Illinois Research Credit Summary

The Illinois research credit is very similar to the federal research tax credit version including the definition of qualifying research. Below are some of the differences between the federal and Illinois research credit.

  • Qualified research is defined in IRC section 41(d) and 41(e) and includes the sum of the in-house research expenses, contract research expenses and basic research payments paid or incurred by the business.
  • The non-refundable research credit is equal to 6.5% of the qualifying expenses for increasing research activities in Illinois, which exceed a base amount.
  • The base amount is the average qualifying expenses in the 3 taxable years immediately preceding the taxable year for which the determination is being made.
  • Any unused research credit may be carried forward 5 years or until it has been fully utilized, whichever occurs first.
  • Partners and shareholders of Subchapter S corporations are allowed a credit in accordance with the determination of income and distributive share of income.
  • The Illinois research credit has been extended through December 31, 2021.

Illinois R&D Tax Credit Case Study

A Chicago company manufactures components for farming equipment. The company claims research credits each year for the design and development activities of its engineers as well as the prototype supplies used in conducting research. This project involved a four year study with a three year look back to claim credits for years 2013 through 2016. The company qualified for the federal R&D Tax Credit of $582,563 and an additional $165,577 in Illinois state research credit. 

FEDERAL
ILLINOIS
Year
Total QREs
Credit
Total QREs
Credit
2016
$2,050,000
$200,083
$2,050,000
$52,542
2015
1,585,000
160,510
1,585,000
46,020
2014
1,305,000
140,070
1,305,000
45,240
2013
835,000
81,900
835,000
21,775
Total$5,775,000$582,563$5,775,000$165,577