Carpetland U.S.A., Inc., 201 Ill. 2d at 369, quoting AFM Messenger Service, Inc., 198 Ill. 2d at 395; Zebra Technologies Corp., 344 Ill. App. 3d at 481. Purely factual findings are entitled to deference and are reversed only if they are contrary to the manifest weight of the evidence ( CarpetlandU.S.A., Inc., 201 Ill. 2d at 369; Zebra Technologies Corp., 344 Ill. App. 3d at 480), while pure questions of law are reviewed de novo (Carpetland U.S.A., Inc., 201 Ill. 2d at 369; Zebra Technologies Corp., 344 Ill. App. 3d at 480), giving deference to the Department's interpretation of its governing statutes and its regulations (see Automatic Data Processing, Inc. v. Department of Revenue, 313 Ill. App. 3d 433, 443-44, 729 N.E.2d 433 (2000)). The Illinois Income Tax Act (Act) provides that a corporate taxpayer conducting a multistate business in Illinois use the formula apportionment method of taxation.
Income is presumed to be business income unless it is clearly classifiable as nonbusiness income. Automatic Data Processing, Inc. v. Department of Revenue, 313 Ill. App. 3d 433, 440, 729 N.E.2d 897 (2000). Courts have interpreted the statute as setting out two tests for determining whether income is business income, namely, the "transactional test" and the "functional test."
The issue is whether the Department properly characterized the gain from the sale of American States as "business income." The Illinois Income Tax Act (Act) ( 35 ILCS 5/101 et seq. (West 2000)), derived from the Uniform Division of Income for Tax Purposes Act (UDITPA), addresses when income of a nonresident corporation conducting business within Illinois is subject to taxation by the State. Under the statute, foreign corporations are required to pay taxes in proportion to the amount of their income-producing activities. 35 ILCS 5/304(a) (West 2000); Texaco-Cities Service Pipeline Co. v. McGaw, 182 Ill. 2d 262, 268, 695 N.E.2d 481, 484 (1998); Automatic Data Processing, Inc. v. Illinois Department of Revenue, 313 Ill. App. 3d 433, 438, 729 N.E.2d 897, 902 (2000). The Act generally establishes two methods by which corporate income will be divided among Illinois and the other jurisdictions in which the taxpayer conducts business: "apportionment" and "allocation.
Under the statute, foreign corporations are required to pay taxes in proportion to the amount of its income-producing activities. 35 ILCS 5/304(a) (West 2000); Texaco-Cities Service Pipeline Co. v. McGaw, 182 Ill. 2d 262, 268, 695 N.E.2d 481, 484 (1998); Automatic Data Processing, Inc. v. Department of Revenue, 313 Ill. App. 3d 433, 438, 729 N.E.2d 897, 902 (2000). Essentially, the Act establishes two methods by which corporate income will be divided among Illinois and the other jurisdictions in which the taxpayer conducts business.
In construing statutes, the ordinary, and commonly accepted definitions of the words used therein are accepted as the correct definitions of those words, unless the statute gives special definitions to the contrary. Champaign Township, 331 Ill. App. 3d at 587 (court held that "coterminous" had a clear, singular meaning); see Automatic Data Processing v. Department of Revenue, 313 Ill. App. 3d 433, 444 (2000) (in the absence of a definition, the term " 'investment company' " would be accorded its ordinarily understood meaning). Thus, the lack of a definition does not render the words "motor vehicle accident" ambiguous. ¶ 60 In the absence of any evidence that a motor vehicle accident occurred, section 11-501.4-1 does not apply.
“Apportionment is intended to assign the amount of income to a state that is proportional to the amount of income-producing activities in that state.” Automatic Data Processing, Inc. v. Department of Revenue, 313 Ill.App.3d 433, 438, 246 Ill.Dec. 246, 729 N.E.2d 897, 902 (2000). ¶ 19 According to section 1501(a)(27) of the Illinois Income Tax Act (35 ILCS 5/1501(a)(27) (West 2008)), “ ‘unitary business group’ means a group of persons related through common ownership whose business activities are integrated with, dependent upon and contribute to each other.”
Business income is apportioned and nonbusiness income is allocated." Automatic Data Processing, Inc. v. Department of Revenue, 313 Ill. App. 3d 433, 438, 729 N.E.2d 897, 902 (2000). The taxpayer bears the burden of establishing that income is nonbusiness income.
We also note that generally "courts will give substantial weight and deference to an interpretation of an ambiguous statute by the agency charged with the administration and enforcement of that statute. [Citation.]" Automatic Data Processing, Inc. v. Department of Revenue, 313 Ill. App. 3d 433, 443-44, 729 N.E.2d 897 (2000). This deference is based on the agency's experience and expertise. AFM Messenger Service, Inc. v. Department of Employment Security, 198 Ill. 2d 380, 394, 763 N.E.2d 272 (2002).
Second, they rely on the well-established principle that when a statute is ambiguous, courts generally defer to interpretations by an agency charged with administering the statute. Automatic Data Processing, Inc. v. Department of Revenue, 313 Ill. App. 3d 433, 444 (2000); Smith v. Town of Normal, 238 Ill. App. 3d 944, 949-50 (1992). Third, they note that IDOT interprets section 47 to require a certificate only for acts that impact on things such as runways and flight paths.