Did a Section 501(c)(3) dog-rescue charity funded only by contributions have to file Illinois Form IL-990-T?

Plain-English summary

The dog-rescue charity did not have to file an Illinois income tax return because it reported no unrelated business taxable income and no federal Form 990-T filing duty. For a federally exempt organization, Section 205 defined Illinois base income by reference to unrelated business taxable income under IRC Section 512, without an Illinois-income-tax deduction.

The organization was recognized under Section 501(c)(3), received only individual contributions, and said it had no unrelated income. On those facts, IDOR concluded it did not need to file Form IL-990-T or another Illinois income tax return.

What this means for you

Federal exempt status does not end the inquiry. Review revenue-generating activities each year for unrelated business taxable income and reassess Illinois filing if a federal Form 990-T obligation arises.

Common questions

Q: Did filing federal Form 990-N create an Illinois Form IL-990-T duty here?
A: No. IDOR focused on unrelated business taxable income and the absence of a federal Form 990-T requirement.

Q: Would unrelated business income change the analysis?
A: Yes. Illinois base income for an exempt organization was tied to federal unrelated business taxable income.

Citations and references

• 35 ILCS 5/205, 502(a)
• IRC §§ 501(a), 501(c)(3), 512
• Forms IL-990-T, U.S. 990-T, and U.S. 990-N

Subject

Exempt Organizations

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2010/ig100019.pdf

Original ruling text

IT 10-0019-GIL 08/03/2010 EXEMPT ORGANIZATIONS
General Information Letter: Exempt organizations are subject to Illinois income tax only
on unrelated business taxable income.
August 3, 2010
Dear:
This is in response to your letter dated July 21, 2010 in which you request a letter ruling. The nature
of your request and the information provided requires that we respond with a General Information
Letter (GIL). A GIL is designed to provide general information, is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code § 1200.120(b) and (c).
Your letter states:
I am writing to request an official determination as to whether or not RESCUE, our not-for-profit
charitable corporation, is required to file form IL-990-T, or any other forms, with the Illinois
Department of Revenue.
We are a very small dog breed (DOG BREED) rescue group that was established in 200X. Our
president and founder, who was handling organization paperwork, died suddenly and
unexpectedly in June of 2009. Checking through the documents that she had, we found that
she had accomplished IRS 501(c)(3) status and incorporated as a not-for-profit with the State
of Illinois. We have since registered with the Illinois Attorney General’s Office, which she had
missed. The question then arose as to whether we need to file anything with IDOR.
We file IRS form 990-N, based on the fact that “the organization’s gross receipts are normally
$25,000 or less,” per IRS Publication 4221-PC (06-07), Compliance Guide for 501(c)(3) Public
Charities.
Our State of Illinois Articles of Incorporation file # is XXXX-XXXX, filed with the Secretary of
State on January XX, 200X.
Our 501(c)(3) acceptance letter is dated August XX, 200X; our employer ID # is XX-XXXXXXX.
See copies attached.
Our IDOR file number is XXXXX-XXXXX – this was obtained by our attorney.
The attorney we have worked with reports that he and an associate have both checked with
IDOR and been told that we do not need to file the IL-990-T. However, upon looking at the IL990-T instructions, I noted it required information from the IRS 990-T, which we do not file. I
therefore called the IDOR Taxpayer Assistance Division on June 22, 2010; I spoke with a lady
named Ms. Z, who assured me we did not need to file anything with IDOR.
On July 9, 2010, another board member and I paid an in-person visit to the IDOR office in Des
Plaines, where we spoke with Mr. Y. He looked at our documents, did a computer check, and
then referred us to the “Who must file Form IL-990-T” section of the 2009 IL-990-T instructions.
He advised us that our organization does not need to file this form, based on the fact that it
refers to “unrelated business taxable income.” He emphasized that that was the defining
phrase. He gave as an example rental property owned by an organization, where the rental
income is used to support the group’s activities. We have no such unrelated income, and do

IT 10-0019-GIL
August 3, 2010
Page 2
not anticipate having any in the future. At this time our only income source is contributions from
individuals.
As we and our attorney have received these conflicting responses, we are requesting an
official determination as to what, if anything, we need to file with IDOR.

RULING
Section 502(a) of the Illinois Income Tax Act (“IITA” ; 35 ILCS 5/502(a)) sets forth the requirements
for filing Illinois income tax returns. That section states in pertinent part as follows:
(a) In general. A return with respect to the taxes imposed by this Act shall be made by every
person for any taxable year:
(1)

For which such person is liable for a tax imposed by this Act, or

(2)
In the case of a resident or in the case of a corporation which is qualified to do business
in this State, for which such person is required to make a federal income tax return, regardless
of whether such person is liable for a tax imposed by this Act.
Under this section, a nonresident must file an Illinois income tax return if it incurs a liability for tax
imposed under Section 201 of the IITA, or in the case of a corporation qualified to do business in
Illinois, if it is required to file a federal return. A nonresident is liable for Illinois income tax under
Section 201 if it computes “Illinois net income” as defined under IITA Section 202. IITA Section 202
defines Illinois net income as that portion of the taxpayer’s “base income” which is allocated or
apportioned to Illinois under the provisions of Article 3 of the IITA, less certain deductions.
IITA Section 205 states that in the case of an organization exempt from federal income tax by reason
of Section 501(a) of the Internal Revenue Code (IRC), base income means unrelated business
taxable income as determined under IRC Section 512 but without deduction for Illinois income tax. An
organization described in IRC Section 501(c)(3) is exempt from federal income tax by reason of IRC
Section 501(a).
Applying the above provisions to the facts stated in your letter, you state that your organization does
not have unrelated business taxable income. Therefore, the organization is not required to file an
Illinois income tax return unless it is qualified to do business in Illinois and is required to file a federal
income tax return. Under federal income tax law, an exempt organization is required to file U.S. Form
990-T if it has gross income from an unrelated business of $1,000 or more. Your letter indicates that
you are not required to file U.S. Form 990-T. Accordingly, based on the facts stated in your letter,
your organization is not required to file an Illinois income tax return.
As stated above, this is a GIL. A GIL does not constitute a statement of policy that applies, interprets
or prescribes the tax laws, and it is not binding on the Department. If you wish to obtain a PLR which
will bind the Department, please submit a request conforming to the requirements of 2 Ill. Adm. Code
§ 1200.110(b).

IT 10-0019-GIL
August 3, 2010
Page 3
Sincerely,

Brian L. Stocker
Associate Counsel (Income Tax)