Base Income

              IT 09-0009-GIL 04/06/2009 BASE INCOME
General Information Letter: Acceptance without adjustment by the IRS of items on a
taxpayer’s federal return is not binding on the Department.
April 6, 2009
Dear:
This is in response to your letter dated December 23, 2008 in which you request 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 at www.revenue.state.il.us.
Your letter states as follows:
We are writing to request a General Information Letter under 2 Ill. Adm. Code 1200.120 to
confirm our understanding of adjustments that may be made by the Department of Revenue to
a corporate taxpayer’s Illinois income tax liability for prior tax years after a federal income tax
audit and formal closing agreement under IRC 7121.
Facts:
Assume the following facts:
1. Corporation A, which has been an Illinois income taxpayer for many years on a separate
company non-unitary basis, was audited for federal income tax purposes for 2003, 2004, 2005,
and 2006.
2. Corporation A entered into a comprehensive settlement of the issues with IRS and this
comprehensive settlement was embodied in a closing agreement under IRC 7121. Some of
the issues that had been raised by IRS on audit were completely conceded by Corporation A,
some were completely conceded by IRS, and others were divided in various ways depending
upon the issue.
3. At the time of the closing agreement, the period of limitations for the Illinois Department of
Revenue to issue a notice of deficiency had expired under IITA 905 for 2003 and 2004.
4. The original federal income tax returns filed by Corporation A for 2003 and for 2006 showed
federal taxable income, and the original federal income tax return filed for 2004 and 2005
showed a net operating loss. The closing agreement increased the taxable income in 2003 and
2006 and decreased the net operating loss in 2004 and 2005.
5. Corporation A’s Illinois income tax returns for each year were filed on or about the fully
extended due date of October 15 of the year following. Corporation A has not signed any
extensions of the limitations periods under IITA 905(f). Therefore, the years 2003 and 2004
were closed under Illinois’ standard three year statute of limitations at the time the closing
agreement was signed.
Issue 1
Would the various adjustments against Corporation A that are embodied in the closing