a) Member entering the group from a separate
return year. IITA Section 207 provides that the amount of Illinois net
loss
that is available as a carryback or carryover is determined after applying the
allocation and apportionment provisions of Article 3. That Section does not
limit the amount of Illinois net
loss that may be carried into a given year. As
a consequence, no such limitation shall apply.
1) Example 1:
A) In 1986, Corporation A was not a member of
a unitary business, and it reported a $170 Illinois net
loss on a separate
return. The
loss could not be carried back. Also in 1986, Corporation B and
Corporation constituted a unitary business group, and they reported Illinois
net income. On January 1, 1987, B purchased the stock of A, and due to their
operations A became part of the unitary business group with B and C. The
following facts apply for 1987:
Corp. A
|
Corp. B
|
Corp. C
|
Combined
|
Base
Income
|
1,000
|
Business
Income
|
1,000
|
Apportionment
Percentage
|
10%
|
15%
|
25%
|
50%
|
Apportionment
Income
|
100
|
150
|
250
|
500
|
Illinois
net loss
deduction
|
(170)
|
---
|
---
|
(170)
|
Illinois
net
income
|
---
|
150
|
250
|
330
|
Loss
Carryover
|
(70)
|
B)
If A, B, and C file separate returns using the combined apportionment method,
A's $170 Illinois net loss deduction will be applied against A's income for
that year, and A will have a $70 Illinois net loss carryover to 1988.B and C
will report $150 and $250 of Illinois net income, respectively. If A, B, and C
file a combined return, A's $170 Illinois net loss deduction will be applied
against the group's combined income, and the combined group will report $330 of
combined Illinois net income.
2) Example 2:
A) Same facts as Example 1 except that in
1986 A reported Illinois net income instead of an Illinois net
loss, and B and
C reported Illinois net losses of $200 and $400, respectively, which could not
be carried back. Consequently, the following facts apply for 1987:
Corp. A
|
Corp. B
|
Corp. C
|
Combined
|
Base
Income
|
1,000
|
Business
Income
|
1,000
|
Apportionment
Percentage
|
10%
|
15%
|
25%
|
50%
|
Apportionment
Income
|
100
|
150
|
250
|
500
|
Net loss
deduction
|
---
|
(200)
|
(400)
|
(600)
|
Illinois
net
income
(loss)
|
100
|
(50)
|
(150)
|
(100)
|
B)
If A, B and C file separate returns in 1987, A will report $100 of Illinois net
income, and B and C will have Illinois net losses of $50 and $150,
respectively. If A, B and C file a combined return in 1987, the group will have
a combined net loss of $100.
b) Member leaving the group during a separate
or combined return year. If a corporation ceases to be a member of a unitary
business group during the year, regardless of whether it filed a separate or
combined return, the amount of net
loss attributable to that member for that
portion of the tax year prior to leaving shall be determined in accordance with
Section
100.5270(f)(2)
of this Part.
c) Carryover and Carryback of Combined Net
Losses to Separate Return Years
1) This
subsection applies to unitary members that have made an election to file a
combined return under IITA Section 502(f). If a combined Illinois net
loss (as
defined in Section
100.5270(b)(3)
of this Part) can be carried under the
principles of Section 172(b) to a separate return year of a corporation (or
could have been so carried if such corporation were in existence) which was a
member of a unitary business group in the year in which such
loss arose, then
the portion of such combined Illinois net
loss attributable to such corporation
(as determined under subsection (c)(3) below) shall be assigned to such
corporation and shall be an Illinois net
loss carryover or carryback to such
separate return year; accordingly, such portion shall not be included in the
combined Illinois net
loss carryovers or carrybacks to the equivalent combined
return year. Thus, for example, if a member filed a separate return for the
third year preceding a combined return year in which a combined Illinois net
loss was sustained and if any portion of such
loss is assigned to such member
for such separate return year, such portion may not be carried back by the
group to its third year preceding such combined return year.
2) Nonassignment to certain members not in
existence. Notwithstanding subsection (c)(1), the portion of a combined
Illinois net loss attributable to a member shall not be assigned to a prior
separate return year for which such member was not in existence and shall be
included in the combined Illinois net loss carrybacks to the equivalent
combined return year of the group (or, if such equivalent year is a separate
return year, then to such separate return year), provided that such member was
a member of the unitary business group immediately after its
organization.
3) Portion of
combined Illinois net
loss attributable to a member. The portion of a combined
Illinois net
loss attributable to a member of a group is an amount equal to the
combined Illinois net
loss of the group multiplied by a fraction, the numerator
of which is what would have been the separate Illinois net
loss of such
corporation had a combined return not been filed, and the denominator of which
is the sum of what would have been the separate Illinois net losses of all
members of the group in such year having such losses. The separate Illinois net
loss of a member of the group shall be determined pursuant to Sections
100.2320
and
100.2340
above.
