Illinois increases income tax rates, restores research credit

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.

Additional reading:

Chicago Tribune, Illinois House overrides Rauner vetoes of income tax increase, budget

Contact your Eide Bailly professional to learn more and to take advantage of the restoration of the R&D tax credit in Illinois.

One comment on “Illinois increases income tax rates, restores research credit

  1. […] Other coverage: Illinois increases income tax rates, restores research credit […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s