What does Illinois General Information Letter IT 18-0001-GIL conclude about Residency?

Plain-English summary

A taxpayer domiciled in Illinois wrote to the Department asking a direct question: if a U.S. federal employee is required to keep an Illinois domicile but is posted abroad for a two-to-four-year tour, would they still owe Illinois individual income tax, or would they qualify as a non-resident since they'd be living outside Illinois for the entire year and not receiving the benefit of Illinois government? Because this letter was a request for general guidance rather than a formal Private Letter Ruling with a complete set of facts, the Department responded with a General Information Letter (GIL) and would not issue a determination on the taxpayer's actual residency status.

Instead, the Department explained the legal framework taxpayers must apply themselves. Under 35 ILCS 5/1501(a)(20)(A), an Illinois "resident" includes someone domiciled in Illinois who is absent from the state only for a "temporary or transitory purpose." The Department noted that residency determinations are fact-intensive, but that, as a general matter, individuals domiciled in Illinois who take short-term overseas assignments generally remain liable for Illinois income tax — living abroad for a full tax year, by itself, does not automatically make an absence "permanent" rather than "temporary or transitory."

To illustrate how fact-specific this test really is, the Department summarized Grede v. Illinois Department of Revenue, 2013 IL App (2d) 120731-U, an Illinois Appellate Court case. Mr. Grede, a Chicago Board of Trade executive who kept his family and financial ties in Illinois while working in Hong Kong under a renewable three-year contract, was ultimately found to have been absent for more than a "temporary or transitory purpose" — even though he had not abandoned his Illinois domicile — because his stock-option incentives gave him a reasonable expectation the assignment could last up to ten years. The case shows that both domicile and the temporary/transitory nature of an absence are separate, fact-driven questions that can come out differently for different people.

Because the letter did not resolve the taxpayer's own situation, the Department pointed out that anyone wanting a binding answer on their specific facts can request a Private Letter Ruling under 86 Ill. Adm. Code 1200.110(b), so long as they are not currently under audit.

What this means for you

Individuals working abroad (including federal or government employees)

Simply living outside Illinois for a full year — even under a multi-year work posting — does not by itself make you an Illinois non-resident. The key legal question is whether your absence is "temporary or transitory" (short and definite) or genuinely open-ended and indefinite, as measured under 86 Ill. Adm. Code 100.3020 and cases like Grede. Contract length, renewal likelihood, financial incentives tied to a longer stay, and whether your family and other ties remain in Illinois can all matter.

Accountants and tax professionals

This GIL is useful as a summary of the "temporary or transitory purpose" standard and the Grede precedent, but it does not resolve any particular client's facts — the Department expressly refused to do so here. If a client needs a binding answer, the route is a Private Letter Ruling request under 86 Ill. Adm. Code 1200.110(b), which requires submitting the complete facts described in items 1 through 8 of that section, and is only available to taxpayers not currently under audit.

Taxpayers considering a GIL vs. a Private Letter Ruling

If you want Department guidance you can actually rely on, a GIL like this one won't get you there — it is non-binding under 86 Ill. Adm. Code 1200.120(b) and (c). Only a Private Letter Ruling, requested with full facts before any audit begins, binds the Department to a specific answer.

Common questions

Q: Does this letter tell me whether I'm an Illinois resident while working overseas?
A: No. The Department explicitly declined to determine the requester's residency status. It only explained the general legal test and gave illustrative case law.

Q: If I'm abroad for a full tax year, am I automatically a non-resident?
A: No. The Department stated that individuals domiciled in Illinois on short-term overseas assignments generally remain Illinois residents, even for a full year abroad, unless their absence is genuinely for other than a temporary or transitory purpose.

Q: What made Mr. Grede's absence in the Grede case "not temporary or transitory," even though he didn't abandon his Illinois domicile?
A: The Illinois Appellate Court found his employment could reasonably be expected to last up to ten years because of stock options that didn't fully vest for five years, and renewing senior-officer contracts was common practice — so his absence was open-ended rather than a short, definite stint.

Q: How do I get a binding answer instead of general information?
A: Request a Private Letter Ruling under 86 Ill. Adm. Code 1200.110(b), providing all the facts required by items 1-8 of that section, provided you are not currently under audit.

