Illinois R&D Tax Credit Summary

ILLINOIS R&D TAX CREDIT SUMMARY

Illinois State R&D Tax Credit

For tax years ending before January 1, 2022, a non-refundable credit is allowed against the regular income tax for increasing research activities in Illinois in an amount equal to 6.5% of qualifying expenditures.

  • 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
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    • 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)

    How to obtain the credit?

    Corporations must complete and file Form IL-1120.

    Refundable/Transferable Tax Credit – No

    Carry-forward

    Any 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.

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    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.”

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