Illinois Research and Development Credit

Program Overview

Illinois grants a credit equal to a percentage of the increase in qualified research expenses conducted within the state over the average of the three preceding years. The credit is currently available through the 2027 tax year. Illinois follows the federal definition of qualified research but restricts eligible spending to activities physically performed in Illinois, so multi-state taxpayers must carefully apportion wages, supplies, and contract research expenses.

Eligibility

• Corporations with increasing qualified research expenditures conducted in Illinois may qualify.
• Pass-through entities with increasing qualified research expenditures conducted in Illinois may qualify.
• Qualified research activities must meet the applicable federal requirements.
• Eligible research expenses must relate to activities physically performed in Illinois.
• Pass-through entities may distribute the credit to partners and shareholders, subject to applicable requirements.

Benefits

• Provides a non-refundable credit against Illinois income tax liability.
• The credit is based on the increase in qualified Illinois research expenses over the applicable base amount.
• Pass-through entities may allocate the credit to eligible partners and shareholders, subject to applicable requirements.