Citations and references

• 35 ILCS 5/1501(a)(20)(A) — Illinois Income Tax Act definition of "resident"
• 86 Ill. Adm. Code 100.3020 — regulation on "temporary or transitory purpose"
• 86 Ill. Adm. Code 1200.120(b), (c) — General Information Letters are non-binding
• 86 Ill. Adm. Code 1200.110(b) — requirements for requesting a binding Private Letter Ruling
• Grede v. Illinois Department of Revenue, 2013 IL App (2d) 120731-U (April 22, 2013)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2018.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2018/it-18-0001-gil.pdf

Original ruling text

IT 18-0001-GIL 09/09/2018 RESIDENCY
The Department will not issue ruling determining residency.
September 9, 2018
Re: Residency
Dear Xxxx:
This is in response to your letter dated June 18, 2018, in which you requested information regarding
your liability for Illinois individual income tax while working in Thailand. The nature of your request and
the information you have provided require that we respond with a General Information Letter, which 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 found on the Department's
web site at www.tax.illinois.gov.
Your letter states as follows:
I am contacting you with a question regarding Illinois State Income Tax liability.
My question is whether I would be liable for Illinois state income tax as a non-resident
domiciliary? I work for the federal government and will be posted to COUNTRY for a tour
of 2-4 years beginning in August 2018. As a U.S. federal employee, I am required to
maintain a state domicile, Illinois in my case, for the duration of the tour. IITA defines
resident for tax purposes as an individual “. . . who is domiciled in Illinois but is absent
from Illinois for a temporary or transitory purpose during the taxable year.” But it’s unclear
if one is a tax resident if domiciled in Illinois but absent for a permanent and not-transitory
purpose. The regs go on to state that the purpose of the tax residency definition is to “. .
. exclude from this category all individuals who, although domiciled in Illinois, are outside
Illinois for other than temporary or transitory purposes and, hence, do not obtain the
benefit of Illinois government.” Since I will be living abroad, i.e., outside of Illinois, for the
entire year beginning in 2019, I would consider my assignment not to be characterized
as one of temporary or transitory nature, as I will not be obtaining the benefits of IL’s
government. Indeed, my only potential visits to Illinois would be of temporary nature to
visit my aging parents.
Could you please confirm whether my interpretation is correct? In other words, if I am
residing in COUNTRY for 2-4 years, I would not be liable for Illinois state income tax?
RULING
Residency determinations are very dependent on the facts and circumstances of each case, but
individuals domiciled in Illinois who are on short-term assignments overseas generally remain liable for
Illinois income tax.
IITA section 1501(a)(20)(A) defines the term “resident” as “[a]n individual (i) who is in this State for
other than a temporary or transitory purpose during the taxable year; or (ii) who is domiciled in this
State but is absent from the State for a temporary or transitory purpose during the taxable year; . . . .”

IT 18-0001-GIL
Page 2
In discussing “temporary or transitory purposes,” Regulation section 100.3020 focuses on whether the
absence will be for a short and definite or long and indefinite period of time. In Grede v. Illinois
Department of Revenue, 2013 IL App (2d) 120731-U (April 22, 2013), the Illinois Appellate Court
addressed this question.
Mr. Grede, an executive vice president at the Chicago Board of Trade, had resided in Illinois for a
number of years with his wife and two children. In 1999, he was recruited to launch a stock exchange
in Hong Kong and serve as its deputy chief operating officer. He signed a three-year contract and began
working April 1, 2000. His family remained in Illinois.
He opened a bank account in Hong Kong, as required to deposit his paychecks. He maintained
brokerage and bank accounts in Illinois and regularly transferred funds to support his family. He signed
extended the six-month lease on an apartment in Hong Kong several times, eventually signing a twoyear lease. In 2003, Mr. Grede learned his employment contract would not be renewed, and he returned
to Illinois.
On his 2001 Illinois income tax return, Mr. Grede reported his status as married filing separately and
claimed to be a non-resident. The Department determined that Mr. Grede remained a resident and
issued a notice of deficiency. The Gredes argued that the decision not to move their children and enroll
them in school in Hong Kong should not be considered a failure by Mr. Grede to abandon his Illinois
domicile. In response, the Department argued that the steps taken toward abandoning their Illinois
domicile were limited. The appellate court held that the Department’s determination that the Gredes
had not abandoned their Illinois domicile was not clearly erroneous.
However, the appellate court found that Mr. Grede nevertheless was absent for more than a temporary
or transitory purpose and did not meet the statutory definition of resident. In so finding, the appellate
court relied on testimony that renewing employment contracts with senior officers was common
practice, and Mr. Grede’s main incentive for accepting the job in Hong Kong was the receipt of stock
options lasting up to 10 years that did not fully vest until he completed 5 years. Given that Mr. Grede
reasonably expected his employment would potentially last as long as 10 years as specified in the
options contract, the Department’s decision that he remained a resident was clearly erroneous.
As stated above, this is a general information letter which does not constitute a statement of policy that
applies, interprets or prescribes the tax laws, and it is not binding on the Department. If you are not
under audit and you wish to obtain a binding Private Letter Ruling regarding your factual situation,
please submit all of the information set out in items 1 through 8 of Section 1200.110(b). If you have any
further questions regarding this letter, you may contact me at (312) 814-1722.
Sincerely,

Brian E. Fliflet
Deputy General Counsel, Income Tax