Illinois Practice and Procedure

Illinois layers a second income tax on top of the first: the personal property tax replacement income tax, with its own set of payers, its own exemptions, and rates that have not moved since 1981. Knowing which entities the replacement tax reaches, and which it does not, decides most Illinois structuring questions before the regular tax is even computed. This hub collects the questions that recur for businesses and trusts touching the state.

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Income and franchise procedure

Does a trust or a REIT owe Illinois replacement tax?Illinois layers a separate Personal Property Tax Replacement Income Tax on top of its regular income tax, and the entities it reaches are not always the ones a name on a K-1 or an entity type suggests. A wholly grantor trust is generally outside the tax entirely, while a REIT is classified and rate-taxed as a corporation rather than a trust, and its taxable REIT subsidiary is an ordinary corporation with no automatic combination or exemption of its own. This article works through the entity classification questions that decide who actually owes the tax, and where the corporate-level dividends-paid deduction a REIT normally relies on can be added back.