Can an insurance company that changed its mind get Illinois's permission to switch how it sources reinsurance premiums for apportionment purposes?

Subject

Apportionment – Insurance Companies

Plain-English summary

The Illinois Department of Revenue granted a reinsurance company's request to change how it sources reinsurance premiums for purposes of apportioning its income to Illinois. The taxpayer is licensed by the Illinois Department of Insurance to write life, health, and annuity business, but unlike a typical insurer, all of its business is reinsurance -- it assumes premiums from other ("ceding") life insurance companies and has no direct premium of its own in Illinois or anywhere else.

Because reinsurance is its principal source of premium, the taxpayer must apportion its income under the special reinsurance rule in 35 ILCS 5/304(b)(2). That statute lets a reinsurer choose one of two ways to figure out how much of its reinsurance premium counts as "Illinois" premium: (A) the share of its total reinsurance premium that comes from ceding companies commercially domiciled in Illinois, or (B) a look-through method based on each ceding company's own ratio of Illinois direct premium to its total direct premium (Form IL-1120 calls these Method C and Method B, respectively).

The taxpayer's prior tax advisor had originally elected Method B (the look-through method). The taxpayer asked to switch to Method A/Method C -- sourcing based on where its ceding-company customers are domiciled -- retroactive to a specified tax year. It argued Method C better reflects economic reality (its actual customers are the ceding companies, not their policyholders, with whom it has no contact), is more accurate (ceding companies' premium-distribution data can be hard to obtain and inconsistent), and is simpler to administer.

Under 35 ILCS 5/304(b)(2) and 86 Ill. Adm. Code 100.3420(e)(3), once an insurer makes this election for its first tax year ending on or after December 31, 2011, the election is binding for all future years unless the Department gives written permission to change it -- and the Department "shall not unreasonably withhold" that permission. A request to change the election must be submitted as a Private Letter Ruling request, and can even apply retroactively as long as the statute of limitations is still open for every affected tax year (with the taxpayer and Department able to sign a Form IL-872 agreement extending that statute of limitations to allow time to process the request). The Department found the taxpayer met these requirements and granted the change, from Method B to Method C, effective for the tax year requested and all subsequent years -- unless the Department later permits another change.

What this means for you

Reinsurers and insurance-company tax teams

If your company's principal source of premium is reinsurance assumed (rather than direct premium), you apportion income to Illinois under the special fraction in 35 ILCS 5/304(b)(2) and 86 Ill. Adm. Code 100.3420(e), not the general direct-premium rule in 304(b)(1). You get to elect how you source "Illinois" reinsurance premium -- either the ceding-company domicile method (Method C) or the look-through, ceding-company-ratio method (Method B) -- but whichever method you use for your first tax year ending on or after December 31, 2011 locks you in for every year after that. Changing later requires the Department's written permission.

Companies wanting to change their apportionment election

A change request must be submitted as a formal Private Letter Ruling request under 2 Ill. Adm. Code 1200.110, and you can ask for it to apply retroactively to a past tax year -- but only if the statute of limitations for assessing additional tax is still open for that year and every later year as of when the Department responds. If your statute of limitations is close to running, you and the Department can sign a Form IL-872 to extend it so there's time to process the request. Also disclose whether you or a related taxpayer are currently under audit or in litigation on the issue -- the Department conditions the ruling on that not being the case.

Accountants and tax professionals advising insurers

Note the underlying policy point the Department accepted: obtaining accurate premium-distribution data from ceding companies (the look-through Method B) can be time-consuming, inconsistent between companies (due to differing NAIC reporting practices), and expensive to gather -- exactly the administrative problem Illinois Income Tax Info. Bulletin No. 1970-4 (1970) anticipated when it created the two elective methods in the first place. That history supported the taxpayer's argument that switching to the domicile-based method (Method C) was reasonable and consistent with the regulation's purpose.

