86 Ill. Adm. Code 100.3600 — Combined Apportionment for Taxpayers Using Different Apportionment Formulas (IITA Section 1501(a)(27))

# Combined Apportionment for Taxpayers Using Different Apportionment Formulas (IITA Section 1501(a)(27))

TITLE 86: REVENUE CHAPTER I: DEPARTMENT OF REVENUE PART 100 INCOME TAX SECTION 100.3600 COMBINED APPORTIONMENT FOR TAXPAYERS USING DIFFERENT APPORTIONMENT FORMULAS (IITA SECTION 1501(A)(27))

Section 100.3600 Combined Apportionment for Taxpayers Using Different Apportionment Formulas (IITA Section 1501(a)(27)) a) IITA Section 1501(a)(27) provides that, in no event, for taxable years ending prior to December 31, 2017, may any unitary business group include members that are ordinarily required to apportion business income under different subsections of IITA Section 304. b) For taxable years ending on or after December 31, 2017, the business income of a unitary business group that includes members who apportion their business income under different subsections of IITA Section 304 shall be apportioned using the average of the apportionment percentages of each subgroup of members using the same apportionment formula (computed as if that subgroup were a separate unitary business group) weighted by the everywhere sales of the members of each subgroup (as determined under Sections 100.3370 and 100.3380). The apportionment percentage of each member of the unitary business group is the apportionment percentage that member would compute if the subgroup of members using the same apportionment formula of that member were a separate unitary business group, multiplied by a fraction equal to the everywhere sales of that subgroup divided by the everywhere sales of the unitary business group. 1) The apportionment percentage of each member shall be equal to a fraction in which: A) the numerator for each member shall be: i) the total sales everywhere, as determined under Sections 100.3370 and 100.3380, for all members of the group that apportion business income under the same subsection of IITA Section 304 as that member, ii) multiplied by a fraction equal to: ● that member's Illinois numerator of the apportionment factor determined under the subsection of IITA Section 304 used by that member to apportion its business income, ● divided by the total denominators of that apportionment factor of all members required to apportion business income under the same subsection of IITA Section 304; and B) the denominator shall be the sum of the everywhere sales of all members of the unitary business group, as determined under Sections 100.3370 and 100.3380(d). 2) For unitary business groups that include one or more partnerships and one or more partners, see Section 100.3380(d). c) EXAMPLE: A combined group is composed of 6 members: Corporations A and B (who apportion their business income using the sales factor under IITA Section 304(a), so that the numerator and denominator of the Respective Section 304 Formula columns are their Illinois and everywhere sales, respectively), Insurance Companies A and B (who apportion their business income using the premiums factor under IITA Section 304(b), so that the numerator and denominator of the Respective Section 304 Formula columns are their Illinois and everywhere premiums, respectively), and Transportation Companies A and B (who apportion their business income using the transportation company formula under IITA Section 304(d), so that the numerator and denominator of the Respective Section 304 Formula columns are their Illinois and everywhere transportation receipts and revenue miles, respectively). The apportionment data for the members of the group are as follows: Everywhere Sales Respective Section 304 Formula Company Numerator Denominator Percentage Corporation A $100 $10 $100 3.333% Corporation B $200 $25 $200 8.333% Subgroup Total $300 $35 $300 Insurance A $250 $3 $50 2.000% Insurance B $450 $6 $100 4.000% Subgroup Total $700 $9 $150 Transportation A $300 $5 $25 2.500% Transportation B $700 $7.5 $175 3.750% Subgroup Total $1,000 $12.5 $200 Grand Total $2,000 Note that the everywhere sales of the insurance and transportation companies exceed the denominators of those companies' apportionment formulas because the denominators of insurance and transportation companies include only premiums and income from transportation services, respectively, while the everywhere sales of those companies include all gross business receipts of those companies, except amounts specifically excluded from the sales factor under Sections 100.3370 and 100.3380. For example, interest, gross rental income and net gains or losses on sales of intangibles in the regular course of business are included in the sales factor, but not in the apportionment formulas used by insurance or transportation companies, and so would cause the everywhere sales of an insurance or transportation company to exceed the denominator of its apportionment formula. The apportionment fraction of each member of the group and for the group is computed as follows: A B C D E Section 304 Apportionment Percentage Subgroup Everywhere Sales A * B Group Everywhere Sales C ÷ D Corporation A 3.333% $300 $10.00 $2,000 0.500% Corporation B 8.333% $300 $25.00 $2,000 1.250% Insurance A 2.000% $700 $14.00 $2,000 0.700% Insurance B 4.000% $700 $28.00 $2,000 1.400% Transportation A 2.500% $1,000 $25.00 $2,000 1.250% Transportation B 3.750% $1,000 $37.50 $2,000 1.875% Total 6.975% (Source: Added at 43 Ill. Reg. 10124, effective August 27, 2019)

