Illinois: 6.5 percent, now locked in through 2031.

Rate	6.5% of increase over a 3-year base
Refundable	No
Carryforward	5 years
Note	Through tax years ending on or before Dec 31, 2031

The credit is at 35 ILCS 5/201(k). It equals 6.5 percent of the excess of your current-year Illinois qualified research expenses over a base amount.

The Illinois base is the average of your Illinois QRE for the three tax years immediately preceding the current year. That is a moving average, not the federal fixed-base percentage. Only research conducted in Illinois counts toward either the current year or the base.

Illinois tracks the federal Section 41 definition of qualified research, limited to Illinois expenses. The credit is non-refundable: it offsets Illinois income tax and cannot produce a cash refund. Unused credit carries forward five years.

Corporations claim the credit on Schedule 1299-D. Partnerships and S corporations compute it on Schedule 1299-A and pass it through to owners. The computation worksheet for both lives in Schedule 1299-I.

The Illinois research credit has long run on a sunset clock and has been renewed repeatedly. The current authorization comes from Public Act 103-0595, signed in 2024, which extended the credit (Credit Code 5340) through tax years ending on or before December 31, 2031.

Because the credit is incremental and carries forward five years, the planning question for a growing SaaS company is less about the sunset date and more about banking credit in your high-growth research years, then drawing it down as Illinois tax liability arrives. A clean, contemporaneous record of Illinois QRE in each year is what makes that base calculation defensible.

R&D Binder produces federal Section 41 documentation from your GitHub commit history. The binder supports your federal Form 6765 and, starting tax year 2026, the mandatory Form 6765 Section G appendix. The same documentation supports Illinois, because the Illinois credit uses the federal Section 41 definition of qualified research, applied to Illinois expenses.

The Illinois state credit workpaper is a $995 add-on to the standard binder engagement. It produces:

• An Illinois-attributable QRE breakdown (employee, contractor, and supplies expenses tied to research conducted in Illinois, using the same business-component partition as the federal binder).
• The three-year average base computation, with each prior year's Illinois QRE laid out.
• Schedule 1299-D input values (current-year QRE, base amount, credit).
• Filing notes for your CPA: which schedule applies, the five-year carryforward, and how the pass-through works for an S corporation or partnership.

We do not file Schedule 1299-D or sign the Illinois return. That remains your CPA's role, the same way federal Form 6765 stays with your CPA. R&D Binder produces the workpaper; your CPA files.

If you operate in multiple states, additional state workpapers are $995 each. Most states with an R&D credit track the federal QRE definition closely, so the marginal cost per state is low once the federal binder is complete.

A worked example. A Chicago SaaS company with 14 engineers, $3.2M in qualifying wages (federal QRE pool), and 10 engineers physically located in Illinois.

• Federal Section 41 credit. Computed on the full $3.2M federal QRE pool through Form 6765, claimed by the CPA. R&D Binder produces the binder, QRE workpaper, and Form 6765 Section G appendix.
• Illinois credit. Computed on the Illinois-attributable portion of QREs. Roughly $2.29M ($3.2M times the 10/14 engineer location ratio). With a three-year average Illinois base of about $1.6M, the increment is roughly $0.69M. At 6.5 percent, the credit is about $44,800. These figures are illustrative; the base is your actual Illinois QRE for the three prior years.
• Total engagement cost. SaaS Standard tier ($4,995, 6 to 25 FTE) plus Illinois state workpaper add-on ($995). Total $5,990.

The credit is non-refundable, so it offsets Illinois income tax in the current year and carries forward five years for the rest. The CPA files both returns. R&D Binder never appears on the federal or Illinois return.

If the Illinois Department of Revenue examines a return on which the research credit was claimed, the substantiation expected is the same kind of documentation the IRS expects under federal Section 41: business-component identification, four-part-test rationale, contemporaneous evidence, and QRE allocation by employee, contractor, and supplies, with the in-state share clearly attributed. The binder R&D Binder produces is built to that standard, and the Illinois workpaper inherits the same business-component structure plus the three-year base history.

Our standard scope ends at delivering the binder and the state workpaper. Audit-defense engagement for an Illinois Department of Revenue examination is a separate scope at $250 per hour, scoped per incident. We do not represent before the Department of Revenue; that remains your CPA's responsibility or your tax controversy attorney's.

• 35 ILCS 5/201(k) (Illinois Income Tax Act, credit for research and development).
• Illinois Public Act 103-0595 (extending the research and development credit, Credit Code 5340, through tax years ending on or before December 31, 2031).
• Illinois Department of Revenue, Schedule 1299-I, Income Tax Credits Information and Worksheets, and Schedule 1299-D (corporate) / Schedule 1299-A (partnership and S corporation).
• Illinois Department of Revenue, Income Tax Credits and Expirations (sunset schedule for Credit Code 5340).
• IRS Form 6765 (federal Credit for Increasing Research Activities); Illinois applies the federal Section 41 definition of qualified research to Illinois expenses.

This page is general informational content, not tax advice for any specific taxpayer. The Illinois research credit is administered by the Illinois Department of Revenue. Rate, base method, carryforward, and the December 31, 2031 sunset reflect published guidance as of June 2026. Confirm current rules and the credit's authorization period with your CPA or the Department of Revenue before filing.

• The Section 41 four-part test
• What is a qualified research expense (QRE)?
• Form 6765 and Section G
• California R&D credit
• Idaho R&D credit
• Indiana R&D credit
• Massachusetts R&D credit