My reinsurance company wants to switch how it sources Illinois reinsurance premiums for apportionment -- from tracking each ceding company's own ratio of Illinois-located risk to simply counting premiums from ceding companies domiciled in Illinois -- can I get permission to make that change?

Plain-English summary

A reinsurer domiciled outside Illinois -- licensed to write insurance directly only in its home state, but approved for surplus lines coverage in Illinois and other states -- does no direct insurance business at all; its entire operation is reinsurance assumed from a single, unaffiliated ceding company also domiciled in its home state. Because reinsurance premiums are its principal source of premium, Illinois requires it to apportion business income using IITA Section 304(b)(2)'s reinsurance formula rather than the ordinary direct-premium formula. That formula lets a reinsurer choose, by election, one of two ways to determine how much of its reinsurance premium counts as "in Illinois": (Method B) look at each ceding company's own ratio of Illinois-located direct premiums to its total direct premiums and apply that ratio to the premium assumed from that company, or (Method C) simply count all premium assumed from ceding companies that are themselves commercially domiciled in Illinois. The taxpayer had originally elected Method B on its first Illinois return, but asked to switch to Method C going forward.

Why the taxpayer wanted to switch. Its ceding company is domiciled in the same out-of-state location as the taxpayer itself -- not Illinois. The taxpayer argued that sourcing premium based on where its actual customer (the ceding company) is domiciled better reflects the economic reality of a single-customer reinsurer with no direct contact with the ceding company's own policyholders, is simpler to administer, and is consistent with how Illinois sources general corporate services to where they're received (IITA Section 304(a)(3)(C-5)(iv)) and with the sourcing rules of its home state.

The Department granted the request. Under IITA Section 304(b)(2) and 86 Ill. Adm. Code 100.3420(e)(3)(A), a taxpayer's reinsurance-sourcing election, once made for its first taxable year ending on or after December 31, 2011, is binding for all later years unless the Department gives written permission to change -- and the Department "shall not... unreasonably" withhold that permission. Having confirmed the request satisfied the Private Letter Ruling procedural requirements (2 Ill. Adm. Code 1200.110(b)) and that the taxpayer wasn't under audit or in litigation over the issue, the Department granted permission to switch from Method B to Method C, effective for the specified tax year and all subsequent years (unless the taxpayer later obtains permission to change again).

What this means for you

Reinsurers reconsidering their Illinois premium-sourcing election

An initial reinsurance-sourcing election under IITA Section 304(b)(2) is binding going forward -- you can't just switch methods on a later return. You need the Department's written permission via a Private Letter Ruling request, but the statute directs the Department not to unreasonably withhold that permission, and this ruling shows a well-documented, single-customer reinsurer's request for a simpler, domicile-based method being granted.

Single-customer or thin-book reinsurers

If your reinsurance business consists of assuming premium from one or a small handful of ceding companies, and tracking each one's own in-state risk ratio is burdensome relative to the benefit, this ruling illustrates the kind of factual case (single customer, no direct policyholder contact, alignment with other-state and general corporate sourcing rules) the Department found persuasive for switching to the commercial-domicile method.

Anyone requesting a retroactive apportionment election change

Requests to change an election can reach back to a tax year ending before the request is filed, but only if the assessment statute of limitations is still open for that year and every later year as of the Department's response -- confirm your limitations window before assuming a retroactive change date will be available.

Common questions

Q: Can a reinsurer switch its Illinois premium-sourcing election after its first election is made?
A: Only with the Department's written permission, obtained through a Private Letter Ruling request under 2 Ill. Adm. Code 1200.110 -- an election made for the first taxable year ending on or after December 31, 2011 is otherwise binding for all future years.

Q: What are the two ways a reinsurer can source Illinois reinsurance premium under 86 Ill. Adm. Code 100.3420(e)(2)?
A: (A) the proportion of premium assumed from ceding companies commercially domiciled in Illinois, relative to all reinsurance premium assumed, or (B) for each ceding company, that company's own ratio of Illinois-located direct premiums to its total direct premiums, applied to the premium assumed from that company.

