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Jul

R&D Tax Credit: Illinois Reinstatement

Businesses across the State of Illinois are breathing a sigh of relief with recent news of the reinstatement of the Research and Development (R&D) Tax Credit on July 6, 2017. The state’s new $36 billion spending budget includes an extension of the R&D tax credit, which previously expired on December 31, 2015, and had not been renewed amid state budget issues. The credit’s reinstatement comes with a sunset date of January 1, 2022. Fortunately, the Illinois legislature has also made the credit apply retroactively to 2016 with a carryforward of five years. For businesses that have filed an extension for their 2016 tax return, there is still time to utilize this valuable credit, and as always, returns can be amended.

Now that the R&D tax credit has been reinstated, companies in Illinois can more comfortably make business and operational decisions such as capital investments, as well as investments in product and process improvements, and hiring of technical staff. The manufacturing industry in particular welcomes back the R&D credit, with between 60 and 70 percent of the state’s R&D credits being claimed by manufacturers. The R&D tax credit also encourages Illinois companies to continue operations at home, rather than moving to a nearby state like Indiana, Wisconsin, or Iowa, who also incentivize research activities with tax credits.

The Illinois R&D credit is non-refundable and applies to qualified research expenditures (“QREs”) such as qualified employee wages, supplies, and third-party contractor costs. The credit is equal to 6.5 percent of the QREs occurring within the state that exceed a base amount, which is the average of the three tax years immediately preceding the tax credit year in which the qualifying expenditures were made. Excess research credits can be carried forward up to five years.

In addition to the manufacturing industry, the R&D credit can be utilized by a variety of companies including aerospace/defense, software development, biotechnology, energy, agriculture, biotechnology, pharmaceutical, and more. With the help of HIREtech’s technical credit team made up of experienced attorneys and engineers, businesses in the state of Illinois, and across the country, can maximize the benefits of this federal and state incentive.

Contact HIREtech to learn more about minimizing your federal and state tax liability through valuable tax credit programs by calling 844.HIREtec or emailing info@hiretech.com.