Common questions

Q: What apportionment methods can a reinsurer choose between for sourcing reinsurance premium to Illinois?
A: Under 86 Ill. Adm. Code 100.3420(e)(2) and the Form IL-1120 instructions, a reinsurer can use Method A (premium-by-premium determination of property/risk located in Illinois), Method B (apply each ceding company's ratio of Illinois direct premium to its total direct premium to the reinsurance assumed from that company), or Method C (the share of total reinsurance premium assumed from companies commercially domiciled in Illinois).

Q: Can an insurance company change its reinsurance-premium sourcing election after it's been made?
A: Yes, but only with the Department's written permission, which by statute (35 ILCS 5/304(b)(2)) "shall not be unreasonably withheld." The request must be made as a Private Letter Ruling request under 86 Ill. Adm. Code 100.3420(e)(3)(A) and 2 Ill. Adm. Code 1200.110.

Q: Can the change apply to a past tax year?
A: Yes, if the statute of limitations for assessing additional tax is still open for that tax year and every later tax year as of the date the Department responds. The taxpayer and Department can agree in writing under 35 ILCS 5/905(f) to extend the statute of limitations to give the Department time to process the request.

Q: Does this ruling mean every reinsurer can now use the domicile-based method?
A: No. This is a Private Letter Ruling, binding on the Department only as to this specific taxpayer, and only to the extent the facts it provided were correct and complete. The ruling states it binds the Department for the specified tax year and later years "except as limited pursuant to 2 Ill. Admin. Code 1200.110(d) and (e)," and it will stop binding the Department if there is a pertinent change in statutory law, case law, rules, or in the facts recited. Other insurers must submit their own PLR request to change their election.

Q: Being under audit -- does that block a ruling like this?
A: The Department conditioned issuance on the taxpayer (and related taxpayers) not currently being under audit or in litigation over the specific issue in the ruling request. Here, the taxpayer disclosed it was under audit for other Corporate Income and Replacement Tax years but stated -- and the Department accepted -- that the audit did not involve the apportionment methodology at issue.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2022.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2022/it22-0001-plr.pdf

Original ruling text

IT-22-0001 03/15/2022 APPORTIONMENT – INSURANCE COMPANIES
Taxpayer’s request to change method of sourcing reinsurance premiums
under IITA Section 304(b)(2) is granted. (This is a PLR.)
March 15, 2022
Re:

Request for Private Letter Ruling
COMPANY (FEIN ##-#######)

