On October 30, 2019, representatives of the Illinois Secretary of State’s office verbally confirmed that it is reversing its controversial position on the Illinois franchise tax issue.

Action Items

If your company has already applied for the amnesty program and paid franchise taxes, please note the following:

  • Request a Refund. Although there is no formal process in place, your company should request a refund of funds already paid.
  • Amnesty Still Available. The amnesty program is still available and will continue to run until November 15, 2019, for companies to pay taxes that were not previously paid for other reasons, without being charged penalties and interest.

Illinois Franchise Tax Issue Background

Over the past several months, the Illinois Secretary of State’s office has taken the position that holding the stock certificates of a subsidiary in another state should not reduce the value of a company’s gross assets held in Illinois by the value of the underlying subsidiary, which is a reversal of its interpretation over the past several years. As a result, many companies have been informed that they have been underpaying their franchise taxes and would not be in good standing in Illinois until those taxes were paid.

Current Interpretation

Based on the latest verbal communication from the Illinois Secretary of State’s office, the office is reverting back to its longstanding prior interpretation that a company’s Illinois franchise taxes may be reduced by the percentage of the value of its gross assets, including subsidiary stock certificates, held outside the state of Illinois. Representatives of the Secretary of State’s office are reaching out to financial institutions directly to inform them of this position.

We Can Help You

If you would like to discuss this further, or need assistance in requesting a refund or amnesty, please contact us. We have addressed the Illinois franchise tax amnesty program in recent Client Alerts:

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