Illinois State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Illinois, with full citations and the original source on every page.
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Can a corporation that had its federal wage deduction disallowed because it claimed the Employee Retention Credit take an offsetting subtraction on its Illinois income tax return?
Yes. Corporations whose federal wage deduction was disallowed under IRC Section 280C(a) because they claimed the CARES Act Employee Retention Credit may subtract that disallowed amount under IITA Sect…
Can a company use alternative apportionment to include a huge one-time asset-sale gain in its Illinois sales factor after that gain was excluded under the incidental-or-occasional-sale rule?
No, not on the facts given here. The Department held that alternative apportionment was not appropriate merely because gross receipts from an incidental or occasional sale of business assets were excl…
Can a corporation use alternative apportionment just because its foreign royalty income is excluded from the Illinois sales factor under the 50% test?
No. The Department denied the petition because royalties that fail IITA Section 304(a)(3)(B-2)'s 50%-of-gross-receipts test are properly excluded from the sales factor, and that exclusion alone -- wit…
If a former employee moved out of Illinois before receiving a back-pay settlement for wages earned while she worked in Illinois, does the employer still have to withhold Illinois income tax from that payment?
Yes. Because the back wages were earned while the employee was working in Illinois, they are allocable to Illinois and subject to Illinois withholding, regardless of where she lived when the settlemen…
Can a German government pension be subtracted from Illinois taxable income the same way a Canadian pension can?
It depends on the type of German pension. The Illinois Department of Revenue could not give a definitive answer without knowing the specific kind of 'government pension,' but explained that a German p…
Are retroactive 'catch-up' retiree healthcare subsidy payments from a City's Illinois Pension Code annuity and benefit funds exempt from Illinois income tax?
Yes, if included in federal adjusted gross income. Distributions from Illinois Pension Code annuity and benefit funds -- including retroactive 'bring current' healthcare subsidy payments -- qualify fo…
Does a non-resident Illinois taxpayer have to prorate (reduce) their standard exemption when some of their income comes from outside Illinois?
Yes. Under IITA Section 204(a), if a taxpayer's total base income is greater than their Illinois income, the taxpayer must prorate their standard exemption to account for income from sources outside o…
If the beneficiaries of an Illinois family trust move out of state and trust administration relocates with them, does the trust stop owing Illinois income and replacement tax?
Not necessarily. Under IITA § 1501(a)(20), a trust is an Illinois resident if the grantor was domiciled in Illinois when the trust became irrevocable -- that test doesn't change just because beneficia…
Does having one full-time remote employee working from her home in Illinois create Illinois corporate income tax nexus for an out-of-state company with zero Illinois sales?
IDOR wouldn't say -- it does not issue rulings on whether nexus exists, since that determination is 'extremely fact-specific.' But it explained that under IITA Section 502(a), if the company has zero …
For Illinois income-tax apportionment purposes, is bitcoin treated as intangible personal property, and is it treated like a patent, copyright, or trademark?
Yes and no. The Illinois Department of Revenue treats bitcoin as 'intangible personal property' under the state's apportionment statute (35 ILCS 5/304), but bitcoin is NOT treated as a 'patent, copyri…
Can Illinois Historic Preservation Tax Credits be divided among partners or LLC members however they agree in a contract, instead of strictly by ownership percentage?
Yes. Under 35 ILCS 31/10(d), a partnership or LLC taxed as a partnership can pass the Illinois Historic Preservation Tax Credit through to its partners or members on a pro rata basis OR per an execute…
Does an Illinois employer have to withhold Illinois income tax from an employee who is not an Illinois resident and performs no work in Illinois?
No. The Department concluded that if the employee was not an Illinois resident and none of the services were performed in Illinois, the compensation is not 'paid in Illinois' under 35 ILCS 5/304, so t…
Can a taxpayer use alternative apportionment to include gain from selling media outlets (mostly attributable to goodwill) in its Illinois sales factor, when that gain would otherwise be excluded under the Occasional Sale Rule?
No. The Department denied the taxpayer's petition for alternative apportionment. It held that the standard Occasional Sale Rule (86 Ill. Adm. Code 100.3380(c)(2)) properly excludes the gross receipts …
If an Illinois resident moves abroad indefinitely for work but still receives K-1 income from his Illinois-based S corporation employer, is his foreign-earned income taxable by Illinois?
