a) In General
Except as otherwise provided in this Section, no
credit or refund shall be allowed or made with respect to any year unless a
claim for refund or credit was filed on or before the later of:
1)
3 years after the date the return
was filed or, in the case of returns required under Article 7 of the IITA
respecting any amounts withheld as tax, the 15th day of the 4th month following
the close of the calendar year in which such withholding was made);
or
2)
one year
after the date the tax was paid. (IITA Section 911(a))
3) Consequence of Failing to File a Timely
Refund Claim. In the case of any overpayment, the Department may grant a credit
or refund of the amount of such overpayment within the applicable period of
limitations for a claim for refund (see IITA Section 909(a)). Failure of a
taxpayer to file a refund claim before the expiration of the limitations period
for a taxable year precludes the Department from granting a credit or refund of
any overpayment for that taxable year after the date of expiration. The
expiration of the period for filing a refund claim for a taxable year:
A) does not preclude the taxpayer from
asserting any adjustments to net income or credits to the extent the
adjustments would reduce or eliminate a deficiency asserted by the Department
for that taxable year. (See Lewis v. Reynolds, 284 U.S.
281 (1932).)
B) does not preclude the taxpayer from
asserting any adjustments to the amount of net loss incurred under IITA Section
207 (except as provided in subsection (g) of this Section for losses incurred
in taxable years ending prior to December 31, 2002) or of any credit earned in
that taxable year, or the amount of net loss deduction under IITA Section 207
or of any credit carryforward that is properly taken in that taxable year, in
order to compute the amount of net loss deduction or credit carryforward
allowable in another taxable year, so that a timely refund claim may be filed
for that other taxable year or a deficiency for that other taxable year may be
reduced or eliminated. (Springfield Street Railway Co. v. U.S., 312 F.2d
754
(Ct. Cl. 1963).)
4) See
subsection (e) regarding when a return is deemed filed.
b) Federal Changes
Irrespective of whether notification of a
federal change required by IITA Section 506(b) has been filed
by a taxpayer, a claim for refund may be filed not later than two years
after the date the notification was due. The recoverable amount of a claim
filed under this subsection (b) is limited to any overpayment
resulting from a change in the taxpayer's netincome, net loss,
or Article 2 credits for the taxable year for which the notification
is required, and any resulting change in a net loss or Article 2 credit
carryover to a subsequent year, after giving effect to the items of
adjustment in the alteration required to be reported. (IITA Section
911(b)(1)) IITA Section 506(b) requires that a notification of federal change
be filed with the Department not later than 120 days after the alteration has
been agreed to or finally determined for federal income tax purposes or, if
earlier, not later than 120 days after any federal income tax deficiency or
refund, tentative carryback adjustment, or abatement or credit resulting
therefrom, has been assessed or paid.
c) Extension by Agreement
1) When, before expiration of the time
otherwise prescribed in this Section for the filing of a claim for refund, the
Department and the taxpayer have consented in writing to the filing after that
time, then a claim may be filed at any time prior to the expiration of the
period agreed upon.
2)
In
the case of a taxpayer who is a partnership, Subchapter S corporation, or trust
and who enters into an agreement with the Department pursuant to this
subsection (c) on or after January 1, 2003, a claim for refund may be filed by
the partners, shareholders, or beneficiaries of the taxpayer at any time prior
to the expiration of the period agreed upon. Any refund allowed pursuant to the
claim, however, shall be limited to the amount of any overpayment of tax due
under the IITA that results from recomputation of items of income, deduction,
credits, or other amounts of the taxpayer that are taken into account by the
partner, shareholder, or beneficiary in computing its liability under the
IITA. (IITA Section 911(c))
3) Prior to the expiration of any extended
period under this subsection (c), the period may be successively further
extended for any or all the taxable years covered by the extension agreement by
the obtaining of a further written consent.
4) Under Section
100.9400(f)(1),
an original return is not a refund claim that preserves a taxpayer's right to a
refund or credit for an overpayment of tax after the statute of limitations for
filing of a refund claim has otherwise expired. However, a timely-filed
original return showing an overpayment shall be treated as an extension of time
for the filing of a claim for refund of that overpayment through the date that
is 6 months after the date on which the Department issues a refund of a portion
of the reported overpayment, notifies the taxpayer that it has allowed a credit
for a portion of the reported overpayment, or notifies the taxpayer that no
refund or credit of the reported overpayment will be allowed.
d) Limit on Amount of Credit or
Refund
1)
Limit When Claim is Filed
within a 3-Year Period
With respect to a taxable year for which a
claimant-taxpayer has filed a return and during the 3-year period in subsection
(a)(1) has filed a claim for refund, the amount of the credit or refund shall
not exceed the portion of the tax paid within the period immediately preceding
the filing of the claim, equal to 3 years plus the period of any extension of
time for filing the return. (IITA Section 911(d)(1)) For the purposes
of this subsection (d)(1), any amount paid on account of withheld tax or
estimated tax (IITA Arts. 7 and 8) or any other payment paid as tax or in
respect of tax imposed by the Act (for example tax paid with a return filed
before the due date) shall be deemed to have been paid not earlier than the
last day prescribed for filing the return (irrespective of extensions) for the
taxable year for which the payments are applicable (see IRC section
6513(b).)