Dear NAME:
This is in response to your letter dated September 4, 2020 in which you request a
Private Letter Ruling, on behalf of COMPANY, for permission to change your
apportionment computation method for reinsurance premiums effective for tax
year ending DATE and subsequent tax years. Review of your request for a
Private Letter Ruling indicates that all information described in paragraphs 1
through 8 of subsection (b) of 2 Ill. Admin. Code 1200.110 is contained in your
request. This Private Letter Ruling will bind the Department only with respect to
COMPANY. Issuance of this ruling is conditioned upon the understanding that
COMPANY and/or any related taxpayer(s) is not currently under audit or involved
in litigation concerning the issues that are the subject of this ruling request.
The facts and analysis as you have presented states as follows:
Private Letter Ruling Request
In accordance with the guidance in 86 Illinois Administrative Code
§100.3420(e)(3)(A) and 2 Illinois Administrative Code §1200.110,
COMPANY (“COMPANY” or “Taxpayer”) respectfully requests that the
Department grant this petition to change their election for apportionment
methodology in respect to reinsurance premium effective retroactively to
tax year ending DATE.
COMPANY is domiciled in STATE and has been fully licensed to conduct
life, health and annuity insurance operations in Illinois by the Department
of Insurance since DATE. COMPANY maintains its corporate offices at
ADDRESS. Unlike a direct writer, COMPANY’S insurance operations
consist solely of reinsurance activity and has no direct premium in Illinois
or any other state. Consequently, COMPANY does not conduct
associated standard insurance operations, such as insurance sales and
claim processing. Based on the past five years, COMPANY has assumed
approximately $$$ million annually of life and annuity premium from
multiple life insurance companies. COMPANY forecasts that the volume of
premium and number of insurers it does business with will continue to
increase for future years.
As COMPANY is licensed as an active insurer in Illinois, it is subject to
both the Illinois Privilege Tax and the Illinois Corporate Income and
Replacement Tax and has timely filed such returns since licensed. Based
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on their insurance operations, COMPANY’S principal source of premium
written consists of premium for reinsurance accepted and so must include
reinsurance assumed in their apportionment factor per 86 IAC
100.3420(e). As established by the initial Illinois Corporate Income and
Replacement Tax Return filed as prepared by their prior tax advisor,
COMPANY “elected” to determine the amount of premium written for
reinsurance accepted in Illinois based upon the proportion which the sum
of the direct premium written for insurance upon property or risk in this
State by each ceding company from which reinsurance is accepted bears
to the sum of the total direct premium written by each such ceding
company for the taxable year as permitted by 86 IAC 100.3420(e)(2)(B).
COMPANY is requesting to change their election for apportionment
methodology in respect to reinsurance premium to determine the amount
of premium written for reinsurance accepted in Illinois based upon the
proportion which premium written for reinsurance accepted from
companies commercially domiciled in Illinois bears to premium written for
reinsurance accepted from all sources as permitted by 86 IAC
100.3420(e)(2)(A). Based on a review of COMPANY’S business
operations and their state tax filings, COMPANY believes this method
streamlines the tax return process and more accurately attributes their
revenues to the states where they do business. Per the discussion in
Illinois Income Tax Info. Bulletin No. 1970-4, the Department has been
long aware of the issues involved in identifying Illinois property or risk
related to reinsurance premium. Obtaining premium distribution
information for ceding insurance companies is time consuming and
obviously compounded by the volume of reinsurance transactions. Due to
financial reporting requirements (or lack thereof) for the ceding insurance
companies, this information is not always readily or publicly available, and
so may require additional expense to obtain. Further, due to potential
differences in permitted reporting methodologies by the National Alliance
of Insurance Commissioners, the premium distribution data obtained for
ceding insurance companies may differ by company and skew the
accuracy of the resulting apportionment. Further, COMPANY believes that
sourcing revenue to their actual customer location (i.e. the domicile of the
ceding insurance companies) more accurately reflects the economic
reality of their business operations. The ceding insurance companies are
COMPANY’S actual customer base, with income and expenses directly
attributable to their home states. Under the current “look-through” sourcing
method, COMPANY is inaccurately attributing revenue to the policyholder
locations of the ceding insurance companies. However, COMPANY has
no interaction with or contractual responsibility to these policyholders.
Sales of services are in Illinois if the services are received in Illinois. Note
that sourcing revenue to the domicile of the ceding insurance companies
also more closely follows the general sourcing of services for general

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corporations to the location where the services are received per 35 ILCS
§5/304(a)(3)(C-5)(iv).

Relevant Supporting Documents
The following documents relevant to the request are attached:
•
•
•

Copies of COMPANY’S Annual Statement, Schedule S, Part 1,
Section 1, Reinsurance Assumed Life Insurance, Annuities and
Deposit Funds, for calendar years YEAR1- YEAR2
Copies of each ceding insurance company’s Annual Statement,
Schedule T, Premiums and Annuity Considerations Allocated by
States and Territories, for calendar years YEAR1 – YEAR2
Copy of Form IL-872, Consent to Extend the Time to Assess of
Refund Income Tax, extending the statute of limitations for tax year
YEAR1 until DATE.

