Illinois experts: nonresident with an IL NOL

Gary, Illinois ties NOL deductions very tightly to what is deductible in any given year for federal income tax purposes. If the taxpayer has positive taxable income in the loss year (i.e., the Illinois source loss is offset by income from other sources for federal income tax purposes), he has no NOL to carry back or forward for Illinois purposes because he has no federal NOL.

This is the last example in Ill. Admin. Code 100.2410(b), the regulation governing NOL carryovers for individuals:

"Example 10: For federal income tax purposes, a nonresident individual has positive adjusted gross income for a taxable year. For that year, the individual has $200,000 in base income from sources outside Illinois and a $20,000 loss, all of which is allocable to Illinois. The individual's Illinois net income for the year is therefore less than zero. Because IITA Section 207 does not apply to individuals, and there is no other provision for carryovers of losses or deductions, the individual may not carry that negative amount over to any other taxable year."

So it makes no difference whether you file an Illinois nonresident return for the loss year or not, if there is no federal NOL.

If there is a federal NOL, a part of which is allocable to Illinois, you can carry it back or forward for Illinois purposes to the same year(s) to which you carry it for federal purposes. However, for Illinois purposes it is deductible only to the extent of income allocated or apportioned to Illinois in the utilization year.

If this is actually a suspended passive loss, rather than an NOL, it appears it would be allowed for Illinois purposes in the year when it is allowed for federal purposes. See Ill. Admin. Code 100.2410(a)(5).

It might help to read the whole regulation, which is available here:

here:

Thanks Katie. My brain was fried when I wrote the question. It is a PAL.