On June 24, the Illinois Department of Revenue released Informational Bulletin FY 2021-27 concerning foreign dividend reporting changes for corporate filers that take effect for tax years ending on or after June 30. The guidance summarizes changes implemented by the Illinois FY 2022 budget legislation, S.B. 2017, which was signed by Governor J.B. Pritzker on June 17.
The new law makes the following changes for Illinois corporate filers (Form IL-1120):
- Decouples Illinois from:
- the federal 100% foreign dividends received deduction (DRD),
- the deduction for global intangible low-taxed income (GILTI), and
- the deduction under IRC Section 243(e) for foreign dividends treated as domestic dividends.
- Disallows a subtraction modification:
- for foreign dividends eligible for deduction federally under IRC Section 245(a), and
- IRC Section 1248 gain.
These changes are outlined in revised instructions (R-06/21) for Schedule M, Other Additions and Subtractions (for businesses), and Schedule J, Foreign Dividends.
Schedule M changes
Corporate filers must add back amounts deducted federally under:
- IRC Section 250(a)(1)(B)(i),
- IRC Section 245A(a), and
- IRC Section 243(e).
These amounts qualify for the foreign dividend subtraction modification on Schedule J, Foreign Dividends.
Schedule J changes
Corporate filers:
- may no longer include any amount attributable to dividends eligible for deduction under IRC Section 245(a);
- are allowed a subtraction modification for dividends reported on federal Form 1120, Schedule C, Line 13, except for any amount attributable to gains treated as a dividend under IRC Section 1248; and
- may include in their subtraction modification for GILTI the addition modification required on Schedule M for the amount deducted federally.
More on the Illinois FY 2022 budget legislation
S.B. 2017 / Public Act 102-0016 makes several other noteworthy changes for Illinois taxpayers including reviving the $100,000 net operating loss limitation that was in effect for 2013-2014 and eliminating the phase-out of the Illinois franchise tax.
For more information the 2021 Illinois legislative session, see our recent episode of the SALT Shaker Podcast policy series. In this episode, Carol Portman, President of the Taxpayers’ Federation of Illinois, joins Breen Schiller, Partner in the Chicago office of Eversheds Sutherland, and host Nikki Dobay for a review of the 2021 Illinois legislative session, which adjourned June 1 with the passage of the budget.