Please let us know if you believe there are additional documents or
information you need to process this request.
Identification of Tax Period and Audit/Litigation
COMPANY requests that this election change be effective for tax year
ending DATE and future years.
While COMPANY is currently under audit for Corporate Income and
Replacement Tax for tax years ending DATE through DATE, COMPANY
does not believe that the apportionment methodology for assumed
reinsurance premium will be an audit issue. Additionally, COMPANY does
not believe this audit will impact apportionment methodology for tax years
ending YEAR and YEAR.
Further, COMPANY has no litigation pending with the Department for any
period or tax type.
Prior Rulings
To the best of COMPANY’S knowledge, the Department has not
previously ruled on the same or a similar issue for the Taxpayer or a
predecessor. Further, neither COMPANY nor any representative of
COMPANY has previously submitted the same or a similar issue to the
Department but withdrew it before a letter ruling was issued.
Statement of Authority
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Illinois Compiled Statutes, Chapter 35/Revenue, Illinois Income Tax Act,
and associated Administrative Code, Title 86/Revenue, Part 100/Income
Tax, state:
35 ILCS §5/304(b)(1) / In general
Except as otherwise provided by paragraph (2), business income of an
insurance company for a taxable year shall be apportioned to this State by
multiplying such income by a fraction, the numerator of which is the direct
premiums written for insurance upon property or risk in this State, and the
denominator of which is the direct premiums written for insurance upon
property or risk everywhere. For purposes of this subsection, the term
“direct premiums written” means the total amount of direct premiums
written, assessments and annuity considerations as reported for the
taxable year on the annual statement filed by the company with the Illinois
Director of Insurance in the form approved by the National Convention of
Insurance Commissioners or such other form as may be prescribed in lieu
thereof.
35 ILCS §5/304(b)(2) / Reinsurance
If the principal source of premiums written by an insurance company
consists of premiums for reinsurance accepted by it, the business income
of such company shall be apportioned to this State by multiplying such
income by a fraction, the numerator of which is the sum of (i) direct
premiums written for insurance upon property or risk in this State, plus (ii)
premiums written for reinsurance accepted in respect of property or risk in
this State, and the denominator of which is the sum of (iii) direct premiums
written for insurance upon property or risk everywhere, plus (iv) premiums
written for reinsurance accepted in respect of property or risk everywhere.
For purposes of this paragraph, premiums written for reinsurance
accepted in respect of property or risk in this State, whether or not
otherwise determinable, may, at the election of the company, be
determined on the basis of the proportion which premiums written for
reinsurance accepted from companies commercially domiciled in Illinois
bears to premiums written for reinsurance accepted from all sources, or,
alternatively, in the proportion which the sum of the direct premiums
written for insurance upon property or risk in this State by each ceding
company from which reinsurance is accepted bears to the sum of the total
direct premiums written by each such ceding company for the taxable
year. The election made by a company under this paragraph for its first
taxable year ending on or after December 31, 2011, shall be binding for
that company for that taxable year and for all subsequent taxable years,
and may be altered only with the written permission of the Department,
which shall not be unreasonably withheld.
86 IAC §100.3420(a) / In general

