Section 100.3375 Combined Apportionment (IITA Section 304(e))

TITLE 86: REVENUE

CHAPTER I: DEPARTMENT OF REVENUE

PART 100 INCOME TAX

SECTION 100.3375 COMBINED APPORTIONMENT (IITA SECTION 304(E))

Section 100.3375  Combined

Apportionment (IITA Section 304(e))

a)

Where 2 or more

persons are engaged in a unitary business as described in

IITA Section

1501(a)(27),

a part of which is conducted in this State by one or more

members of the group, the business income attributable to this State by any

such member or members shall be apportioned by means of the combined

apportionment method.

(IITA Section 304(e))

b)         All members of a unitary

business group must use the combined apportionment method to determine business

income attributable to Illinois, including the provisions for determining

taxability in another state as set forth in Section 100.3200 of this Part.

c)         The combined

apportionment method is applied by first computing the business income of each

member of the unitary business group to derive the total business income of the

group. Next, the apportionment factor for each group member subject to Illinois

income tax is computed using the individual group member's Illinois sales as

the numerator and the entire unitary business group's sales as the denominator.

This apportionment factor is applied to the group's total business income to

derive the amount of business income on which the group member would pay

Illinois income tax. (See General Telephone Co. v. Johnson,

469 N.E.2d

1067 (Ill. 1984).)

d)

For tax years ending

on or after December 31, 2025, sales of each member of a unitary business group

who is not a taxpayer, as defined

in IITA Section 1501(a)(24),

shall be

determined based upon the apportionment rules applicable to the member and

shall be aggregated

which the group member would pay

Illinois income tax. (See General Telephone Co. v. Johnson,

469 N.E.2d

1067 (Ill. 1984).)

d)

For tax years ending

on or after December 31, 2025, sales of each member of a unitary business group

who is not a taxpayer, as defined

in IITA Section 1501(a)(24),

shall be

determined based upon the apportionment rules applicable to the member and

shall be aggregated. Each taxpayer member of the unitary business group shall

include in its sales factor numerator a portion of the aggregate Illinois sales

of the non-taxpayer members based on a ratio, the numerator of which is that

taxpayer member's Illinois sales taking into account its applicable sales

factor provisions, and the denominator of which is the aggregate Illinois sales

of all the taxpayer members of the group taking into account their respective

sales factor provisions. In addition, if inclusion of sales in the sales factor

or numerator of the sales factor depends on whether a taxpayer is considered

taxable in another state within the meaning of

IITA Section 303(f),

that

taxpayer shall be considered taxable in any state in which any member of its unitary

business group is considered taxable under

IITA Section 303(f)

.

(IITA

Section 304(e))

e)         The following examples

illustrate the provisions of this Section:

EXAMPLE 1:

Corporations A, B,

and C constitute a unitary business group. All members have a taxable year

ending June 30, 2024, and all members are taxable in Illinois. Corporation A

has $5,000,000 in business income, $1,000,000 in Illinois sales, and $5,000,000

in everywhere sales. Corporation B has $2,000,000 in business income,

$1,500,000 in Illinois sales, and $2,000,000 in everywhere sales. Corporation C

has $3,000,000 in business income, $2,000,000 in Illinois sales, and $3,000,000

in everywhere sales. Total combined apportionable income is $10,000,000

Corporation A

has $5,000,000 in business income, $1,000,000 in Illinois sales, and $5,000,000

in everywhere sales. Corporation B has $2,000,000 in business income,

$1,500,000 in Illinois sales, and $2,000,000 in everywhere sales. Corporation C

has $3,000,000 in business income, $2,000,000 in Illinois sales, and $3,000,000

in everywhere sales. Total combined apportionable income is $10,000,000. The

combined income apportionable to Illinois for the common tax year is computed

as follows:  $10,000,000 in combined business income x ($4,500,000 of A, B, and

C's Illinois sales/$10,000,000 of combined total sales) = $4,500,000.

EXAMPLE 2:

Corporations X, Y,

and Z constitute a unitary business group. All members have a taxable year

ending June 30, 2024. Corporation Z is protected by Public Law 86-272 and not

taxable in Illinois.

Corporation X has $800,000 in business income, $600,000

in Illinois sales, and $800,000 in everywhere sales. Corporation Y has $1,000,000

in business income, $500,000 in Illinois sales, and $1,000,000 in everywhere

sales. Corporation Z has $4,000,000 in business income, $200,000 in Illinois

sales, and $4,000,000 in everywhere sales. Total combined apportionable income

is $5,800,000. The combined income apportionable to Illinois for the common tax

year is computed as follows:  $5,800,000 in combined business income x ($1,100,000

of X and Y's Illinois sales/$5,800,000 of combined total sales) = $1,100,000.

EXAMPLE 3:  Corporations D, E, and F constitute a

unitary business group. All members have a taxable year ending December 31,

2025. Corporation F is protected by Public Law 86-272 and not taxable in

Illinois.

Corporation

D has $800,000 in business income, $600,000 in Illinois sales, and $800,000 in

everywhere sales. Corporation E has $1,000,000 in business income, $500,000 in

Illinois sales, and $1,000,000 in everywhere sales. Corporation F has

$4,000,000 in business income, $200,000 in Illinois sales, and $4,000,000 in

everywhere sales

protected by Public Law 86-272 and not taxable in

Illinois.

Corporation

D has $800,000 in business income, $600,000 in Illinois sales, and $800,000 in

everywhere sales. Corporation E has $1,000,000 in business income, $500,000 in

Illinois sales, and $1,000,000 in everywhere sales. Corporation F has

$4,000,000 in business income, $200,000 in Illinois sales, and $4,000,000 in

everywhere sales. Total combined apportionable income is $5,800,000. Corporation

D must include in its sales factor numerator $109,091 of Corporation F's

Illinois sales computed as follows:  $200,000 of F's Illinois sales x ($600,000

of D's Illinois sales/$1,100,000 of D and E's combined Illinois sales).

Corporation E must include in its sales factor numerator $90,909 of Corporation

F's Illinois sales computed as follows: $200,000 of F's Illinois sales x

($500,000 of E's Illinois sales/$1,100,000 of D and E's combined Illinois

sales). The combined income apportionable to Illinois for the common tax year

is computed as follows:  $5,800,000 in combined business income x [($600,000 D's

Illinois sales + $109,091 F's apportioned Illinois sales)/$5,800,000 of

combined total sales + ($500,000 E's Illinois sales + $90,909 F's apportioned

Illinois sales)/$5,800,000 of combined total sales] = $1,300,000.

EXAMPLE 4:  Corporations R, S, and T constitute a

unitary business group. All members have a taxable year ending December 31,

2025. Corporation T is protected by Public Law 86-272 and not taxable in

Illinois. Corporation T has $500,000 in sales from Illinois to customers in

State M, where one or more members of the unitary business group has taxable

nexus. As at least one member of the unitary business group has taxable nexus

in State M, Illinois' throwback rule would not apply to the sales made by

Corporation T to customers in State M. These sales are considered taxable in

another state because the unitary business group has a connection to State M

customers in

State M, where one or more members of the unitary business group has taxable

nexus. As at least one member of the unitary business group has taxable nexus

in State M, Illinois' throwback rule would not apply to the sales made by

Corporation T to customers in State M. These sales are considered taxable in

another state because the unitary business group has a connection to State M.

The combined sales factor denominator remains the total combined sales of the

group.