Ill. Admin. Code tit. 86, § 100.2160 - Research and Development Credit (IITA Section 201(k))
a)
For tax years ending after July 1,
1990 and prior to December 31, 2003, and tax years ending on or after December
31, 2004 and prior to January 1, 2027, each taxpayer shall be allowed a credit
against the tax imposed by IITA Section 201(a) and (b) for increasing research
activities in this State. It is the intent of the General Assembly that the
research and development credit under IITA Section 201(k) applies continuously
for all tax years ending on or after December 31, 2004 and ending prior to
January 1, 2027, including, but not limited to, the period beginning on January
1, 2016, the date on which the credit expired prior to enactment of PA
100-22, and ending on July 6, 2017, the effective date of PA
100-22. All actions taken in reliance on the continuation of the credit
under IITA Section 201(k) by any taxpayer are hereby validated. (IITA
201(k))
b)
The credit
allowed shall be equal to 61/2% of the qualifying expenditures for increasing
research activities in this State. (IITA Section 201(k))
c) Not all "research" will qualify for the
credit. Nor will every expenditure associated with research qualify for the
credit. Qualified research is defined in IRC section 41(d). Qualifying
expenditures means the qualifying expenditures as defined for the federal
credit for increasing research activities which would be allowable under IRC
section 41 and which are conducted in this State.
1) IRC section 41(b) defines "qualifying
research expenses" as the sum of the in-house research expenses and the
contract research expenses paid or incurred by the taxpayer during the taxable
year in carrying on any trade or business of the taxpayer .
2) Qualifying expenditures also include basic
research payments. Basic research payments are defined in IRC section
41(e).
d) Qualifying
expenditures for increasing research activities in this State means the excess
of qualifying expenditures for the taxable year in which incurred over
qualifying expenditures for the base period. Qualifying expenditures for the
base period means the average of the qualifying expenditures for each year in
the base period.
e) Base period
means the 3 taxable years immediately preceding the taxable year for which the
determination is being made. For purposes of computing the average qualifying
expenditures for the base period:
1) For
taxable years after a taxpayer has succeeded to the tax items of a corporation
under IITA Section 405(a), qualifying expenditures incurred by the corporation
during the base period shall be deemed to be qualifying expenditures of the
taxpayer .
2) If the taxpayer
incurred no qualifying expenditures during a base period year, the qualifying
expenditures for that year are zero, even if the taxpayer was not in existence
or conducting any business in this State during that year.
3) If the taxpayer was doing business in this
State for only part of a base period year, the qualifying expenditures for that
year shall be equal to the qualifying expenditures actually incurred,
multiplied by 365 and divided by the number of days in the portion of the
taxable year during which the taxpayer was doing business in this
State.
4) Qualifying expenditures
incurred in taxable years in which the taxpayer did not qualify for the credit,
including taxable years ending on or after December 31, 2003 and prior to
December 31, 2004 must be included in the computation of qualifying
expenditures for the base period.
f)
Any credit in excess of the tax
liability for the taxable year may be carried forward to offset the income tax
liability of the taxpayer for the next 5 years or until it has been fully
utilized, whichever occurs first (IITA Section 201(k)), provided that
no credit earned in a tax year ending prior to December 31, 2003 may be carried
forward to any year ending on or after December 31, 2003. If an unused credit
is carried forward to a given year from 2 or more earlier years, that credit
arising in the earliest year is applied first. If a tax liability for the given
year remains, the credit from the next earliest year is applied. Any remaining
unused credit or credits can be carried forward to the next following year in
which a tax liability exists. However, the credit can only be carried forward 5
years from the year in which the taxpayer incurred the expense for which the
credit was given. Any unused credit is then forfeited.
g) Combined Returns. In the case of taxpayers
filing combined returns, Section
100.5270(d)
details the manner in which the credit is determined.
h) Pass-through of Credits to Partners and
Subchapter S Corporation Shareholders
1) For
tax years beginning on and after January 1, 1999, partners and shareholders of
subchapter S corporations shall be allowed a credit under this Section
to be determined in accordance with the determination of income and
distributive share of income under IRC 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.
2) Repeal and
re-enactment of the credit. Due to the repeal of the credit for taxable years
ending on or after December 31, 2003, and the re-enactment of the credit for
taxable years ending on or after December 31, 2004:
A) A partner or shareholder may not claim a
credit passed through from a partnership or subchapter S corporation for any
taxable year of the partner or shareholder ending on or after December 31, 2003
and prior to December 31, 2004, even if the credit was earned in a taxable year
of the partnership or subchapter S corporation ending prior to December 31,
2003.
B) No credit may be earned by
a partnership or subchapter S corporation for a taxable year ending on or after
December 31, 2003 and prior to December 31, 2004, and passed through to a
partner or shareholder, even if the partner or shareholder would have reported
the credit for a taxable year ending on or after December 31, 2004.
Notes
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