The Illinois Department of Revenue (IDOR) has become aware that the Line 3 instructions for the Illinois Form IL-1120, Corporation Income and Replacement Tax Return, were incorrect for corporations who have the same tax-exempt interest from a Regulated Investment Corporation (RIC) on both
- U.S. Form 1120, Schedule M-1, Line 7, and
- Illinois Schedule K-1-P, Partner’s or Shareholder’s Share of Income, Deductions, Credits, and Recapture, Line 32.
The corrected instruction for these taxpayers is to report the RIC tax-exempt interest from the Illinois K-1-P, Line 32, on the Illinois Form IL-1120, Line 7 (not on both Line 3 and Line 7). These taxpayers should not report the "passed-through" RIC tax-exempt interest on Line 3.
To remediate this issue on current (2018) and past year returns, IDOR has revised its internal procedures to catch these errors upfront and make return adjustments. Taxpayers will be sent a notice if a revision is made.
IDOR will include these details in the Form IL-1120 instructions for future year returns.
Taxpayers with questions regarding this issue may contact Kevin Anguish, IDOR’s Business Processing Division Manager by telephone at 217 785-4025, or by email at Kevin.Anguish@illinois.gov.