Illinois increases income tax rates, restores research credit
Illinois lawmakers have ended a two-year long budget stalemate by enacting individual and corporate income tax rate increases over the Governor’s veto.
Key provisions of the bill include:
- An increase in the individual flat income tax rate to 4.95 percent, from the former 3.75 percent rate.
- An increase in the corporate income tax rate to a combined 9.5% rate (including the 2.5% “replacement tax” component). The rate had been 7.75%.
- Limiting the Illinois domestic production deduction to manufacturing in Illinois.
- Restoration of the state research credit until 2022.
- An increase in the state earned income tax credit.
The changes are effective July 1, 2017. The bill is expected to increase Illinois tax revenues by $5 billion annually.
The bill was passed under the threat of a downgrade of Illinois debt to junk status. It is unclear how the rating agencies will react to the bill. Illinois currently has a $6.2 billion annual budget deficit and a backlog of $14.7 billion in unpaid bills.
Contact your Eide Bailly professional to learn more and to take advantage of the restoration of the R&D tax credit in Illinois.