86 Ill. Adm. Code 100.2112. MICRO TAX CREDIT (IITA SECTION 238)

Section 100.2112 MICRO Tax Credit (IITA Section 238)

a) For tax years beginning on or after January 1, 2025, a taxpayer who has entered into an Agreement with the Department of Commerce and Economic Opportunity (DCEO) under the Manufacturing Illinois Chips for Real Opportunity (MICRO) Act [35 ILCS 45]

(MICRO Act) is entitled to a credit against the taxes imposed under the Illinois Income Tax Act (IITA) Section 201 (a) and (b) in an amount to be determined in the Agreement. (IITA Section 238(a))

b) The credit may be in the form of a MICRO Illinois Credit, a MICRO Construction Jobs Credit, or both. (IITA Section 238(b)(1))

c) Instead of claiming the credit against the taxes imposed under IITA Section 201(a) and

(b), with respect to the portion of a MICRO Illinois Credit that is calculated based on the incremental income tax attributable to new employees and retained employees, the taxpayer may elect, in accordance with the MICRO Act, to claim the credit, on or after January 1, 2025, against its obligation to pay over withholding under IITA Section 704A. (IITA Section 238(b)(6)) (See Section 100.7382.)

d) The credit shall be computed as established in this subsection.

1) The credit allowed shall not exceed the percentage of incremental income tax and percentage of training costs permitted in the MICRO Act and in the Agreement with respect to the project.

(IITA Section 238(b)(1))

2) The amount of the credit allowed during a tax year plus the sum of all amounts allowed in prior tax years shall not exceed the maximum amount of credit established in the Agreement. (IITA Section 238(b)(2))

3) The amount of the credit shall be determined on an annual basis.

4) The credit may not be applied against any State income tax liability in more than 15 taxable years, except as applied in a carryover year as provided in subsection (f). (IITA Section 238(b)(3))

5) The credit may not exceed the amount of taxes imposed pursuant to IITA Section 201(a) and (b). (IITA Section 238(b)(4))

6) In the case of an election under Section 100.7382, no credit shall be allowed under IITA Section 238 or this Section for the taxable year of the election against the taxes imposed under IITA Section 201(a) and (b) . (IITA Section 238(b)(6))

e) The credit allowed under this Section shall be taken in the taxable year that includes the date of the tax credit certificate issued by DCEO under Section 110-30 of the MICRO Act, except that credits awarded by DCEO prior to January 1, 2025, shall be taken in the first taxable year beginning on or after January 1, 2025.

f) Any credit that is unused in the year the credit is computed may be carried forward and applied to the tax liability of the 5 taxable years following the excess credit year, or until it has been fully utilized, whichever occurs first . The credit shall be applied to the earliest year for which there is a tax liability. If there are credits from more than one tax year that are available to offset a liability, the earlier credit shall be applied first. (IITA Section 238(b)(4)) In the case of an election under Section 100.7382, no credit to which the election applies may be carried forward under IITA Section 238(b)(4) and this Section.

g) No credit shall be allowed with respect to any Agreement for any taxable year ending after the noncompliance date.

1) Upon receiving notification by DCEO of the noncompliance of a taxpayer with an Agreement, the Department shall notify the taxpayer that no credit is allowed with respect to that Agreement for any taxable year ending after the Noncompliance Date, as stated in such notification.

2) If any credit has been allowed with respect to an Agreement for a taxable year ending after the noncompliance date for that Agreement, any refund paid to the taxpayer for that taxable year shall, to the extent of that credit allowed, be an erroneous refund within the meaning of IITA Section 912. (IITA Section 238(b)(5))

h) If, during any taxable year, a taxpayer ceases operations at a project location that is the subject of that Agreement with the intent to terminate operations in the State, the tax imposed under subsections (a) and (b) of IITA Section 201 for such taxable year shall be increased by the amount of any credit allowed under the Agreement for that project location prior to the date the taxpayer ceases operations. (IITA Section 238(b)(5))

i) Partnerships and Subchapter S Corporations

1) If the taxpayer is a partnership or a Subchapter S corporation, the credit is allowed to pass through to the partners or shareholders in accordance with the determination of income and distributive share of income under Sections 702 and 704 and subchapter S of the Internal Revenue Code, or as otherwise agreed by the partners or shareholders, provided that such agreement shall be executed in writing prior to the due date of the return for the taxable year and meet such other requirements as the Department may establish by rule. Partnership has the meaning prescribed in IITA Section 1501(a)(16). (IITA Section 251)

2) The credit earned by a partnership or a subchapter S corporation will be treated as earned by its owners as of the last day of the taxable year of the partnership or subchapter S corporation in which the tax credit certificate is issued by DCEO under Section 110-30 of the MICRO Act.

3) The credit shall be allowed to each owner in the taxable year of the owner in which the taxable year of the partnership or subchapter S corporation ends and may be carried forward to the 5 succeeding taxable years of the owner until used.

4) Any credit passed through to a partnership or subchapter S corporation under this subsection shall pass through to its partners or shareholders in the same manner as a credit earned by the partnership or subchapter S corporation.

j) To claim the credit, a taxpayer shall attach to its Illinois income tax return:

1) a copy of the tax credit certificate and annual certification (if any) issued by DCEO; and

2) in the case of a partner in a partnership or shareholder of a subchapter S corporation that earned the credit, a Schedule K-1-P or other written statement from the partnership or subchapter S corporation stating:

A) the portion of the total credit shown on the tax credit certificate that is allowed to that partner or shareholder; and

B) the taxable year of the partnership or subchapter S corporation in which the tax credit certificate was issued.

k) For purposes of this Section, the terms "Agreement," "incremental income tax," "new employee," "noncompliance date," "MICRO Construction Jobs Credit," "MICRO Illinois Credit," "retained employee," and "training costs" shall have the same meaning as when used in the MICRO Act.

l) This credit is exempt from the sunset provisions of IITA Section 250. (IITA Section 238(a))

(Source: Added at 49 Ill. Reg. 3115, effective February 26, 2025)