On June 14, 2019, an Illinois Appellate Court held that a taxpayer’s subsidiaries are financial organizations that were excluded from the taxpayer’s Illinois combined return. During 2006, 2007 and 2008, Illinois excluded from a combined return those affiliates that apply a different apportionment method. (Note that, for taxable years ending on or after December 31, 2017, members with different apportionment formulas are no longer excluded from Illinois combined returns.) Financial organizations, which included “sales finance companies,” used a different apportionment method than other types of corporations. In relevant part, a sales finance company is a company engaged in “the business of making loans for the express purpose of funding purchases of … services by the borrower….” The taxpayer’s affiliates made loans to customers to facilitate the purchase of insurance from related insurance companies. The question before the court was whether insurance constituted a service or an intangible. The court concluded that insurance was a service, and therefore, the taxpayer’s subsidiaries were excluded from the Illinois combined return.

Premier Auto Fin., Inc. v. Illinois Indep. Tax Tribunal, 2019 IL App (1st) 172472-U.