Did ceasing operations create an exception allowing a C corporation to use a net-loss carryover during Illinois's historical suspension?

Plain-English summary

Stopping business did not allow the corporation to bypass the historical suspension. Section 207(d) prohibited C-corporation carryover deductions for taxable years ending within the specified period.

The law made no exception for a final return or cessation of operations. It preserved carryforward life by not counting suspended years, but it did not permit the deduction during those years.

What this means for you

Before winding down, model whether state loss attributes can reach a later eligible taxable year or survive a transaction. A final return does not accelerate a suspended deduction.

Common questions

Q: Could the final year use the loss?
A: No.

Q: Did suspended years count against the carryover period?
A: No, under the historical rule.

Citations and references

• 35 ILCS 5/207(a), (d)

Subject

Net Income (Loss) And Net Loss Deduction

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2011.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2011/it-11-0013.pdf

Original ruling text

IT 11-0013-GIL 07/08/2011 NET INCOME (LOSS) AND NET LOSS DEDUCTION
General Information Letter: The law suspending net loss deductions for C corporations
contains no exception or special provision for taxpayers that cease operations during
the period in which net loss deductions are suspended.
July 8, 2011
Dear:
This is in response to your letter dated June 24, 2011, in which you request information regarding
Illinois income tax law. The nature of your letter and the information provided require 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 86 Ill. Adm. Code
1200.120(b) and (c), which may be accessed from the Department’s web site at www.ILtax.com.
Your letter states as follows:
We are aware that P.A. 96-1496 suspends the use of a corporate Illinois net loss deduction for
tax years ending on or after January 1, 2011 and prior to December 31, 2014. Is there any
exception to the rule if the corporation’s final year falls within this period?
RULING
Section 207 of the Illinois Income Tax Act (“IITA” ; 35 ILCS 5/207) states in part:
(a) If after applying all of the (i) modifications provided for in paragraph (2) of Section 203(b),
paragraph (2) of Section 203(c) and paragraph (2) of Section 203(d) and (ii) the allocation and
apportionment provisions of Article 3 of this Act and subsection (c) of this Section, the
taxpayer’s net income results in a loss;
(1)

for any taxable year ending prior to December 31, 1999, such loss shall be
allowed as a carryover or carryback deduction in the manner allowed
under Section 172 of the Internal Revenue Code;

(2)

for any taxable year ending on or after December 31, 1999 and prior to
December 31, 2003, such loss shall be allowed as a carryback to each of the 2
taxable years preceding the taxable year of such loss and shall be a net
operating loss carryover to each of the 20 taxable years following the taxable
year of such loss; and

(3)

for any taxable year ending on or after December 31, 2003, such loss shall be
allowed as a net operating loss carryover to each of the 12 taxable years
following the taxable year of such loss, except as provided in subsection (d).

…
(d)
In the case of a corporation (other than a Subchapter S corporation), no carryover
deduction shall be allowed under this Section for any taxable year ending after December 31,
2010 and prior to December 31, 2014; provided that, for purposes of determining the taxable
years to which a net loss may be carried under subsection (a) of this Section, no taxable year
for which a deduction is disallowed under this subsection shall be counted.

IT 11-0013-GIL
July 8, 2011
Page 2

Accordingly, pursuant to subsection (d), no net operating loss deduction otherwise allowed a
corporate taxpayer (other than an S corporation) under subsection (a)(1), (2), or (3) for taxable years
ending after December 31, 2010 and prior to December 31, 2014, shall be allowed. There are no
exceptions to the rule in subsection (d) for the final taxable year of a corporation or otherwise.
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.

Sincerely,

Brian L. Stocker
Associate Counsel (Income Tax)