This month we are continuing our “What’s Happening in Your State?” series, where we provide information about the R&D credit in a different state each month. This month, we are focusing on Illinois!
What are the specificities of the R&D Tax Credit in Illinois ?
Qualified research expenses occurring in Illinois for qualified activities are capturable towards the Illinois R&D credit. The qualification requirements closely follow the federal definitions contained within Section 41 of the Internal Revenue Code, but there are a few nuances that a taxpayer should be aware of.
First, if the tax year for which the credit is being claimed does not have adequate tax liability for use of the credit, the credit can be carried forward for five years. The credit cannot be carried back. Additionally, the statute of limitations to claim the R&D credit in Illinois is typically 3 years from the date the original return was filed or one year after Illinois tax is paid, whichever is later. The Illinois R&D credit is equal to 6.5% of the excess of the qualifying Illinois expenses over the base amount.
All entities (C-Corps, S-Corps, LLCs, Partnerships) can claim the Illinois R&D Credit. Partners and shareholders are allowed a credit in accordance with the determination of income and distributive share of income.
The Illinois R&D credit can be extremely beneficial, but as noted above, there are some significant differences, including the carryback and carryforward provisions. As such, it’s important to work with a consulting team that is well versed in the Illinois provisions to ensure that the company is maximizing its credit potential while considering its utilization.
Interested in learning more about how your company may be able to take advantage of the Illinois R&D credit? Submit your information here!