Section 100.3600 Combined Apportionment for Taxpayers Using Different Apportionment Formulas (IITA Section 1501(a)(27))

a) IITA Section 1501(a)(27) provides that, in no event, for taxable years ending prior to December 31, 2017, may any unitary business group include members that are ordinarily required to apportion business income under different subsections of IITA Section 304.

b) For taxable years ending on or after December 31, 2017, the business income of a unitary business group that includes members who apportion their business income under different subsections of IITA Section 304 shall be apportioned using the average of the apportionment percentages of each subgroup of members using the same apportionment formula (computed as if that subgroup were a separate unitary business group) weighted by the everywhere sales of the members of each subgroup (as determined under Sections 100.3370 and 100.3380). The apportionment percentage of each member of the unitary business group is the apportionment percentage that member would compute if the subgroup of members using the same apportionment formula of that member were a separate unitary business group, multiplied by a fraction equal to the everywhere sales of that subgroup divided by the everywhere sales of the unitary business group.

1) The apportionment percentage of each member shall be equal to a fraction in which:

A) the numerator for each member shall be:

i) the total sales everywhere, as determined under Sections 100.3370 and 100.3380, for all members of the group that apportion business income under the same subsection of IITA Section 304 as that member,

ii) multiplied by a fraction equal to:

● that member's Illinois numerator of the apportionment factor determined under the subsection of IITA Section 304 used by that member to apportion its business income,

● divided by the total denominators of that apportionment factor of all members required to apportion business income under the same subsection of IITA Section 304; and

B) the denominator shall be the sum of the everywhere sales of all members of the unitary business group, as determined under Sections 100.3370 and 100.3380(d).

2) For unitary business groups that include one or more partnerships and one or more partners, see Section 100.3380(d).

c) EXAMPLE: A combined group is composed of 6 members: Corporations A and B (who apportion their business income using the sales factor under IITA Section 304(a), so that the numerator and denominator of the Respective Section 304 Formula columns are their Illinois and everywhere sales, respectively), Insurance Companies A and B (who apportion their business income using the premiums factor under IITA Section 304(b), so that the numerator and denominator of the Respective Section 304 Formula columns are their Illinois and everywhere premiums, respectively), and Transportation Companies A and B (who apportion their business income using the transportation company formula under IITA Section 304(d), so that the numerator and denominator of the Respective Section 304 Formula columns are their Illinois and everywhere transportation receipts and revenue miles, respectively). The apportionment data for the members of the group are as follows:

Everywhere

Sales

Respective Section 304 Formula

Company

Numerator

Denominator

Percentage

Corporation A

$100

$10

$100

3.333%

Corporation B

$200

$25

$200

8.333%

Subgroup Total

$300

$35

$300

Insurance A

$250

$3

$50

2.000%

Insurance B

$450

$6

$100

4.000%

Subgroup Total

$700

$9

$150

Transportation A

$300

$5

$25

2.500%

Transportation B

$700

$7.5

$175

3.750%

Subgroup Total

$1,000

$12.5

$200

Grand Total

$2,000

Note that the everywhere sales of the insurance and transportation companies exceed the denominators of those companies' apportionment formulas because the denominators of insurance and transportation companies include only premiums and income from transportation services, respectively, while the everywhere sales of those companies include all gross business receipts of those companies, except amounts specifically excluded from the sales factor under Sections 100.3370 and 100.3380. For example, interest, gross rental income and net gains or losses on sales of intangibles in the regular course of business are included in the sales factor, but not in the apportionment formulas used by insurance or transportation companies, and so would cause the everywhere sales of an insurance or transportation company to exceed the denominator of its apportionment formula. The apportionment fraction of each member of the group and for the group is computed as follows:

A

B

C

D

E

Section 304 Apportionment Percentage

Subgroup Everywhere

Sales

A * B

Group Everywhere Sales

C ÷ D

Corporation A

3.333%

$300

$10.00

$2,000

0.500%

Corporation B

8.333%

$300

$25.00

$2,000

1.250%

Insurance A

2.000%

$700

$14.00

$2,000

0.700%

Insurance B

4.000%

$700

$28.00

$2,000

1.400%

Transportation A

2.500%

$1,000

$25.00

$2,000

1.250%

Transportation B

3.750%

$1,000

$37.50

$2,000

1.875%

Total

6.975%

(Source: Added at 43 Ill. Reg. 10124, effective August 27, 2019)