Illinois Franchise Tax and License Fee Amnesty
SALT Alert, February 2008 

Illinois requires corporations incorporated in Illinois and foreign corporations (i.e., corporations incorporated outside of Illinois that have obtained authority to transact business in Illinois) to pay an initial and annual franchise tax and an additional franchise tax in the year of an increase in paid-in capital. The franchise tax is generally measured by paid-in capital apportioned to Illinois based on a two-factor formula of property and receipts.

In accordance with the Franchise Tax and License Fee Amnesty Act of 2007, the Illinois Secretary of State is administering an amnesty for all corporate businesses owing past due franchise tax or license fees. Corporations whose amnesty filings are accepted by the Illinois Secretary of State will receive an abatement of all penalties and interest and will be relieved from any exposure to civil or criminal prosecution. The amnesty filing period ends upon the close of business on March 17, 2008.

Participating corporations must complete an amnesty program petition form and pay all overdue franchise taxes, license fees, and standard filing fees. In addition, Annual Reports are required to be filed for all open years under the Amnesty Act. For corporations that previously filed Annual Reports but underreported or underpaid, the statute of limitations period of seven years is generally applicable. For unreported increases in paid-in capital the look-back period is shortened from seven years to four years. For corporations that have not filed, there is no look-back limitation.

Corporations owing past franchise taxes or fees that fail to comply with the amnesty program by March 17, 2008 will see the monthly interest rate charged on their delinquent franchise taxes double from 1 percent to 2 percent.

Read a summary of the Amnesty Program issued by the Illinois Secretary of State and the petition form that is required to be filed with the applicable reports discussed above. 

The requirement for a foreign corporation to obtain authority to transact business in a state is usually a legal determination and should be made in conjunction with the assistance of competent legal counsel.



The information provided in this alert is only a general summary and is being distributed with the understanding that Plante & Moran, PLLC is not rendering legal, tax, accounting, or other professional advice or opinions on specific facts or matters and accordingly, assumes no liability whatsoever in connection with its use.