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Except as otherwise provided in this Section, business income of an
insurance company for a taxable year shall be apportioned to this State by
multiplying such income by a fraction, the numerator of which is the direct
premiums written for insurance upon property or risk in this State, and the
denominator of which is the direct premiums written for insurance upon
property or risk everywhere. [IITA Section 304(b)(l)]
86 IAC §100.3420(b) / Insurance Company
For purposes of the IITA, an “insurance company” means any taxpayer
properly treated as an insurance company for purposes of federal income
taxation under subchapter L of the Internal Revenue Code (IRC sections
801 through 848). (See IITA Section 102.) No other taxpayer may be
treated as an insurance company for purposes of the IITA.
86 IAC 100.3420(c) / Direct Premiums Written
“Direct premiums written” means the total amount of direct premiums
written, assessments and annuity considerations as reported for the
taxable year on the annual statement filed by the company with the Illinois
Director of Insurance in the form approved by the National Convention of
Insurance Commissioners (currently known as the National Association of
Insurance Commissioners) or such other form as may be prescribed in
lieu of the National Association of Insurance Commissioners form.
1) The apportionment factor shall take into account only those
receipts that are included in either “gross premiums written”
under IRC section 832(b)(4)(A) or “gross amount of premiums”
under IRC section 803(a)(l)(A). Only receipts that are included
in federal taxable income of the taxpayer, and that are not
subtracted in the computation of base income under a provision
of Section 203 of the IITA, may be included in the
apportionment factor. (See Continental Illinois National Bank
and Trust Company of Chicago v. Lenckos, 102 Ill.2d 210
(1984).)
2) Only direct premiums written for insurance, assessments
against mutual policyholders and consideration for annuity
contracts that include elements of insurance are included in the
apportionment factor. Other receipts are excluded from the
apportionment factor, even if included in net income.
3) Examples of receipts that are excluded from the apportionment
factor include:
A. Interest, dividends and other income from investments.
B. Gains or losses from the adjustment of reserves, salvage
or subrogation.
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C. Deposit-type funds. This is due to the fact that deposittype funds involve no insurance risk and are therefore
reported separately from premiums, assessments and
annuity considerations on the annual report.
D. Premiums on which State income taxes are prohibited by
federal law.
4) Premiums rebated or repaid to policyholders and reported as
negative amounts on the annual statement are treated as
negative amounts in the computation of the apportionment
factor. However, neither the numerator nor the denominator of
the apportionment factor may be reduced below zero.
86 IAC §100.3420(d) / Insurance on Property or Risk in this State
A direct premium is written for insurance upon property or risk in this State
and included in the numerator of the apportionment factor if it is allocated
to this State in the annual statement filed by the insurance company with
the Director of Insurance. If an insurance company does not file an annual
statement with the Director of Insurance or if any direct premiums written
by an insurance company are not allocated to a specific state on its
annual statement, that insurance company shall include in the numerator
of its apportionment factor the direct premiums written for insurance on
property or risk in this State, determined in accordance with the
determination of gross taxable premium written under Section 409(1) of
the Illinois Insurance Code [215 ILCS 5/409(1)], provided that the
determination shall be made without allowing the exceptions in that
Section 409(1) for premiums on annuities, premiums on which State
premium taxes are prohibited by federal law, premiums paid by the State
for Medicaid eligible insureds, premiums paid for health care services
included as an element of tuition charges at any university or college
owned and operated by the State of Illinois, premiums on group insurance
contracts under the State Employees Group Insurance Act of 1971 [5
ILCS 375], or premiums for deferred compensation plans for employees of
the State, units of local government or school districts.
86 IAC §100.3420(e) / Reinsurance
If the principal source of premiums written by an insurance company
consists of premiums for reinsurance accepted by it, the business income
of such company shall be apportioned to this State by multiplying such
income by a fraction, the numerator of which is the sum of direct
premiums written for insurance upon property or risk in this State, plus
premiums written for reinsurance accepted in respect of property or risk in
this State, and the denominator of which is the sum of direct premiums
written for insurance upon property or risk everywhere, plus premiums
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written for reinsurance accepted in respect of property or risk everywhere.
(IITA Section 304(b)(2))
1) The principal source of premiums written by an insurance
company consists of premiums for reinsurance accepted by the
taxpayer for a taxable year if the premiums written for
reinsurance accepted that would be includable in the
denominator of the apportionment fraction for the taxable year
under this subsection (e) exceed the direct premiums written for
insurance that would be includable in the denominator of the
apportionment fraction under this subsection (e).
2) An insurance company may determine the amount of premiums
written for reinsurance accepted in respect of property or risk in
this State by consideration of each premium written, or the
premiums may, at the election of the company, be determined
on the basis of:
A. the proportion which premiums written for reinsurance
accepted from companies commercially domiciled in
Illinois bears to premiums written for reinsurance
accepted from all sources; or
B. the proportion which the sum of the direct premiums
written for insurance upon property or risk in this State by
each ceding company from which reinsurance is
accepted bears to the sum of the total direct premiums
written by each such ceding company for the taxable
year.
3) The election to determine the portion of reinsurance premiums
accepted in respect of property or risk in this State for a
particular tax year, by consideration of each premium written or
by either of the alternative methods outlined in subsection
(e)(2), shall be made by using the chosen method on the
taxpayer’s return for the taxable year. For taxable years ending
prior to December 31, 2011, the election may be made or
changed at any time. The election made by a company for its
first taxable year ending on or after December 31, 2011 is
binding for that company for that taxable year and for all
subsequent taxable years, and may be altered only with the
written permission of the Department, which shall not be
unreasonably withheld. (IITA Section 304(b)(2))

