Overview
Action Items
- Confirm whether your company is allocating a portion of its assets to another state in its Illinois annual reports and evaluate as a result whether the Illinois Secretary of State may deem that the company has been underpaying its Illinois franchise taxes.
- If you receive interrogatories from the Illinois Secretary of State, please contact us for assistance.
- Amnesty Period: October 1-November 15, 2019 (46 days); contact us if you need assistance on this matter.
The Illinois franchise tax is being phased out beginning January 1, 2020, and will be eliminated completely in 2024. As this phase-out period approaches, the Illinois Secretary of State has ramped up collection activities against Illinois taxpayers for unpaid franchise taxes, including by challenging companies on the methods they have used in prior years to calculate their franchise taxes. As part of this effort, the Secretary of State has issued interrogatories to many companies organized or qualified in Illinois that focus on the paid-in capital or allocation factors used by these companies to calculate their Illinois franchise taxes. In many instances, particularly where an Illinois-based bank holding company holds a subsidiary's stock outside the state of Illinois, the Illinois Secretary of State has taken the position that the allocation factor used was incorrect and that the company has been underpaying its Illinois franchise tax. The Secretary of State has refused to preclear or accept for filing any articles of merger or issue a certificate of good standing for any company that has received these interrogatories, but not yet addressed the issues to the Secretary of State’s satisfaction.
In connection with the planned phase-out, Illinois has established a franchise tax amnesty program for companies with outstanding delinquent franchise taxes. The franchise tax and license fees amnesty program will be administered by the Secretary of State and will begin on October 1, 2019, and remain open through November 15, 2019. Based on the new law, the amnesty program applies to franchise tax or license fee liabilities for any tax period ending after June 30, 2011, and prior to July 1, 2018, although the Illinois Secretary of State has advised companies in some cases that all franchise tax or license fee liabilities accrued since their dates of incorporation or qualification in Illinois must be paid under the amnesty program, not just such taxes and fees since June 30, 2011.
Upon payment of all franchise taxes and license fees due, the Secretary of State will waive applicable interest and penalties. Amnesty is not available to taxpayers involved in any criminal investigation or civil or criminal litigation.
Additional details regarding the administration of the programs can be found on the Illinois Secretary of State’s website (https://www.cyberdriveillinois.com/departments/business_services/amnesty.html).
We Can Help You
If you would like to discuss this further, or need assistance in requesting amnesty, please contact us.