Q: Does the Department have to grant a request to change a reinsurance-sourcing election?
A: The statute says permission "shall not be unreasonably withheld," but it's still a case-by-case Private Letter Ruling determination -- this ruling only binds the Department for this specific taxpayer's facts, not as a general rule for all reinsurers.

Citations and references

Statutes, regulations, and other authority:

• 35 ILCS 5/304(b)(1) (general insurance company apportionment -- direct premiums)
• 35 ILCS 5/304(b)(2) (reinsurance apportionment; election methods; binding election rule)
• 86 Ill. Adm. Code 100.3420(a)-(e) (insurance company apportionment; reinsurance; election-change procedure)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures)
• Illinois Income Tax Info. Bulletin No. 1970-4 (09/28/1970) (background on the reinsurance premium sourcing election)
• Continental Illinois National Bank and Trust Co. of Chicago v. Lenckos, 102 Ill. 2d 210 (1984) (cited re: apportionment-factor receipts)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2025.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2025/it25-0001-plr.pdf

Original ruling text

IT 25-0001-PLR

8/4/2025

APPORTIONMENT – INSURANCE COMPANIES

Taxpayer’s request to change method of sourcing reinsurance premiums
under IITA Section 304(b)(2) is granted. (This is a PLR.)
August 4, 2025
NAME1, TITLE1
c/o NAME2, TITLE2
COMPANY
ADDRESS1
EMAIL
Re:

Request for Private Letter Ruling
COMPANY
FEIN: ###
Tax Year Ended: DATE

Dear NAME1:
This letter is in response to your letter dated June 20, 2025, in which you requested
a Private Letter Ruling, on behalf of COMPANY, for permission to change its
apportionment computation method for reinsurance premiums effective for tax
year ending DATE, and subsequent tax years. The Department issues two types of
letter rulings. Private Letter Rulings (“PLRs”) are issued by the Department in
response to specific taxpayer inquiries concerning the application of a tax statute or
rule to a particular fact situation. A PLR is binding on the Department, but only as to
the taxpayer who is the subject of the request for ruling and only to the extent the
facts recited in the PLR are correct and complete. Persons seeking PLRs must
comply with the procedures for PLRs found in the Department’s regulations at 2 Ill.
Adm. Code 1200.110. The purpose of a General Information Letter (“GIL”) is to
direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of
Department policy and is not binding on the Department. See 2 Ill. Adm. Code
1200.120. You may access our website at https://tax.illinois.gov/ to review
regulations, letter rulings and other types of information relevant to your inquiry.
Review of your request for a Private Letter Ruling disclosed that all information
described in paragraphs 1 through 8 of subsection (b) of 2 Ill. Admin. Code 1200.110
appears to be contained in your request. This Private Letter Ruling will bind the
Department only with respect to COMPANY, for the issue or issues presented in this
ruling, and is subject to the provisions of subsection (e) of 2 Ill. Admin. Code
1200.110 governing expiration of Private Letter Rulings. Issuance of this ruling is
conditioned upon the understanding that neither COMPANY, nor a related taxpayer

