a Corporation in an Enterprise Zone

8. Contributions Made to Designated Zone Organizations

9. Dividends From a Corporation in a "High Impact Business"

10. Contributions to Job Training Program

11. 'Claim of Right' Deduction

12. Personal Property Replacement Tax

13. Financial Organizations

G. Computation of Taxable Income

H. Net Operating Loss Deduction

2100.06. CORPORATE REORGANIZATION: MERGERS AND ACQUISITIONS

A. Recognition of Gain or Loss

2100.07. TAXATION OF MULTISTATE BUSINESSES

A. Sufficient Nexus to Taxing State

B. Federal Constitutional Limitations

1. Due Process Clause

2. Interstate Commerce Clause

3. Foreign Commerce Clause

C. Public Law 86-272

1. Scope of Public Law 86-272

2. Interpretation of Pub. L. No. 86-272

a. Pre-Wrigley Confusion

b. The Wrigley Decision

c. Post-Wrigley Developments

3. Illinois Application of Pub. L. No. 86-272

2100.08. APPORTIONMENT AND ALLOCATION

Introductory Material

A. General Description

B. Uniform Division of Income for Tax Purposes Act (UDITPA)

C. Multistate Tax Compact (MTC)

D. Distinction between Business and Nonbusiness Income

1. Pass–Through Income of a Partnership

2. Dividends

3. Interest

4. Income From the Disposition of Capital Assets

5. Allocation of Nonbusiness Income

a. Rents and Royalties

b. Capital Gains and Losses

c. Interest and Dividends

d. Royalties From Patents and Copyrights

2100.09. UNITARY BUSINESS DOCTRINE

A. Judicial Development

1. Assignment of Income by Formula if Business Is "Unitary"

2. Developing "Unitary Business" Concept

3. "Nexus" Among Interstate Business Activities

4. "Factors of Profitability"

5. Effect on Foreign Commerce

B. Statutory and Regulatory Framework

1. Illinois Uniform Division of Income for Tax Purposes Act

2. Illinois UDITPA Regulations

3. Holding Companies

a. Worldwide Combinations

b. Corporate Partners

c. Combined Reports by Unitary Business

d. Part-Year Unitary Members

e. Net Operating Losses

f. Carryback and Carryforward of Net Operating Losses

g. Contents of a Combined Report

4. Apportionment by Single Sales Factor Formula

a. Illinois Apportionment Methodology

b. Sales Factor

c. Application of Throwback Rule to Members of Unitary Business Group ("Joyce Rule")

d. Property Factor

e. Payroll Factor

5. Apportionment Formula for Special Industries

a. Insurance Companies

b. Financial Organizations

c. Transportation Services

2100.10. TAX PROCEDURE AND TAXPAYER REMEDIES

A. Filing Returns

1. Returns and Payments

2. Manner of Filing

3. Election to File Combined

4. Estimated Tax

B. Assessment of Tax

1. Assessment

2. Statute of Limitations on Assessments; Effect of Federal Adjustments

3. Administrative Procedures

4. Audit and Preliminary Appeal Procedures

5. Office Conference

6. Filing a Protest

a. Protest Procedure

b. Administrative Hearing

c. Rehearing

C. Judicial Challenges to Department Action

1. Administrative Review Law

2. Protest Moneys Act

3. Suits in Federal Court

4. Factors to Consider in Choosing a Forum

D. Claims and Actions for Refund

1. Claims for Refund

a. Form of Claim

b. Statutes of Limitation on Refund Claims

c. Actions for Refund

E. Taxpayers' Bill of Rights

F. Tax Shelter Voluntary Compliance Program

Working Papers

Item Description Sheet

Worksheet 1 Definition of Doing Business

Worksheet 2 Illinois Department of Revenue Addresses

Worksheet 3 BNA 2008 Survey of State Tax Departments: Illinois Questionnaire

Bibliography

Bibliography

Brian Browdy
Mr. Browdy practices state and local tax with his primary focus on the resolution of state and local tax disputes and tax planning for multistate and multinational corporations. He received his B.A. degree from Northwestern University and his law degree from DePaul University. He is admitted to practice in Illinois.
Jordan Goodman
Mr. Goodman is a partner in the Chicago law firm of Horwood, Marcus & Berk, Chartered, where he concentrates his practice on state and local tax planning and the resolution of state and local tax disputes for multistate and multinational corporations. He advises businesses in various industries on the tax ramifications and benefits of organizational structures and has lectured on state and local taxation before business and professional associations. Mr. Goodman is co–author of the chapter entitled Illinois Income Tax Considerationsfor the Illinois Institute of Continuing Legal Education publication Organizing and Advising Illinois Businesses and the chapter entitled Illinois Sales and Use Tax in the American Bar Association's Sales and Use Tax Handbook. He received his B.S. in accounting with high honors from Indiana University and his J.D. from the University of Illinois. Mr. Goodman is also a Certified Public Accountant.
David Hughes
David Hughes is an associate at Horwood, Marcus & Berk, Chartered, where he practices state and local tax with special emphasis on income and sales/use tax matters. His work focuses primarily on the resolution of state and local tax disputes and tax planning for multistate and multinational corporations. Mr. Hughes is co–author of the chapter entitled Illinois Sales and Use Tax in the American Bar Association's Sales and Use Tax Handbook. He graduated magna cum laude with a degree in English from the University of Notre Dame and received his law degree from Columbia University.
Fred O. Marcus
Mr. Marcus is a partner in Horwood, Marcus & Berk, Chartered, where as chairman of the firm's state and local tax practice group, he concentrates on state tax planning and the resolution of state and local tax disputes on a nationwide basis for multistate and multinational corporations. He received his B.S. in accounting in 1970 from the University of Illinois and his J.D. in 1974 from the DePaul University College of Law. Mr. Marcus has served as a faculty member for programs sponsored by the Tax Executive Institute, the Committee On State Taxation, and the National Institute on State and Local Taxation. He has also written numerous articles on state taxation. He is currently a member of the Illinois Department of Revenue's Practitioner Liaison Group; the American Bar Association's Section of Taxation's State and Local Tax Committee, and the Advisory Council of the National Institute on State and Local Taxation.
Marilyn Wethekam