Illinois R&D Tax Credit Summary

Illinois R&D tax credit, R&D Tax Credit

Illinois State R&D Tax Credit

For tax years ending before January 1, 2016, a credit is allowed against the regular income tax for increasing research activities in Illinois in an amount equal to 6.5% of qualifying expenditures.

Refundable Tax Credit – No

  • “Qualifying expenditures” means qualifying expenditures as defined for the federal credit for increasing research activities that would be allowed under IRC § 41 and that are conducted in Illinois
  • “Qualifying expenditures for the base period” means the average of the qualifying expenditures for each year in the base period
  • The base period is the three years immediately preceding the tax year for which the credit is calculated
  • Qualified research is defined in IRC § 41(d). IRC § 41(b) as the sum of in-house research expenses and contract research expenses paid or incurred by the taxpayer during the taxable year in carrying on any trade or business of the taxpayer
  • Qualifying expenditures also include basic research payments, as that term is defined in IRC § 41(e)

Carry-forward

ny credit in excess of tax liability for the tax year can be carried forward for five years or until it is fully used, whichever occurs first. No credit earned in a tax year ending prior to December 31, 2003 may be carried forward to any year ending on or after December 31, 2003.

For carryover purposes, taxpayers may only use credit that was earned for tax years ending on or after December 31, 2004 and ending before January 1, 2016. Any credit or credit carry-forward that was earned prior to December 31, 2003 may not be used.

Flow Through Entity

“For tax years beginning on and after January 1, 1999, partners and shareholders of Subchapter S corporations shall be allowed a credit under this subsection (h) to be determined in accordance with the determination of income and distributive share of income under Sections 702 and 704 and Subchapter S of the Internal Revenue Code (IITA Section 201(k)). No inference shall be drawn from the enactment of PA 91-644, which expressly allows this pass-through of credits, in construing IITA Section 201(k) for tax years beginning prior to January 1, 1999.”

How to obtain the credit?

Corporations must complete and file Form IL-1120.

Find out if you qualify for the R&D tax credit

 

SELL YOUR NOL’s AND R&D CREDITS

If your company hasn’t considered the R&D credit in the past because you have net operating losses (NOLs) and could not utilize the credit contact us today to find out which states allow you to sell your credits and losses for up to 95 cents on the dollar. Also, qualified start-up companies can now take a credit on their payroll taxes for their R&D credit, allowing your company to utilize the R&D credit immediately, even if your company does not have taxable income.

 

States Offering R&D Credit:

                             States Without R&D Credit

Alabama
District of Columbia
Missouri
Montana
Nevada
Oklahoma
South Dakota
Tennessee
Washington
West Virginia
Wyoming