COMPANY
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August 4, 2025
is currently under audit or involved in litigation concerning the issues that are the
subject of this ruling request.
In your letter you have stated and made inquiry as follows:
In accordance with the guidance in 86 Illinois Administrative Code
§100.3420(e)(3)(A) and 2 Illinois Administrative Code §1200.110,
COMPANY (“COMPANY” or “Taxpayer”) respectfully requests that the
Department grant this petition to change their election for
apportionment methodology in respect to reinsurance premium
effective retroactively to tax year ending DATE.
Statement of Facts
COMPANY is domiciled in STATE, which is the only state COMPANY is
fully licensed to write property and casualty insurance operations.
COMPANY is also approved to write surplus lines insurance coverage
in ### states, including Illinois. COMPANY maintains a statutory office
at its corporate offices at ADDRESS2 and their primary administrative
office at ADDRESS1. Unlike a direct writer, COMPANY’s insurance
operations consist solely of reinsurance activity and has no direct
premium in Illinois or any other state. Consequently, COMPANY does
not conduct associated standard insurance operations, such as
insurance sales and claim processing. Further, COMPANY only
assumes business from a single, unaffiliated insurance company,
COMPANY2, which is also domiciled in STATE. COMPANY has
increased reinsurance assumed each year since it commenced on
DATE, with assumed premium of $$$ for DATE; $$$ for DATE; $$$ for
DATE; and $$$ for DATE. COMPANY forecasts that the volume of
premium assumed will continue to increase for future years but does
not anticipate that they will expand into reinsurance contracts with any
additional direct writing insurers.
As COMPANY is an approved surplus lines insurer in Illinois, it is not
subject to the Illinois Privilege Tax. However, COMPANY does file as a
member of the COMPANY3 unitary group’s Illinois Corporate Income
and Replacement Tax Return. Based on their insurance operations,
COMPANY’s principal source of premium written consists of premium
for reinsurance accepted and so must include reinsurance assumed in
their apportionment factor per 86 IAC 100.3420(e). As established by
the initial Illinois Corporate Income and Replacement Tax Return filed
for tax year YEAR, COMPANY “elected” to determine the amount of
premium written for reinsurance accepted in Illinois based upon the

COMPANY
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August 4, 2025
proportion which the sum of the direct premium written for insurance
upon property or risk in this State by each ceding company from which
reinsurance is accepted bears to the sum of the total direct premium
written by each such ceding company for the taxable year as permitted
by 86 IAC 100.3420(e)(2)(B).
COMPANY is requesting to change their election for apportionment
methodology in respect to reinsurance premium to determine the
amount of premium written for reinsurance accepted in Illinois based
upon the proportion which premium written for reinsurance accepted
from companies commercially domiciled in Illinois bears to premium
written for reinsurance accepted from all sources as permitted by 86
IAC 100.3420(e)(2)(A). Based on a review of COMPANY’s business
operations and their other state tax filings, COMPANY believes this
method streamlines the tax return process and more accurately
attributes their revenues to the state where they do business, i.e.
STATE. Per the discussion in Illinois Income Tax Info. Bulletin No. 19704, the Department has been long aware of the issues involved in
identifying Illinois property or risk related to reinsurance premium. As
a single state and single customer reinsurer, COMPANY believes that
sourcing revenue to their actual customer location (i.e. the domicile of
the ceding insurance company) more accurately reflects the economic
reality of their business operations. The ceding insurance company is
COMPANY’s actual customer base, with income and expenses directly
attributable to their home state of STATE. Under the current “lookthrough” sourcing method, COMPANY is inaccurately attributing
revenue to the policyholder locations of the ceding insurance
company. However, COMPANY has no interaction with or contractual
responsibility to these policyholders. Note that sourcing revenue to the
domicile of the ceding insurance company also more closely follows
the general sourcing of services for general corporations to the
location where the services are received per 35 ILCS §5/304(a)(3)(C5)(iv). Further, sourcing revenue to the domicile of the ceding
insurance company aligns with the insurance apportionment
requirements in STATE per STATE Statutes CITATION.
Relevant Supporting Documents
The following documents relevant to the request are attached:
•

Copies of COMPANY’s Annual Statement, Schedule F, Part 1,
Assumed Reinsurance, for calendar years DATE RANGE

COMPANY
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August 4, 2025
•

Copies of COMPANY2’s Annual Statement, Schedule T, Exhibit
of Premiums Written, for calendar years DATE RANGE

