How was base employment calculated for the additional replacement-tax investment credit when the prior taxable year had only nine months?

Plain-English summary

A nine-month taxable year used nine monthly employment counts and a divisor of nine. The additional replacement-tax investment credit depended in part on whether Illinois base employment increased by at least 1% over the preceding year.

Regulation 100.2101 defined base employment as the average monthly Illinois headcount during the taxable year. Because the April-through-December period had its own short-period return, IDOR said its nine Form UI-3/40 figures were totaled and divided by nine.

What this means for you

Match the employment averaging period to the legal taxable year shown on the return. Reconcile every monthly count to the employment-security filings.

Common questions

Q: Did the taxpayer include January through March?
A: No, assuming April through December was the taxable year.

Q: Was the divisor twelve?
A: No. It was nine.

Citations and references

• 35 ILCS 5/201(e)
• 86 Ill. Adm. Code 100.2101(c)(1)

Subject

Credit – Replacement Tax Investment

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2012.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2012/it-12-0002.pdf

Original ruling text

IT 12-0002-GIL 01/31/2012 CREDIT – REPLACEMENT TAX INVESTMENT
General Information Letter: For purposes of determining the credit rate for increased
employment, employment for the prior taxable year is the average employment for each
month of the taxable year and, in the case of a short taxable year, uses only the number
of months in that taxable year.
January 31, 2012
Dear:
This is in response to your letter dated October 17, 2011 in which you state the following:
I was instructed to contact you with respect to Illinois Replacement Tax Credit, specifically to
Step 2 – Figuring your base employment calculation worksheet.
If the preceding tax year was a short period (4/1/09 – 12/31/09), would you only include the
monthly figures from the Illinois Form UI-3/40 for the 9 months – (4-12) and divide by 9, or
required to enter the entire twelve month period, regardless of the short period return.
According to the Department of Revenue (“Department”) regulations, the Department may issue only
two types of letter rulings: Private Letter Rulings (“PLR”) and General Information Letters (“GIL”).
The regulations explaining these two types of rulings issued by the Department can be found in 2
Ill.Adm.Code §1200, or on the website http://www.tax.illinois.gov/LegalInformation/regs/part1200.
Due to the nature of your inquiry and the information presented in your letter, we are required to
respond with a GIL. GILs are designed to provide background information on specific topics. GILs,
however, are not binding on the Department.
Section 201(e) of the Illinois Income Tax Act (“IITA;” 35 ILCS 5/101 et seq.) allows a credit against
the Illinois Personal Property Tax Replacement Income Tax imposed by Section 201 (c) and (d), and
an additional credit equal to .5% of the basis of qualified property placed in service during the taxable
year if the taxpayer’s base employment in Illinois has increased by at least 1% over the preceding
year.
For specific guidance on the operation of this credit, please refer to the Department regulations 86
Ill.Admin.Code 100.2101. Regarding the calculation of base employment, the regulations state as
follows:
(c)(1) Base employment. For purposes of calculating the additional investment credit, base
employment in Illinois is defined as the average monthly total of individuals employed in Illinois
by a taxpayer during the taxable year. To calculate base employment for a particular taxable
year, the taxpayer need only total the number of individuals he employed in Illinois during each
month of the taxable year as reported to the Illinois Department of Employment Security on
Line 1 of Form UC-3/40 or Form UI-3/40M and divide this total by the number of months in
the taxable year.
Emphasis added.
You can find the regulation on
http://tax.illinois.gov/LegalInformation/regs/Part100/100-2101.pdf.

the

Department’s

website

at

You indicate that the 9 month period has its own tax return: “the short period return.” If this 9-month
period was your “taxable year,” then you are correct in using the monthly figures from the Illinois Form

IT 12-0002-GIL
January 31, 2012
Page 2
UI-3/40 for nine months and dividing by 9. You attached a copy of an IL-477 which seems to be filled
out correctly assuming your taxable year was from April 2009 through December 2009 and the
numbers match those you provided to the Illinois Department of Employment Security.
As stated above, this is a general information letter which does not constitute a statement of policy
that either applies, interprets or prescribes tax law. It is not binding on the Department. Should you
have additional questions, please do not hesitate to contact our office.
Sincerely,

Heidi Scott
Associate Counsel -- Income Tax