4) Examples. The provisions
of this subsection (c) may be illustrated by the following examples:
A) Example 1:
i) In 1986, Corporations A and B were not
members of a unitary business group and each filed separate Illinois returns.
Both A and B reported net income in 1986 and prior years. On January 1, 1987, B
purchased all the stock of A, and due to their operations A became part of the
unitary business group with B. In 1987 A and B file a combined return and the
following facts apply:
Corp. A
|
Corp. B
|
Combined
|
Base Income
|
(200)
|
Business Income
|
(200)
|
Apport. %
|
10%
|
20%
|
30%
|
Aport. Income
|
(20)
|
(40)
|
(60)
|
Illinois Net Loss
|
(20)
|
(40)
|
(60)
|
ii)
The portion of the 1987 $60 combined Illinois net
loss which will be
attributable to A and B will be as follows:
Corp. A
|
60 x 20/60 = 20
|
Corp. B
|
60 x 40/60 = 40
|
iii)
It should be noted that where a combined net
loss such as in this Example
results entirely from a unitary business
loss (i.e. there are no nonbusiness or
separate apportionment partnership items of income or
loss), and where there
are no prior year losses being carried over (compare to Example 2), then each
member's portion of the combined net
loss can also be calculated by multiplying
the combined business
loss by each member's separate apportionment percentage
(i.e. based on each member's factors in Illinois as compared to the group's
combined factors everywhere). This is illustrated by the following
calculations:
Corp. A
|
200 x 10% = 20
|
Corp. B
|
200 x 20% =
|
B) Example 2:
i) In 1986, Corporation A and Corporation B
were not members of a unitary business group and each filed separate Illinois
returns. A reported a $100 Illinois net
loss in 1986 and B reported net income.
Corporation A's net
loss could not be carried back because of losses in prior
years. On January 1, 1987, B purchased all the stock of A, and due to their
operations A became part of the unitary business group with B. In 1987 A and B
file a combined return and the following facts apply:
Corp. A
|
Corp. B
|
Combined
|
Base Income
|
200
|
Business
Income
|
200
|
Apport. %
|
10%
|
20%
|
30%
|
Apport.
Income
|
20
|
40
|
60
|
Illinois
Net Loss
Deduction
|
(100)
|
(100)
|
Illinois
Net
Income/Loss
|
(80)
|
40
|
(40)
|
ii)
If A and B file separate returns in 1988, the portion of the 1987 $40 combined
Illinois net
loss which will be attributable to A and B in 1988 will be as
follows:
Corp. A
|
40 x 100/100 = 40
|
Corp. B
|
40 x 0/100 = 0
|
C) Example 3:
i) Corporation P was formed on January 1,
1986. P filed a separate return for the calendar year 1986. On March 15, 1987,
P formed Corporation S. P and S filed a combined return for 1987. On January 1,
1988, P purchased all the stock of Corporation T, which had been formed in 1987
and had filed a separate return for its taxable year ending December 31,
1987.
ii) P, S, and T join in the
filing of a combined return for 1988, which return reflects a combined Illinois
net loss of $11,000. $2,000 of such combined net loss is attributable to P,
$3,000 to S, and $6,000 to T. Such attribution of the combined net loss was
made on the basis of the separate net losses of each member as determined under
subsection (c) (3).
iii) $5,000 of
the 1988 combined Illinois net loss can be carried back to P's separate return
for 1986. Such amount is the portion of the combined net loss attributable to P
and S. Even though S was not in existence in 986, the portion attributable to S
can be carried back to P's separate return year, since S (unlike T) was a
member of the group immediately after its organization. The 1988 combined net
loss can be carried back against the group's income in 1987 except to the
extent (i.e., $6,000) that it is apportioned to T for its 1987 separate return
year and to the extent that it was absorbed in P's 1986 separate return year.
The portion of the 1988 combined net loss attributable to T ($6,000) is a net
loss carryback to its 1987 separate return.
D) Example 4:
i) Assume the same facts as in Example 3.
Assume further that on June 15, 1989, P sells all the stock of T to an
outsider, that and S file a combined return for 1989 (which includes the income
of T for the period January 1 through June 5), and that T files a separate
return for the period June 16 through December 31, 1989.
ii) The 1988 combined Illinois net loss, to
the extent not absorbed in prior years, must first be carried to the short
period ending June 15, 1989. Any portion of the $6,000 amount attributable to T
which is not absorbed in T's 1987 separate return year or in the short combined
period ending June 15, 1989, shall then be carried to T's separate short return
year ending December 31, 1989.