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A. A request for permission to alter an election shall be
submitted to the Department as a request for a private
letter ruling under 2 Ill. Adm. Code 1200.110, and
permission to alter an election shall be granted by private
letter ruling. Requests may be made for the change to
take effect for a taxable year ending prior to the date the
request is filed, provided that the request shall be granted
only if the statute of limitations for assessment of
additional tax is open for that taxable year and every
subsequent taxable year as of the date the Department
responds to the request. The taxpayer and the
Department may agree in writing to extend the statute of
limitations under IITA Section 905(f) in order to allow the
Department time to process the request.
Illinois Income Tax Info. Bulletin, No. 1970-4, 09/28/1970
The problems of identifying Illinois property or risk related to reinsurance
premiums may be difficult. This information is frequently unobtainable by
reinsurance companies except at great expense. An election is provided
which is intended to relieve reinsurers from the obligation of determining
the state in which the risk or property which they have reinsured is
located. Whether or not the facts with respect to location are otherwise
determinable, the taxpayer may elect, for purposes of its apportionment
factor, to determine reinsurance premiums accepted in respect of property
or risk in Illinois by either of two alternatives:
a) Reinsurance premiums in Illinois may be determined on the
basis of the proportion which premiums written for reinsurance
accepted from companies commercially domiciled in Illinois
bears to premiums written for reinsurance accepted from all
sources; or
b) Alternatively, reinsurance premiums in Illinois may be
determined on the basis of the proportion which the sum of the
direct premiums written for insurance upon property or risk in
Illinois by each ceding company from which reinsurance is
accepted bears to the sum of the total direct premiums written
by each ceding company for the taxable year.
COMPANY is requesting to change their election for apportionment
methodology in respect to reinsurance premium to determine the amount
of premium written for reinsurance accepted in Illinois based upon the
proportion which premium written for reinsurance accepted from
companies commercially domiciled in Illinois bears to premium written for
reinsurance accepted from all sources as permitted by 86 IAC
100.3420(e)(2)(A). This is a request for an apportionment methodology
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change as permitted by regulation from one permitted method to another
permitted method. Further, COMPANY believes this request is also
supported by the simplification of their tax return preparation and
alignment of apportionment to their business operations as identified
previously above.
As this is a request for an apportionment methodology change as
permitted by regulation, COMPANY is unaware of any authority contrary
to this request.
Identification of Impacted Trade Secrets
This request does not impact any specific trade secret information for
COMPANY that would need to be deleted from the publicly disseminated
version of the private letter ruling.
Taxpayer Signature
Please send all questions or requests for additional information to me via
email, by phone, or by mail via the below contact information.
Under penalties of perjury, I declare that I have examined this request,
including the accompanying documents, and to the best of my knowledge
and belief the facts presented in support of the requested ruling are true,
correct and complete.