No, not if he actually changed his domicile. The Department said that if the taxpayer's 2007 move to another country was indefinite (not temporary or transitory) and he has no intention of returning t…
If a taxpayer's federal net operating loss deduction is limited because of an IRC Section 965(n) election (related to the repatriation transition tax), can the taxpayer still subtract that disallowed federal deduction amount on its Illinois return?
No. The Department ruled that the Illinois Income Tax Act does not provide any subtraction modification for the 'deferred amount' that a Section 965(n) election prevents from being deducted federally.…
Does a Nevada trust set up by an Illinois decedent's family member have to file an Illinois fiduciary income tax return (IL-1041), even though the trust was created and is administered in Nevada?
It depends on facts the Department said were unclear from the taxpayer's letter. A trust is an Illinois resident trust — and must file an IL-1041 — if it was either (1) created by the will of a decede…
If I have a pre-existing tax deficiency, will Illinois apply my overpayment credit to that old deficiency first instead of letting me credit it to a current or future liability?
Yes. The Department confirmed that if a taxpayer with a pre-existing liability files a return asking to credit an overpayment toward a future liability, the Department will first apply the overpayment…
Can partners in a partnership divide up Illinois's River Edge Historic Preservation Credit however they agree, instead of strictly according to their partnership ownership percentages?
Yes, within limits. The Department ruled that under 35 ILCS 5/221(d), partners may allocate the River Edge Historic Preservation Credit pursuant to an executed agreement documenting an alternative dis…
If a partnership or LLC receives Illinois Historic Preservation Tax Credits, can the partners divide up those credits by agreement instead of strictly by their partnership interests?
Yes. The Illinois Department of Revenue ruled that under the Historic Preservation Tax Credit Act, a partnership (here, an investment fund structured as an LLC taxed as a partnership) may allocate its…
Does an Illinois trucking company have to withhold Illinois income tax on wages paid to an out-of-state driver who is dispatched from Illinois but drives interstate routes that originate and end near his home in another state?
It depends, and the Department did not give a final yes-or-no answer for this driver. The Department explained that Illinois withholding is not required if the driver's work qualifies for a federal ex…
When an Illinois resident pays alimony and earns income taxed by another state that won't let her deduct the alimony against that nonresident income, does the alimony still reduce her Illinois credit for taxes paid to that other state?
Yes. The Department ruled that because Article 3 of the Illinois Income Tax Act would let a nonresident allocate 100% of an alimony deduction to Illinois, the alimony deduction must be allocated to th…
Is a U.S. REIT that is more than 50%-owned by publicly traded foreign REIT-type entities a 'captive REIT' under Illinois law, requiring it to add back its federal dividends-paid deduction?
No. The Illinois Department of Revenue ruled that the taxpayer, a U.S. REIT more than 50%-owned (directly and constructively) by a Dutch REIT-type entity whose Class A shares are staple-traded on fore…
Can a company exclude the sale proceeds of its inventory from the Illinois sales-factor when it sells off an entire division, using Illinois's alternative apportionment petition process?
No, not on the facts presented here. The Department agreed that the accounts-receivable and fixed-asset portions of the sale qualified for the 'occasional sale' exclusion from the sales factor, but it…
Can a taxpayer exclude the inventory portion of proceeds from selling an entire business division out of its Illinois sales apportionment factor?
No, not on the facts presented here. The Department denied the taxpayer's petition for alternative apportionment. It agreed that the accounts-receivable and fixed-asset portions of the division sale q…
Can a taxpayer get permission to use an alternative apportionment method (separate accounting) to exclude a non-unitary investment entity from its Illinois sales factor?
Not through this request. The Department denied the petition outright because it was not timely filed under 86 Ill. Adm. Code 100.3390(e)(1) — it needed to have been submitted at least 120 days before…
Can a taxpayer get permission to use an alternative apportionment method (based on trading volume by exchange location) instead of the statutory sales-factor sourcing rules?
Not on this record. The Illinois Department of Revenue denied the petition because the taxpayer never first calculated its apportionment under the standard statutory method (sourcing dealer income to …
If I'm an Illinois resident and both Illinois and Indiana taxed my gambling winnings, can I get an Illinois credit for the tax I paid to Indiana?
No, in most cases the credit works out to zero. Illinois's credit for taxes paid to other states is capped based on how much of your income would be sourced to other states under Illinois's own sourci…
What does Illinois General Information Letter IT 19-0009-GIL conclude about Education Expense Credit?
Consumable school supplies used up in lab-type courses and private piano lessons counted toward a fine-arts requirement can qualify as Education Expense Credit expenses for a home-schooled child, but …
What does Illinois General Information Letter IT 19-0008-GIL conclude about Withholding – Other Rulings?