Please let us know if you believe there are additional documents or
information you need to process this request.
Identification of Tax Period and Audit/Litigation
COMPANY requests that this election change be effective for tax year
ending DATE and future years.
COMPANY is not under audit for Corporate Income and Replacement
Tax for any tax years.
Further, COMPANY has no litigation pending with the Department for
any period or tax type.
Prior Rulings
To the best of COMPANY’s knowledge, the Department has not
previously ruled on the same or a similar issue for the Taxpayer or a
predecessor. Further, neither COMPANY nor any representative of
COMPANY has previously submitted the same or a similar issue to the
Department but withdrew it before a letter ruling was issued.
Statement of Authority
Illinois Compiled Statutes, Chapter 35 / Revenue, Illinois Income Tax
Act, and associated Administrative Code, Title 86 / Revenue, Part 100
/ Income Tax, state:
35 ILCS §5/304(b)(l) / In general
Except as otherwise provided by paragraph (2), business
income of an insurance company for a taxable year shall be
apportioned to this State by multiplying such income by a
fraction, the numerator of which is the direct premiums written
for insurance upon property or risk in this State, and the
denominator of which is the direct premiums written for
insurance upon property or risk everywhere. For purposes of
this subsection, the term “direct premiums written” means the
total amount of direct premiums written, assessments and
annuity considerations as reported for the taxable year on the
annual statement filed by the company with the Illinois
Director of Insurance in the form approved by the National

COMPANY
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August 4, 2025
Convention of Insurance Commissioners or such other form as
may be prescribed in lieu thereof.
35 ILCS §5/304(b)(2) / Reinsurance
If the principal source of premiums written by an insurance
company consists of premiums for reinsurance accepted by it,
the business income of such company shall be apportioned to
this State by multiplying such income by a fraction, the
numerator of which is the sum of (i) direct premiums written
for insurance upon property or risk in this State, plus (ii)
premiums written for reinsurance accepted in respect of
property or risk in this State, and the denominator of which is
the sum of (iii) direct premiums written for insurance upon
property or risk everywhere, plus (iv) premiums written for
reinsurance accepted in respect of property or risk
everywhere. For purposes of this paragraph, premiums written
for reinsurance accepted in respect of property or risk in this
State, whether or not otherwise determinable, may, at the
election of the company, be determined on the basis of the
proportion which premiums written for reinsurance accepted
from companies commercially domiciled in Illinois bears to
premiums written for reinsurance accepted from all sources,
or, alternatively, in the proportion which the sum of the direct
premiums written for insurance upon property or risk in this
State by each ceding company from which reinsurance is
accepted bears to the sum of the total direct premiums written
by each such ceding company for the taxable year. The
election made by a company under this paragraph for its first
taxable year ending on or after December 31, 2011, shall be
binding for that company for that taxable year and for all
subsequent taxable years, and may be altered only with the
written permission of the Department, which shall not be
unreasonably withheld.
86 IAC §100.3420(a) / In general
Except as otherwise provided in this Section, business income
of an insurance company for a taxable year shall be
apportioned to this State by multiplying such income by a
fraction, the numerator of which is the direct premiums written
for insurance upon property or risk in this State, and the

COMPANY
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August 4, 2025
denominator of which is the direct premiums written for
insurance upon property or risk everywhere. [IITA Section
304(b)(1))]
86 IAC §100.3420(b) / Insurance Company
For purposes of the IITA, an “insurance company” means any
taxpayer properly treated as an insurance company for
purposes of federal income taxation under subchapter L of the
Internal Revenue Code (IRC sections 801 through 848). (See
IITA Section 102.) No other taxpayer may be treated as an
insurance company for purposes of the IITA.
86 IAC 100.3420(c) / Direct Premiums Written
“Direct premiums written” means the total amount of direct
premiums written, assessments and annuity considerations as
reported for the taxable year on the annual statement filed by
the company with the Illinois Director of Insurance in the form
approved by the National Convention of Insurance
Commissioners (currently known as the National Association of
Insurance Commissioners) or such other form as may be
prescribed in lieu of the National Association of Insurance
Commissioners form.
(1) The apportionment factor shall take into account only those
receipts that are included in either “gross premiums
written” under IRC section 832(b)(4)(A) or “gross amount of
premiums" under IRC section 803(a)(l)(A). Only receipts that
are included in federal taxable income of the taxpayer, and
that are not subtracted in the computation of base income
under a provision of Section 203 of the IITA, may be included
in the apportionment factor. (See Continental Illinois
National Bank and Trust Company of Chicago v. Lenckos,
102 Ill.2d 210 (1984).)
(2) Only direct premiums written for insurance, assessments
against mutual policyholders and consideration for annuity
contracts that include elements of insurance are included
in the apportionment factor. Other receipts are excluded
from the apportionment factor, even if included in net
income.