2) Limit When
Claim is Not Filed Within a 3-Year Period
Irrespective of whether a return was filed, if the
claim was not filed within the 3-year period in subsection (a) or
within an agreed-to extended period for filing of a refund claim, the
amount of credit or refund shall not exceed the portion of the tax paid during
the one year immediately preceding the filing of the claim. (IITA
Section 911(d)(2))
3) Limit
When Claim is Filed Under an Extension
If the claim is filed prior to the expiration of an extended
period for filing under subsection (c), the credit or refund is limited to the
amount that could have been allowed if the claim had been filed prior to the
expiration of the period that was extended.
e)
Time Return Deemed Filed
For purposes of this Section, a tax return filed
before the last day prescribed by law for the filing of the return (including
any extensions) shall be deemed to have been filed on the last day.
(IITA Section 911(e)) The last day prescribed for filing returns shall include
any automatic extensions of time for filing, regardless of whether the taxpayer
filed the return prior to the unextended due date.
f) Special Period of Limitation with Respect
to Net Loss Carrybacks
The 3-year period of limitation prescribed in subsection
(a)(1) does not apply if the claim for refund relates to an overpayment
attributable to a net loss carryback provided by IITA Section 207. Instead, the
period of limitation shall be that period which ends 3 years after the time for
filing the return (including extensions) for the taxable year in which the net
loss occurs, or the period prescribed in subsection (c) in respect of that
taxable year, whichever expires later. The amount of the refund may exceed the
portion of the tax paid within the period provided in subsection (d) to the
extent of the amount of the overpayment attributable to the net loss
carryback.
g) Net Losses.
On and after August 23, 2002, no claim for refund shall be allowed to
the extent the refund is the result of an amount of net loss incurred under
IITA Section 207 that was not reported to the Department within 3 years after
the due date (including extensions) of the return for the loss year on either
the original return filed by the taxpayer or on amended return or to the extent
that the refund is the result of an amount of net loss incurred in any taxable
year under Section 207 for which no return was filed within 3 years after the
due date (including extensions) of the return for the loss year. (IITA
Section 911(h))
1) This subsection (g)
applies only to net losses incurred in taxable years ending prior to December
31, 2002.
2) This subsection (g)
does not preclude a taxpayer from increasing a net loss in order to carry
forward deduction of that increased net loss to reduce or eliminate a
deficiency for a subsequent taxable year.
EXAMPLE:
Corporation A and its wholly-owned subsidiary Corporation B
are members of a unitary business group, but filed separate returns for
calendar years 2005 through 2009. Corporation A reported positive net income
every year, and Corporation B reported net losses under IITA Section 207 for
each year. After auditing Corporation A's returns for 2007, 2008 and 2009, the
Department adjusted various items of income and apportionment, and issued
notices of deficiency. The limitations periods for filing claims for refund
have expired for 2005 and 2006, but not for the later years.
The taxpayer may file amended returns for all of the years in
question to combine the corporations so that Corporation B's net losses for the
years under audit can offset the income of Corporation A, and may carry any
combined net loss properly determined for any year (including 2005 and 2006) to
each subsequent year in order to determine the correct liabilities for the
years 2007, 2008 and 2009, and reduce or eliminate the deficiencies determined
by the Department or to claim refunds for the open years.
h)
Periods of Limitation
Suspended While Taxpayer is Unable to Manage Financial Affairs Due to
Disability
1)
In the case of
an individual, the running of the periods specified in this Section shall be
suspended during any period when that individual is financially
disabled. (IITA Section 911(i))
2)
For purposes of this
subsection (h), an individual is financially disabled if that
individual is unable to manage his or her financial affairs by reason of a
medically determinable physical or mental impairment of the individual that can
be expected to result in death, or which has lasted or can be expected to last
for a continuous period of not less than 12 months. An individual shall not be
treated as financially disabled during any period when that individual's spouse
or any other person is authorized to act on behalf of that individual with
respect to financial matters. (IITA Section 911(i)) A person who has
been determined to be financially disabled for any period of time for purposes
of IRC section 6511(h) shall be deemed to be financially disabled for purposes
of this subsection (h) for the same period.
3) After a limitations period has expired,
legislation cannot extend the period. (See Sepmeyer v. Holman, 162 Ill. 2d 249
(1994).) Accordingly, this subsection (h) shall apply only to periods specified
in this Section that had not expired prior to August 15, 2014, the effective
date of Public Act 98-970, which enacted IITA Section 911(i).