Form It 04-3 - Recommendation Form For Disposition Page 3

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CONCLUSIONS OF LAW:
Section 201(a) of the Illinois Income Tax Act (“Act”) (35 ILCS 5/101 et seq.)
imposes a tax on the privilege of earning or receiving income in or as a resident of the
state of Illinois. (35 ILCS 5/201(a)). The tax is measured by net income, which is
calculated by starting with the taxpayer’s federal taxable income. (35 ILCS 5/201(a);
203(b)). The findings of the Department concerning the correct amount of tax due are
prima facie correct, and the Department’s certified record relating to the tax due is proof
of such determination. (35 ILCS 5/904, 914; Balla v. Department of Revenue, 96
Ill.App.3d 293, 295 (1st Dist. 1981)).
The Department’s prima facie case was established in this matter when its
certified record concerning the tax due was admitted into evidence. In response, the
taxpayer contends that the Department should have allowed the taxpayer to deduct net
operating losses that were carried forward from previous years.
The Department
disallowed the deduction because the losses were originally claimed on the Iowa returns,
and the Department contends that the losses were not incurred in Illinois. The taxpayer
claims that it has only done business in Illinois and has never conducted business in Iowa.
There are certain requirements that a foreign corporation must follow in order to
conduct business in Illinois. These include procuring a certificate of authority to transact
business in this State under the Illinois Business Corporation Act (See 805 ILCS
5/13.05), and registering with the Department. (See IT 03-0037-GIL) The taxpayer
failed to fulfill either of these requirements during the time period of 1988 through 1997.
The certificate of authority that the taxpayer presented at the hearing was issued by this
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