When did a charitable remainder unitrust have to file an Illinois fiduciary income-tax return?

Plain-English summary

A charitable remainder unitrust used the ordinary Illinois trust filing framework. If Illinois modifications and other adjustments left net income subject to tax, the trust filed Form IL-1041 and paid the tax.

A resident trust also filed IL-1041 whenever it was required to file a federal income-tax return, even if it owed no Illinois tax. A trust exempt from federal income tax under Section 501(a) did not file IL-1041, but Form IL-990-T was required if it had unrelated business taxable income under Section 512.

The GIL separately warned that the Illinois Attorney General's charitable-trust filing requirements were independent of Department of Revenue filings.

What this means for you

Determine federal exemption, federal return duty, Illinois residence, taxable net income, and UBTI separately. Also review charitable-trust registration outside the income-tax system.

Common questions

Q: Did every charitable remainder unitrust file IL-1041?
A: No.

Q: Did federal exemption eliminate every Illinois filing?
A: It eliminated IL-1041 under the GIL, but UBTI could require IL-990-T and separate Attorney General filings could apply.

Citations and references

• 35 ILCS 5/502(a)(1), (2)
• 35 ILCS 5/203(c)(2), 1501(a)(20)(C), (D)
• I.R.C. §§ 501(a), 512

Subject

Trusts

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-12-0008.pdf

Original ruling text

IT 12-0008-GIL 03/23/2012 TRUSTS
General Information Letter: Illinois income tax treatment of charitable remainder
unitrusts follows the federal income tax treatment.
March 23, 2012
Dear:
This is in response to your letter dated December 1, 2011 in which you state the following:
Several weeks ago Ms. Z in our office spoke with one of your agents regarding Illinois’s
fiduciary filing requirements for charitable remainder unitrusts. Our firm provides trust
administration services for clients across the country and prepares the Federal Form 5227 for
several Illinois fiduciaries.
We recently conducted state-by-state research to confirm that our established patterns are in
compliance. We did not find anything on your website specifically addressing charitable
remainder unitrusts. The agent mentioned that if we submitted a letter, your department could
prepare a written response for our records. We kindly request said document.
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.
Charitable remainder trusts have the same obligations in regard to the reporting of income and
payment of income tax as any other trust. Section 502(a)(1) of the Illinois Income Tax Act (“IITA”; 35
ILCS 5/101 et seq.) provides that an income tax return is required by every person liable for an
income tax. If, after making addition and subtraction modifications to taxable income as required by
Section 203(c)(2), and any other adjustments, there remains a net income subject to tax, a form IL1041 is required to be filed along with payment of tax.
Also, if the charitable remainder unitrust is a “resident” as defined by Section 1501(a)(20)(C) or (D),
such a trust is required to file a form IL-1041 if the trust was required to file a federal income tax
return, regardless of whether the trust is liable for an Illinois income tax. IITA Section 502(a)(2).
However, if the trust is a charitable organization exempt from federal income tax by reason of IRC
501(a), the trust is not required to file an IL-1041. Form IL-990-T will be required if the trust has
unrelated business taxable income as determined under IRC 512.
The Office of the Illinois Attorney General has Illinois fiduciary filing requirements that are separate
from those required by the Illinois Department of Revenue. We suggest you contact her office as well
to ensure full compliance with that Agency as well:
Charitable Trust Bureau
100 W. Randolph Street
11th Floor

IT 12-0008-GIL
March 23, 2012
Page 2
Chicago, IL 60601
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