RULING
Section 304(b)(2) of the Illinois Income Tax Act (“IITA”) (35 ILCS 5/304(b)(2))
provides:
Reinsurance. If the principal source of premiums written by an insurance
company consists of premiums for reinsurance accepted by it, the business
income of such company shall be apportioned to this State by multiplying
such income by a fraction, the numerator of which is the sum of (i) direct
premiums written for insurance upon property or risk in this State, plus (ii)
premiums written for reinsurance accepted in respect of property or risk in
this State, and the denominator of which is the sum of (iii) direct premiums
written for insurance upon property or risk everywhere, plus (iv) premiums
written for reinsurance accepted in respect of property or risk everywhere.
For purposes of this paragraph, premiums written for reinsurance accepted in
respect of property or risk in this State, whether or not otherwise
determinable, may, at the election of the company, be determined on the
basis of the proportion which premiums written for reinsurance accepted from
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companies commercially domiciled in Illinois bears to premiums written for
reinsurance accepted from all sources, or, alternatively, in the proportion
which the sum of the direct premiums written for insurance upon property or
risk in this State by each ceding company from which reinsurance is
accepted bears to the sum of the total direct premiums written by each such
ceding company for the taxable
year. The election made by a company
under this paragraph for its first taxable year ending on or after December
31, 2011, shall be binding for that company for that taxable year and for all
subsequent taxable years, and may be altered only with the written
permission of the Department, which shall not be unreasonably withheld.
Regarding this provision, the Instructions to Form IL-1120 provide:
You may determine your reinsurance premiums from Illinois sources using
one of the following methods. You must use the same method for all future
years unless you receive written permission from the Department to change
methods.
Method A – Determine the reinsurance premiums assumed, relating to
property or risk located in Illinois.
Method B – For each company from which reinsurance is accepted,
determine the ceding insurance company’s ratio of direct premiums on
property or risk located in Illinois, to its total direct premiums. Apply this ratio
to the reinsurance premiums assumed from that company. For example,
reinsurer R assumes premiums of $40,000 and $50,000 from ceding
companies A and B respectively. Company A’s ratio of direct premiums on
property or risk located in Illinois, to its total direct premiums, is 10 percent
and Company B’s ratio is 20 percent. Reinsurer R has $14,000 of
reinsurance premiums assumed on property or risk located in Illinois,
consisting of $4,000 from ceding Company A (10 percent of $40,000) and
$10,000 from ceding Company B (20 percent of $50,000).
Method C – Determine the amount of reinsurance premiums assumed from
insurance
companies commercially domiciled in Illinois. Include in
reinsurance premiums assumed in Illinois, all premiums for reinsurance
accepted from insurance companies commercially domiciled in Illinois.
IITA Section 304(b)(2) provides that an insurance company is allowed to make
the election provided therein regardless of whether or not it may be determined
that any particular reinsurance premiums are accepted in respect to property or
risk located in Illinois. However, the section requires that an election made for the
first taxable year ending on or after December 31, 2011, must apply to all future
taxable years. The election is binding on the taxpayer for all subsequent taxable
years unless the taxpayer receives written permission from the Department to

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alter that election. The Department’s permission must not be unreasonably
withheld.
86 Ill. Admin. Code 100.3420(e)(3)(A) provides a request for permission to alter
an election shall be submitted to the Department as a request for a private letter
ruling and permission to alter an election shall be granted by private letter ruling.
Requests may be made for the change to take effect for a taxable year ending
prior to the date the request is filed, provided that the request shall be granted
only if the statute of limitations for assessment of additional tax is open for that
taxable year and every subsequent taxable year as of the date the Department
responds to the request. The taxpayer and the Department may agree in writing
to extend the statute of limitations under IITA Section 905(f) in order to allow the
Department time to process the request.
COMPANY is hereby granted permission to alter its election in respect of its
DATE taxable year. COMPANY may change its method from Method B, as
described in the Instructions to Form IL-1120, to Method C, as so described, for
its YEAR taxable year. The taxpayer must use Method C for its YEAR taxable
year and all subsequent taxable years, unless it receives Department permission
to alter that election.
Except as provided herein, this ruling shall bind the Department for the taxable
year ending DATE and subsequent taxable years. The facts upon which this
ruling is based are subject to review by the Department during the course of any
audit, investigation or hearing and this ruling shall bind the Department only if the
material facts as recited and incorporated in this ruling are correct and complete.
This ruling shall bind the Department for the taxable years specified above,
except as limited pursuant to 2 Ill. Admin. Code 1200.110(d) and (e). In addition,
this ruling will cease to bind the Department if there is a pertinent change in
statutory law, case law, rules or in the material facts recited in this ruling.
Sincerely,
Jennifer Uhles
Associate Counsel (Income Tax)

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