Could a C corporation use an Illinois net-loss carryover on its final return during the historical 2011–2014 suspension?

Plain-English summary

A final return did not create an exception to the historical C-corporation net-loss suspension. Section 207(d) barred carryover deductions for the specified taxable-year endings.

The suspension rule also said those years would not count when measuring the carryforward period. But if the corporation ceased to exist and never had a post-suspension taxable year, it had no later return on which to use the loss.

What this means for you

Before liquidation, model whether suspended state tax attributes can survive through a later taxable year or transaction. A final return does not automatically accelerate them.

Common questions

Q: Could the corporation use the loss on its final return?
A: No.

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

Citations and references

• 35 ILCS 5/207(a), (d)

Subject

Net Income (Loss) And Net Loss Deduction (Iita § 207)

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-11-0018.pdf

Original ruling text

IT 11-0018-GIL 09/30/2011 NET INCOME (LOSS) AND NET LOSS DEDUCTION (IITA § 207)
General Information Letter: There is no exception to the provision in IITA Section
207(d), which disallows net loss deductions after 2010 and prior to calendar 2014, for
corporations ceasing to exist prior to the end of that period.
September 30, 2011
Dear:
This is in response to your letter dated September 7, 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:
I am looking for clarification of the suspension of the NLD deduction for corporations. Is the
NLD allowed on the final return, if the final return is for a tax year ending after January 1, 2011
and before December 31, 2014?
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 11-0018-GIL
September 30, 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)