Yes: for an Illinois resident who works partly in another state but whose out-of-state work is incidental (or Illinois is the base of operations), the full wages are properly reported as Illinois inco…
What does Illinois General Information Letter IT 19-0007-GIL conclude about Refunds – Credit Of Overpayment To Liabilities?
Yes — although the Illinois Income Tax Act uses permissive "may" language, the Department's own regulation (86 Ill. Adm. Code 100.9400) makes crediting an overpayment against an outstanding tax liabil…
What does Illinois General Information Letter IT 19-0006-GIL conclude about Credits – Other?
IT 19-0006-GIL explains how to claim the River Edge Redevelopment Zone remediation tax credit on Schedule 1299-D, but tells the taxpayer that because the credit sunset for tax years beginning on or af…
Does the taxable cost of group-term life insurance over $50,000 count toward an employee's Illinois base income, and should it be included in Box 16 (state wages) of Form W-2?
Yes. The taxable cost of group-term life insurance coverage over $50,000 is included in federal adjusted gross income, so it is also part of Illinois base income, and for an employee who works entirel…
What does Illinois General Information Letter IT 19-0003-GIL conclude about Subtraction Modification (Retirement Income)?
No: dividends paid on company stock held in a regular taxable brokerage account (as opposed to an IRA or qualified retirement plan) are not retirement income and may not be subtracted from adjusted gr…
Can an Illinois partnership claim a refund or credit itself when it overpaid pass-through withholding on behalf of its nonresident partners?
No. Under 86 Ill. Adm. Code 100.7035(e), a partnership (or other pass-through entity) may not claim a refund or credit for an overpayment of pass-through withholding made on behalf of a partner; the i…
What does Illinois Private Letter Ruling IT 18-0011-PLR conclude about Sales Factor -Intangible Property?
Yes -- the Illinois Department of Revenue ruled that a taxpayer originating senior secured loans to customers in the ordinary course of business is treated as a 'dealer' for purposes of the Illinois s…
For Illinois sales-factor sourcing purposes, is a taxpayer that regularly originates loans to customers still a 'dealer in securities' even though it qualifies for the federal negligible-sales exemption from mark-to-market accounting?
Yes -- the Illinois Department of Revenue ruled that a taxpayer originating loans to customers in the ordinary course of business is a 'dealer in securities' for purposes of the Illinois sales-factor …
What does Illinois Private Letter Ruling IT 18-0005-PLR conclude about Sales Factor -Intangible Property?
Yes -- the Illinois Department of Revenue ruled that the taxpayer, which regularly originates loans to customers in the ordinary course of business, is a 'dealer' for purposes of the Illinois sales-fa…
What does Illinois Private Letter Ruling IT 18-0004-PLR conclude about Sales Factor -Intangible Property?
Yes -- the Illinois Department of Revenue ruled that a taxpayer who regularly originates loans to customers in the ordinary course of business is treated as a 'dealer' for purposes of the Illinois sal…
Must an Illinois trucking company withhold Illinois income tax from a nonresident interstate driver who is dispatched from Illinois but drives loads outside the state?
It depends on control, not just dispatch: if the driver's service is directed or controlled from Illinois (e.g., dispatching), Illinois withholding is required, but if it is directed or controlled fro…
Can an ROTC instructor paid by a school district subtract that pay as military pay on Illinois Schedule M?
The Department did not give a yes-or-no answer. It explained that Illinois law lets active-duty and National Guard members subtract military pay on Schedule M, but said civilian pay generally does not…
How does a taxpayer request a refund of an overpaid Illinois income tax credit that hasn't been fully applied?
The Department didn't decide whether the taxpayer was entitled to the specific refund; it pointed to the general rule instead. Under IITA Section 909, the Department may credit and must refund any bal…
Does a German employer pension qualify for Illinois's income tax subtraction for retirement income?
No. The Illinois Department of Revenue concluded that a pension paid by a private German employer under Germany's Betriebsrentengesetz does not qualify for the Illinois retirement-income subtraction, …
Is a nonresident employee's compensation taxable by Illinois when she travels through a multi-state territory for an Illinois-based employer but her base of operations (her home) is in another state?
No. Because the employee's services are not localized in any single state and her base of operations is her home in another state, none of her compensation is allocated to Illinois -- even though she …
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These are official tax letter rulings and advisory opinions issued by Illinois's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.