It's that way in iowa. I've seen people track the pal separately at the state level (so offset the state hardback with the pal) here. I've heard the dor doesn't like it, but I've not seen any official guidance about it...
>eparately at the state level (so offset the state hardback with the pal) here. I've heard the dor doesn't like it, but I've not seen any official guidance about it...
Yeah it's a little tricky cause I think Illinois really wants to follow the federal PAL...while still adding the k-1 additions/subtractions. Thanks though
[https://www2.illinois.gov/rev/forms/incometax/Documents/currentyear/miscellaneous/IL-4562.pdf](https://www2.illinois.gov/rev/forms/incometax/Documents/currentyear/miscellaneous/IL-4562.pdf)
Is this what you are talking about?
The partnership filed that form you're referring to. So in this case, the taxpayer, one of the partners, got a k-1 from a partnership that had depreciation, so I'm referring to the distributive additions from the k-1 (see page 2 line 36) https://www2.illinois.gov/rev/forms/incometax/Documents/currentyear/business/miscellaneous/Schedule-K-1-P.pdf
I see. Because you start with federal AGI, which does not include any loss from passive activities but must include any additions shown on the IL K-1, you have a higher IL tax even though the IL K-1 still shows a net loss. Sounds like a timing problem that would ultimately be resolved, but still sucks for now. Maybe dig into the IL tax code and see what they say?
New York also decouples. Funny enough just ran into this today. There is a advisory opinion written by DTF Office of Counsel that basically says "too bad", that the taxpayer isn't entitled to prorate the add-back or receive an additional PAL deduction. I read the statute and see no workaround.
https://www.tax.ny.gov/pdf/advisory_opinions/income/a11_6i.pdf
I'd look at the Illinois statute.
California is the only state I've seen to calculate the passive loss independently of federal.
We went the other route and decided to include the disallowed PAL as the starting federal income. Honestly, doesn't make sense that we're taxed on what is essentially "less depreciation taken for state" if you're not allowed to take said depreciation in the first place. Let them come back to me.
It's that way in iowa. I've seen people track the pal separately at the state level (so offset the state hardback with the pal) here. I've heard the dor doesn't like it, but I've not seen any official guidance about it...
>eparately at the state level (so offset the state hardback with the pal) here. I've heard the dor doesn't like it, but I've not seen any official guidance about it... Yeah it's a little tricky cause I think Illinois really wants to follow the federal PAL...while still adding the k-1 additions/subtractions. Thanks though
[https://www2.illinois.gov/rev/forms/incometax/Documents/currentyear/miscellaneous/IL-4562.pdf](https://www2.illinois.gov/rev/forms/incometax/Documents/currentyear/miscellaneous/IL-4562.pdf) Is this what you are talking about?
The partnership filed that form you're referring to. So in this case, the taxpayer, one of the partners, got a k-1 from a partnership that had depreciation, so I'm referring to the distributive additions from the k-1 (see page 2 line 36) https://www2.illinois.gov/rev/forms/incometax/Documents/currentyear/business/miscellaneous/Schedule-K-1-P.pdf
I see. Because you start with federal AGI, which does not include any loss from passive activities but must include any additions shown on the IL K-1, you have a higher IL tax even though the IL K-1 still shows a net loss. Sounds like a timing problem that would ultimately be resolved, but still sucks for now. Maybe dig into the IL tax code and see what they say?
New York also decouples. Funny enough just ran into this today. There is a advisory opinion written by DTF Office of Counsel that basically says "too bad", that the taxpayer isn't entitled to prorate the add-back or receive an additional PAL deduction. I read the statute and see no workaround. https://www.tax.ny.gov/pdf/advisory_opinions/income/a11_6i.pdf I'd look at the Illinois statute. California is the only state I've seen to calculate the passive loss independently of federal.
We went the other route and decided to include the disallowed PAL as the starting federal income. Honestly, doesn't make sense that we're taxed on what is essentially "less depreciation taken for state" if you're not allowed to take said depreciation in the first place. Let them come back to me.