a)
On or after January 1, 2025, with
respect to any portion of a Manufacturing Illinois Chips for Real
Opportunity (MICRO) Illinois Credit that is based on the incremental
income tax attributable to new employees or retained employees, a taxpayer may
elect to claim a MICRO Tax Credit against its obligation to
pay over withholding under the Illinois Income Tax Act (IITA)
Section 704A instead of claiming the credit against
the taxes imposed under IITA Section 201(a) and (b).
(35 ILCS
45/110-30(h))
b)
For amounts deducted or withheld
after December 31, 2024, a taxpayer who makes an election under the MICRO
Act and this Section shall be allowed a credit against
payments due under IITA Section 704A and this Section for
amounts withheld during the first quarterly reporting period beginning after
the certificate is issued equal to the portion of the MICRO Illinois Credit
attributable to the incremental income tax attributable to new employees and
retained employees as certified by the Department of Commerce and Economic
Opportunity (DCEO) pursuant to an agreement with the taxpayer
under the MICRO Act for the taxable year. (IITA Section
704A(g-2))
c)
The credit
may be in the form of a MICRO Illinois Credit. (IITA Section
238(b)(1))
d) Taxpayer Defined. A
taxpayer who meets the definition of "applicant" in Section 110-10 of the MICRO
Act, as determined by DCEO, and has been issued a tax credit certificate by
DCEO may make the election under this Section. For purposes of this
section, the term "taxpayer" shall also include taxpayer and members of the
taxpayer's unitary business group as defined in IITA Section
1501(a)(27). (IITA Section 704A(g-2))
e) Effect of Election. When an election under
this Section is made, the amount of the credit awarded to the taxpayer under
Section 110-30 of the MICRO Act for the taxable year of the election shall be
allowed as a credit against payments due under IITA Section 704A for the first
quarterly reporting period beginning after the end of the quarterly reporting
period in which the credit is awarded. No credit awarded in a taxable year for
which the election is made shall be allowed under IITA Section 238 and Section
100.2112.
EXAMPLE: Taxpayer makes the election under this Section for
its taxable year ending June 30, 2026. For its taxable year ending June 30,
2026, Taxpayer is awarded a tax credit certificate under IITA Section 238 in
the amount of $15,000. This amount has been certified by DCEO as equal to the
incremental income tax attributable to new employees and retained employees. In
addition, Taxpayer has a credit carryover under IITA Section 238(b)(4) of
$5,000 from 2025. Under IITA Section 704A(g-2) and this subsection, Taxpayer is
allowed a credit of $15,000 against withholding payments due under IITA Section
704A(c) in its first quarterly reporting period that begins after the end of
the quarterly reporting period in which the tax credit certificate is awarded
to the Taxpayer. Taxpayer may not claim a credit against the tax imposed under
IITA Section 201(a) and (b) for its taxable year ending June 30, 2026, for the
$15,000 credit awarded in that taxable year, but may claim a credit for the
$5,000 carried forward from 2025.
f) Manner of Making Election. The
election shall be made in the manner prescribed by the Department and once made
shall be irrevocable. (MICRO Act Section 110-30(h)) The election shall
be made by claiming the credit on the withholding return due under IITA Section
704A for the first quarterly reporting period of the calendar year beginning
after the end of the quarterly reporting period in which the tax credit
certificate is awarded. The election applies to the amount of the MICRO
Illinois Credit that is calculated based on the incremental income tax
attributable to new employees and retained employees as shown on the tax credit
certificate issued by DCEO to the taxpayer.
g) Partnerships and S Corporations. A
partnership or Subchapter S corporation may make an election under this
subsection. When a partnership or S corporation makes an election under this
subsection, no credit shall pass through to the partners or shareholders for
the taxable year under IITA Section 238 and Section 100.2112.
h)
The credit or credits may not
reduce the taxpayer's obligation for any payment due under IITA
Section 704A
to less than zero. If the amount of the credit or credits
exceeds the total payments due under IITA Section 704A
with
respect to amounts withheld during the quarterly reporting period, the excess
may be carried forward and applied against the taxpayer's liability
under IITA Section 704A
in succeeding quarterly reporting
periods for the 20 quarterly reporting periods following the initial
excess credit period,
as allowed to be carried forward under
IITA
Section 211(4), or until it has been fully utilized,
whichever occurs first.
The credit or credits shall be applied to the
earliest quarterly reporting period for which there is a tax liability. If
there are credits from more than one quarterly reporting period that are
available to offset a liability, the earlier credit shall be applied
first. (IITA Section 704A(g-2))
EXAMPLE: Taxpayer makes an election under this Section for
its taxable year ending December 31, 2026. For its taxable year ending December
31, 2026, Taxpayer is awarded a tax credit certificate under IITA Section 238
of $10,000 during its withholding quarterly reporting period ending June 30,
2026. This amount has been certified by DCEO as equal to the incremental income
tax attributable to new employees and retained employees. Under Section
704A(g-2) and this Section, Taxpayer is allowed a credit of $10,000 against
withholding payments due under IITA 704A(c) in its quarterly reporting period
ending September 30, 2026. Taxpayer withheld tax during its withholding quarter
ending September 30, 2026, of $4,000. Under Section 704(A)(g-2) and this
Section, Taxpayer's credit may not exceed $4,000. Taxpayer is allowed to carry
forward the $6,000 excess credit for application against its withholding
liability in the succeeding quarterly reporting periods for 20 quarterly
reporting periods following the initial excess credit period, or until the
first succeeding quarterly reporting period that utilizes the remaining excess
credit, whichever occurs first. If Taxpayer withheld tax during its withholding
quarter ending December 31, 2026, of $1,000, then Taxpayer is allowed to carry
forward the $5,000 excess credit to its withholding liability for the March 31,
2027, reporting period.
i)
No credit shall be allowed under IITA Section 704A(g-2) and this Section with
respect to any payment due under IITA Section 704A after the date a notice of
noncompliance is issued to the Department under Section 110-70 of the MICRO
Act, as stated in the notification. If any credit has been allowed for
a payment due after the date of the notice of noncompliance, any refund paid to
the taxpayer for that taxable year shall, to the extent of the credit allowed,
be an erroneous refund within the meaning of IITA Section
912. (IITA Section 238(b)(5))
j) For purposes of this Section, the terms
"Agreement," "applicant," "incremental income tax," "new employee,"
"noncompliance date," "retained employee," and "MICRO Illinois Credit," shall
have the same meaning as when used in the MICRO Act.
k)
This credit is exempt from
the sunset provisions of IITA Section
250. (IITA Section 704A(g-2))
