Short answer. Illinois's research credit is 6.5 percent of the increase in Illinois research spending over a three-year average base. It is non-refundable, carries forward five years, and is authorized through tax years ending on or before December 31, 2031.
Key facts
| Rate | 6.5% of the increase in Illinois QRE |
|---|---|
| Base | Average Illinois QRE for the prior 3 years |
| Refundable | No |
| Carryforward | 5 years |
| Authorized through | Tax years ending on or before Dec 31, 2031 |
6.5 percent over a moving base
The rate is fixed; the base moves every year.
The credit at 35 ILCS 5/201(k) is 6.5 percent of the amount by which your current-year Illinois qualified research expenses exceed a base. The base is the average of your Illinois QRE for the three immediately preceding years, a moving average rather than the federal fixed-base percentage. Only research conducted in Illinois counts toward either the current year or the base.
Because the base is a three-year average, a company growing its Illinois research fast earns more credit, while flat spending against a rising base earns less. The qualified expense definition tracks federal Section 41, limited to Illinois.
Non-refundable, five-year carryforward
The rate offsets Illinois tax and banks what you cannot use.
The credit is non-refundable: it reduces Illinois income tax and cannot produce a cash refund. Unused credit carries forward five years. For a growing software company, the planning question is less about the rate and more about banking credit in high-growth research years, then drawing it down as Illinois tax appears.
The 2031 authorization
Illinois has run this credit on a sunset clock for years.
The current authorization comes from Public Act 103-0595, which extended the credit (Credit Code 5340) through tax years ending on or before December 31, 2031. The credit has lapsed and been renewed before, so the date is worth tracking, but the five-year carryforward means credit earned before a lapse stays usable. The credit is claimed on Schedule 1299-D, supported by Schedule 1299-I.
More on Illinois's R&D credit
The full state overview, the federal Section 41 work it builds on, and related state guides:
Sources
Every claim on this page traces to a primary authority. Each source below is independent and verifiable.
- Illinois Public Act 103-0595 (research credit extension, 35 ILCS 5/201(k)) - Illinois General Assembly
- Illinois Schedule 1299-I, Income Tax Credits Information and Worksheets - Illinois Department of Revenue
- 26 U.S.C. ยง 41 (credit for increasing research activities) - Cornell Law School, Legal Information Institute
Get documentation built to survive an exam
R&D Binder produces the federal Section 41 binder and the Illinois state workpaper from one engagement, both built to survive an exam.