COMPANY
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August 4, 2025
(3) Examples of receipts that are excluded from the
apportionment factor include:
(A) Interest, dividends and other income from
investments.
(B) Gains or losses from the adjustment of reserves,
salvage or subrogation.
(C) Deposit-type funds. This is due to the fact that
deposit-type funds involve no insurance risk and are
therefore reported separately from premiums,
assessments and annuity considerations on the annual
report.
(D) Premiums on which State income taxes are
prohibited by federal law.
(4) Premiums rebated or repaid to policyholders and reported
as negative amounts on the annual statement are treated as
negative amounts in the computation of the apportionment
factor. However, neither the numerator nor the denominator
of the apportionment factor may be reduced below zero.
86 IAC §100.3420(d) / Insurance on Property or Risk in this State
A direct premium is written for insurance upon property or risk
in this State and included in the numerator of the
apportionment factor if it is allocated to this State in the annual
statement filed by the insurance company with the Director of
Insurance. If an insurance company does not file an annual
statement with the Director of Insurance or if any direct
premiums written by an insurance company are not allocated
to a specific state on its annual statement, that insurance
company shall include in the numerator of its apportionment
factor the direct premiums written for insurance on property or
risk in this State, determined in accordance with the
determination of gross taxable premium written under Section
409(1) of the Illinois Insurance Code [215 ILCS 5/409(1)],
provided that the determination shall be made without allowing
the exceptions in that Section 409(1) for premiums on
annuities, premiums on which State premium taxes are
prohibited by federal law, premiums paid by the State for
Medicaid eligible insureds, premiums paid for health care

COMPANY
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August 4, 2025
services included as an element of tuition charges at any
university or college owned and operated by the State of Illinois,
premiums on group insurance contracts under the State
Employees Group Insurance Act of 1971 [5 ILCS 375], or
premiums for deferred compensation plans for employees of
the State, units of local government or school districts.
86 IAC §100.3420(e) / Reinsurance
If the principal source of premiums written by an insurance
company consists of premiums for reinsurance accepted by it,
the business income of such company shall be apportioned to
this State by multiplying such income by a fraction, the
numerator of which is the sum of direct premiums written for
insurance upon property or risk in this State, plus premiums
written for reinsurance accepted in respect of property or risk in
this State, and the denominator of which is the sum of direct
premiums written for insurance upon property or risk
everywhere, plus premiums written for reinsurance accepted in
respect of property or risk everywhere. (IITA Section 304(b)(2))
(1) The principal source of premiums written by an insurance
company consists of premiums for reinsurance accepted by
the taxpayer for a taxable year if the premiums written for
reinsurance accepted that would be includable in the
denominator of the apportionment fraction for the taxable
year under this subsection (e) exceed the direct premiums
written for insurance that would be includable in the
denominator of the apportionment fraction under this
subsection (e).
(2) An insurance company may determine the amount of
premiums written for reinsurance accepted in respect of
property or risk in this State by consideration of each
premium written, or the premiums may, at the election of
the company, be determined on the basis of:
(A) the proportion which premiums written for
reinsurance
accepted
from
companies
commercially domiciled in Illinois bears to
premiums written for reinsurance accepted from all
sources; or

COMPANY
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August 4, 2025
(B) the proportion which the sum of the direct premiums
written for insurance upon property or risk in this
State by each ceding company from which
reinsurance is accepted bears to the sum of the total
direct premiums written by each such ceding
company for the taxable year.
(3) The election to determine the portion of reinsurance
premiums accepted in respect of property or risk in this
State for a particular tax year, by consideration of each
premium written or by either of the alternative methods
outlined in subsection (e)(2), shall be made by using the
chosen method on the taxpayer’s return for the taxable year.
For taxable years ending prior to December 31, 2011, the
election may be made or changed at any time. The election
made by a company for its first taxable year ending on or
after December 31, 2011, is binding for that company for
that taxable year and for all subsequent taxable years, and
may be altered only with the written permission of the
Department, which shall not be unreasonably withheld.
(IITA Section 304(b)(2))
(A) A request for permission to alter an election shall be
submitted to the Department as a request for a
private letter ruling under 2 Ill. Adm. Code 1200.110,
and permission to alter an election shall be granted
by private letter ruling. Requests may be made for the
change to take effect for a taxable year ending prior
to the date the request is filed, provided that the
request shall be granted only if the statute of
limitations for assessment of additional tax is open
for that taxable year and every subsequent taxable
year as of the date the Department responds to the
request. The taxpayer and the Department may agree
in writing to extend the statute of limitations under
IITA Section 905(f) in order to allow the Department
time to process the request.
Illinois Income Tax Info. Bulletin, No. 1970-4, 09/28/1970

