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Client Alert: Clarification from the Illinois Secretary of State’s Office Regarding Franchise Taxes

The Illinois Secretary of State’s office has sent out the following clarification of its position regarding Illinois franchise taxes:

“I am writing to clarify the policy of the Office of the Secretary of State regarding stock certificates maintained in another state with regard to calculating Illinois franchise tax obligations. It is the position of this office that stock certificates maintained in another state shall be considered property allocated to that state and not to the State of Illinois, subject to verification. Furthermore, no corporation will be required to amend any previously filed franchise tax assessment for the purpose of treating stock certificates that can be verified as having been maintained in another state at the time of the previous filing, as property allocated to the State of Illinois.

The Department of Business Services will adhere to its policy of verifying the information contained in the corporation’s Annual Reports and other reports, including the corporation’s allocation factor. In that vein, corporations will need to prove that the stock certificates were actually transferred to another state, how long they have remained there, the value of said stock certificates, among other factors to be taken into account in order to reduce the amount of property reported to the State of Illinois as property located in the State of Illinois. Uncertificated stock will still be considered to be administered, managed and controlled from the State of Illinois. If necessary, and per Department policy, corporate board resolutions, tax returns, accountant’s affidavits and other evidence may be required of the corporation to verify its position.

Further, as you know, there is currently an amnesty in effect regarding the penalties and interest on any corporate franchise tax obligations. The amnesty period ends at the close of business on Friday November 15, 2019. All amnesty petitions must be filed or postmarked as of November 15, 2019. Please advise your members that if they have any potential franchise tax liability, it would behoove them to take advantage of the amnesty. Any petitions for amnesty filed after that date will be rejected, per statute.”

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