Illinois Corporate NOL

Does Illinois allow corporate NOLs?

I had a new client last year that we filed an Illinois corporate return form 1120. It was their first year of operation and had a federal loss of $225k. Looking back I don't see any notes as to an election made to carry forward their loss on the IL return and this year they have a net income of $120k which appears to be fully taxable at the state level because IL adds back federal NOL deductions.

Based on the instructions it appears Illinois stopped allowing corporate NOLs in 2003. Can any Illinois preparers confirm this?

Illinois allows for an NLD (Net Loss Deduction). See Schedule NLD. It would not have needed to be filed with the initial loss year, but for the first income year and every year after that. Personally, I include the Schedule with every tax return just so that all of the carryover information is readily available. Illinois does not allow for carryback of the NLD, only carryforward. And the NLD is calculated independent of the federal NOL.

And they did suspend use of the NOL/NLD for C corps for a few years, seems like I had one that went thru recently tho', so it might be back. And watch for updates since I'll bet they allow them due to the virus.

https://www2.illinois.gov/rev/questionsandanswers/Pages/605.aspx

When can an Illinois Net Loss Deduction (NLD) be used?

NLD can be used to reduce the base income allocable to Illinois only if the loss year return and all other returns that are impacted by the loss year carryback and carryforward provisions have been filed and to the extent the loss was not used to offset income from any other tax year. For Illinois net losses in tax years ending on or after December 31, 2003, Illinois net losses can no longer be carried back, and can only be carried forward for 12 years. Illinois net losses are used in order of expiration beginning the first year with taxable income after the loss year.

The use of Illinois net losses to offset income for tax years ending on or after December 31, 2012, and before December 31, 2014, is limited to a maximum deduction of $100,000 per year for Corporations other than S corporations. This limitation does not apply to S corporations, partnerships, estates, or fiduciaries.

For tax years ending on or after January 1, 2011, and before December 31, 2012, the use of Illinois net operating loss to offset income is suspended for corporations (other than S corporations).

Illinois allows for an NLD (Net Loss Deduction). See Schedule NLD. It would not have needed to be filed with the initial loss year, but for the first income year and every year after that. Personally, I include the Schedule with every tax return just so that all of the carryover information is readily available. Illinois does not allow for carryback of the NLD, only carryforward. And the NLD is calculated independent of the federal NOL.

I think what was throwing me off is that there is no election that needs to be made and as JR said there were a few years in between where they made changes. Thanks guys!