COMPANY
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August 4, 2025
The problems of identifying Illinois property or risk related to
reinsurance premiums may be difficult. This information is
frequently unobtainable by reinsurance companies except at
great expense. An election is provided which is intended to
relieve reinsurers from the obligation of determining the state in
which the risk or property which they have reinsured is located.
Whether or not the facts with respect to location are otherwise
determinable, the taxpayer may elect, for purposes of its
apportionment factor, to determine reinsurance premiums
accepted in respect of property or risk in Illinois by either of two
alternatives:
(a) Reinsurance premiums in Illinois may be determined
on the basis of the proportion which premiums
written for reinsurance accepted from companies
commercially domiciled in Illinois bears to
premiums written for reinsurance accepted from all
sources; or
(b) Alternatively, reinsurance premiums in Illinois may
be determined on the basis of the proportion which
the sum of the direct premiums written for insurance
upon property or risk in Illinois by each ceding
company from which reinsurance is accepted bears
to the sum of the total direct premiums written by
each ceding company for the taxable year.
STATE Statutes CITATION / Income computation
STATE STATUTE
COMPANY is requesting to change their election for apportionment
methodology in respect to reinsurance premium to determine the
amount of premium written for reinsurance accepted in Illinois based
upon the proportion which premium written for reinsurance accepted
from companies commercially domiciled in Illinois bears to premium
written for reinsurance accepted from all sources as permitted by 86
IAC 100.3420(e)(2)(A). This is a request for an apportionment
methodology change as permitted by regulation from one permitted
method to another permitted method. Further, COMPANY believes this
request is also supported by the simplification of their tax return

COMPANY
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August 4, 2025
preparation and alignment of apportionment to their business
operations and other tax filings as identified previously above.
As this is a request for an apportionment methodology change as
permitted by regulation, COMPANY is unaware of any authority
contrary to this request.
Identification of Impacted Trade Secrets
This request does not impact any specific trade secret information for
COMPANY that would need to be deleted from the publicly
disseminated version of the private letter ruling.
Taxpayer Signature
Please send all questions or requests for additional information to me
via email, by phone, or by mail via the below contact information.
Under penalties of perjury, I declare that I have examined this request,
including the accompanying documents, and to the best of my
knowledge and belief the facts presented in support of the requested
ruling are true, correct and complete.
Please direct any correspondence to NAME2, TITLE, at NAME2 at the
above address, EMAIL or PHONE.
RULING
Section 304(b)(2) of the Illinois Income Tax Act (“IITA”) (35 ILCS 5/304(b)(2)) provides:
Reinsurance. If the principal source of premiums written by an
insurance company consists of premiums for reinsurance accepted by
it, the business income of such company shall be apportioned to this
State by multiplying such income by a fraction, the numerator of which
is the sum of (i) direct premiums written for insurance upon property or
risk in this State, plus (ii) premiums written for reinsurance accepted in
respect of property or risk in this State, and the denominator of which
is the sum of (iii) direct premiums written for insurance upon property
or risk everywhere, plus (iv) premiums written for reinsurance
accepted in respect of property or risk everywhere. For purposes of this
paragraph, premiums written for reinsurance accepted in respect of
property or risk in this State, whether or not otherwise determinable,
may, at the election of the company, be determined on the basis of the

