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Illinois amends apportionment regulations to clarify market-based sourcing, alternative apportionment provisions

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Effective Aug. 3, 2017, Illinois has amended the apportionment regulations governing the calculation of the sales factor to provide guidance on several issues, including market-based sourcing, that have been previously addressed by statute. The guidance clarifies the proper sourcing of income from: (i) a patent, copyright or trademark; (ii) electricity; (iii) the sale or lease of real property; (iv) the lease or rental of tangible personal property; (v) interest, net gains and other items of income from intangible personal property; and (vi) services. In addition, the adopted regulations eliminate the double throwback rule and clarify the exclusion of incidental or occasional sales. Finally, the alternative apportionment regulation has been modified to reflect market-based sourcing and the creation of the Illinois Independent Tax Tribunal. Many of the regulatory changes are retroactively applicable to tax years in which the underlying statutes governing the sales factor calculation were amended.