How to file Illinois Franchise Tax

Illinois’ franchise tax is part of the state's annual report filing and its foreign registration filing. It is, by FAR, one of the most complex annual filings for a secretary of state.

The Illinois annual report is typically filed by your tax accountant for good reasons: it has complex instructions, Illinois does not alert you if you overpay, and filing incorrectly (or not at all) can cause the state registration to lapse and be revoked.

The Franchise Tax applies to Corporations, both foreign and domestic. This article is focused on Foreign Corporations (those domestically registered outside of Illinois, e.g. Delaware)

When is the Illinois Franchise Tax due?

Franchise Taxes are due with your Illinois Annual Report. To calculate your annual report due date: the annual report is due at the end of month PRIOR to the Anniversary Month. The Anniversary Month is the month the company was initially registered in Illinois.

There are also Franchise Taxes payable after initially foreign registering in the state for some companies, although Illinois will tell those companies how much they owe after their foreign registration filing is filed.

The Illinois annual report

There are a few components to an Illinois annual report.

1. The annual report itself
2. The franchise tax calculation
3. In some cases, additional forms must be attached, namely form BCA 14.30 when you have unreported changed in paid-in capital during the year

The annual report itself includes standard questions on many secretary of state annual reports: basic business information, officer/director information, etc. Unfortunately, it cannot be filed online by foreign corporations.

The last part of the form, and the most complex part, focuses on paid-in capital, apportionment, and the franchise tax calculation.

Paid in capital

On the Illinois annual report, you must report both “Paid in Capital” and “Paid in Capital on record with the Secretary of State”. If these numbers are different, you also need to file BCA 14.30 with your Annual Report. We’ll come back to that.

Paid in Capital in this instance is the sum of “Stated Capital” and “Paid-in Surplus Accounts”. This is typically the combination of Federal Form 1120, Schedule L, lines 22 and 23.

Calculating franchise tax for Illinois

Illinois franchise tax is calculated by multiplying 0.001 by an estimate of the portion of your business that takes place in Illinois, multiplying that by Paid-in Capital, before adding penalties/interest (if applicable) and a Filing Fee. The annual report form has a worksheet to calculate what you owe.

Here are the basic steps:

Calculate an “Allocation Factor”.

• This is Illinois’ calculation of what portion of your business takes place in Illinois
• Sum the total of your “Gross Amount of Business Transacted” plus “Value of Property (gross assets)” in Illinois, and divide it by that same sum for everywhere
• Carry it to 6 decimal places

Calculate “Illinois Capital”

• Multiply your Total Paid-in Capital by the Allocation Factor
• If you’re late, Paid-in Capital is the greater of your current Paid-in Capital or what it was when last reported to the Secretary of State

Calculate your Franchise Tax

• Multiply Illinois Capital by .001 (round to nearest cent, minimum is $25)
• In 2024, if your Franchise Tax calculation is $5k or less, you pay $0 in Franchise Tax
• The maximum annual Franchise Tax is $2,000,000

Add penalties and interest. If late to file, calculate two numbers and add them together:

• Penalty: multiply Franchise Tax by 10%
• Interest: multiple Franchise Tax by 2% for each month late or part there (minimum $1)

Add a Filing Fee, which is $75

Total due for the annual report is the Franchise Tax, Penalties and Interest, and the Filing Fee

Filing BCA 14.30 - when your issued shares or paid-in capital change

If your Paid in Capital or Issued Shares have changed since you last reported them to the Illinois Secretary of State, you must file BCA 14.30 with your Annual Report. The point of this form is to capture those changes and catch you up on any additional franchise taxes you owe as a result. It’s due with the Annual Report.

Sometimes this form is called the Cumulative report of changes in issued shares or paid-in capital, or the “Cumulative Report”.

The form itself requires you to report on anything not previously reported to the state:

1. Any contributions to paid-in capital, e.g. share issues, contributions of other kinds
2. Any reductions to paid-in capital, e.g. cancellations of shares

Based on that information, you will calculate whether you owe additional franchise tax for the year, which is reportable on this filing.

Here are the basic steps:

Calculate the Cumulative Change, which is the change in Paid-in Capital since it was last reported to the Secretary of State.

• If it’s a net reduction, this can’t reduce the basis for the annual franchise tax until the subsequent year

Calculate Taxable Illinois Capital

• Multiply the Cumulative Change by the Applicable Allocation factor, which is the Allocation factor used on the Annual Report for the previous year
• If there was no Annual Report filed in the previous year, use the Allocation factor that was on the Application for Authority for a foreign corporation

Calculate Additional Franchise Tax

• Multiply Taxable Illinois Capital by .0015
• Rounded to the nearest cent

Add penalties and interest. If BCA 14.30 is late, calculate two numbers and add them together:

• Penalty: multiply Franchise Tax by 10%
• Interest: multiple Franchise Tax by 2% for each month late or part thereof

Add a Filing Fee, which is $5

Total due for BCA 14.30 is Franchise Tax, Penalties and Interest, and the Filing Fee

Other forms you may need to file with your Illinois Annual Report

Companies that must file EEO-1 must attach the Workforce Demographic Data portion of their EEO-1 to their Annual Reports.

Public companies listed on a major US exchange that have their “Principal Executive Office” in Illinois must also file BCA 8.12, the Female and Minority Directors Report.

Franchise Taxes on initial foreign registration

When filing as a foreign corporation in Illinois, companies must provide information to calculate franchise taxes. However, in this situation Illinois will calculate the tax owed for you and send you a bill after you submit the foreign registration filing.