COMPANY
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August 4, 2025
proportion which premiums written for reinsurance accepted from
companies commercially domiciled in Illinois bears to premiums
written for reinsurance accepted from all sources, or, alternatively, in
the proportion which the sum of the direct premiums written for
insurance upon property or risk in this State by each ceding company
from which reinsurance is accepted bears to the sum of the total direct
premiums written by each such ceding company for the taxable year.
The election made by a company under this paragraph for its first
taxable year ending on or after December 31, 2011, shall be binding for
that company for that taxable year and for all subsequent taxable
years, and may be altered only with the written permission of the
Department, which shall not be unreasonably withheld.
Regarding this provision, the Instructions to Form IL-1120 provide:
You may determine your reinsurance premiums from Illinois sources
using one of the following methods. You must use the same method
for all future years unless you receive written permission from IDOR to
change methods.
Method A – Determine the reinsurance premiums assumed, relating to
property or risk located in Illinois.
Method B – For each company from which reinsurance is accepted,
determine the ceding insurance company’s ratio of direct premiums
on property or risk located in Illinois, to its total direct premiums. Apply
this ratio to the reinsurance premiums assumed from that company.
For example, reinsurer R assumes premiums of $40,000 and $50,000
from ceding companies A and B respectively. Company A’s ratio of
direct premiums on property or risk located in Illinois, to its total direct
premiums, is 10 percent and Company B’s ratio is 20 percent.
Reinsurer R has $14,000 of reinsurance premiums assumed on
property or risk located in Illinois, consisting of $4,000 from ceding
Company A (10 percent of $40,000) and $10,000 from ceding Company
B (20 percent of $50,000).
Method C – Determine the amount of reinsurance premiums assumed
from insurance companies commercially domiciled in Illinois. Include
in reinsurance premiums assumed in Illinois, all premiums for
reinsurance accepted from insurance companies commercially
domiciled in Illinois.

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August 4, 2025
IITA Section 304(b)(2) provides that an insurance company is allowed to make the
election provided therein regardless of whether or not it may be determined that any
particular reinsurance premiums are accepted in respect to property or risk located
in Illinois. However, the section requires that an election made for the first taxable
year ending on or after December 31, 2011, must apply to all future taxable years. The
election is binding on the taxpayer for all subsequent taxable years unless the
taxpayer receives written permission from the Department to alter that election. The
Department’s permission must not be unreasonably withheld.
86 Ill. Admin. Code 100.3420(e)(3)(A) provides a request for permission to alter an
election shall be submitted to the Department as a request for a private letter ruling
and permission to alter an election shall be granted by private letter ruling. Requests
may be made for the change to take effect for a taxable year ending prior to the date
the request is filed, provided that the request shall be granted only if the statute of
limitations for assessment of additional tax is open for that taxable year and every
subsequent taxable year as of the date the Department responds to the request. The
taxpayer and the Department may agree in writing to extend the statute of limitations
under IITA Section 905(f) in order to allow the Department time to process the
request.
COMPANY is hereby granted permission to alter its election in respect of its DATE,
taxable year. COMPANY may change its method from Method B as described in the
Instructions to Form IL-1120 (i.e., 86 Ill. Admin. Code 100.3420(e)(2)(B)), to Method
C as described in the Instructions to Form IL-1120 (i.e., 86 Ill. Admin. Code
100.3420(e)(2)(A)), for its YEAR taxable year. The taxpayer must use Method C for its
YEAR taxable year and all subsequent taxable years, unless it receives Department
permission to alter that election.
Except as provided herein, this ruling shall bind the Department for the taxable year
ending YEAR, and subsequent taxable years. The factual representations upon which
this ruling is based are subject to review by the Department during the course of any
audit, investigation, or hearing, and this ruling shall bind the Department only if the
factual representations recited in this ruling are correct and complete. This Private
Letter Ruling is revoked and will cease to bind the Department 10 years after the date
of this letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or earlier if there is
a pertinent change in statutory law, case law, rules or in the factual representations
recited in this ruling.
Sincerely,

COMPANY
Page 14
August 4, 2025

Jennifer Uhles
Associate Counsel (Income Tax)
JU:se