Did a corporation lose its Illinois net-loss carryforwards merely because it stopped doing business in Illinois before later returning?

Plain-English summary

A corporation did not lose Illinois net-loss carryforwards merely because it stopped doing business in Illinois. If the loss remained available under Section 207 and carried to a later year when the corporation resumed Illinois business, it could be deducted then.

The normal statutory rules still applied, including required carry order, date-specific periods, and historical suspension or $100,000-cap provisions. The business interruption created no special election or extension.

What this means for you

Preserve Illinois loss schedules and returns during an inactive period. Before using a loss after reentry, confirm that it has not expired or been absorbed under the normal ordering rules.

Common questions

Q: Did leaving Illinois erase the loss?
A: No.

Q: Did leaving Illinois pause every expiration rule?
A: The GIL did not say so; ordinary Section 207 limits still controlled.

Citations and references

• 35 ILCS 5/207(a), (a-5), (b), (d)

Subject

Net Operating Loss And Net Operating Loss Deduction

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2013.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2013/it-13-0007.pdf

Original ruling text

IT 13-0007-GIL 05/07/2013 NET OPERATING LOSS AND NET OPERATING LOSS DEDUCTION
General Information Letter: Corporation that incurred Illinois net losses, and then
ceased conducting business in Illinois, is not barred from carrying the losses forward
and deducting them in subsequent years when it is again conducting business in Illinois,
subject to the same limitations as if it had continuously conducted business in Illinois.
May 7, 2013
Dear:
This is in response to your letter dated April 17, 2013. 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:
Could you please provide us with written information stating whether a corporation that has
closed doing business in your state could resume carrying its net operating loss should it
decide to reopen doing business in the future? If so, please provide the regulations which
govern such a continuation of its NOL.
RULING
Section 207 of the Illinois Income Tax Act (“IITA” ; 35 ILCS 5/207) states, in part, as follows:
(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).
(a-5) Election to relinquish carryback and order of application of losses.
(A) For losses incurred in tax years ending prior to December 31, 2003, the taxpayer may
elect to relinquish the entire carryback period with respect to such loss. Such election shall be
made in the form and manner prescribed by the Department and shall be made by the due
date (including extensions of time) for filing the taxpayer’s return for the taxable year in which

IT 13-0007-GIL
May 7, 2013
Page 2
such loss is incurred, and such election, once made, shall be irrevocable.
(B) The entire amount of such loss shall be carried to the earliest taxable year to which such
loss may be carried. The amount of such loss which shall be carried to each of the other
taxable years shall be the excess, if any, of the amount of such loss over the sum of the
deductions for carryback or carryover of such loss allowable for each of the prior taxable years
to which such loss may be carried.
(b) Any loss determined under subsection (a) of this Section must be carried back or carried
forward in the same manner for purposes of subsections (a) and (b) of Section 201 of this Act
as for purposes of subsections (c) and (d) of Section 201 of this Act.
….
(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, 2012, and no carryover deduction shall exceed $100,000 for
any taxable year ending on or after December 31, 2012 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, or for which the deduction would exceed $100,000 if not for this subsection,
shall be counted.

Under this section, except to the extent provided in subsection (a-5)(A), a taxpayer may not elect the
taxable years to which an Illinois net operating loss may be carried. Under the ordering rule in
subsection (a-5)(B), the amount of loss that may be carried to a taxable year is the excess of the
amount of such loss over the sum of the deductions for carryback or carryover of such loss allowable
for each of the preceding taxable years to which such loss may be carried.
A taxpayer that ceases to do business in Illinois does not, on such account, lose any tax attributes it
may have acquired under IITA Section 207. Accordingly, assuming that a loss is otherwise carried
under the provisions of IITA Section 207 to a taxable year when the taxpayer resumes carrying on
business in Illinois, the taxpayer is allowed any Illinois net loss deduction as specified in that section.
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)