86 Ill. Adm. Code 100.7382 — MICRO Tax Credit (IITA Section 704A(g-2))

# MICRO Tax Credit (IITA Section 704A(g-2))

TITLE 86: REVENUE CHAPTER I: DEPARTMENT OF REVENUE PART 100 INCOME TAX SECTION 100.7382 MICRO TAX CREDIT (IITA SECTION 704A(G-2))

Section 100.7382 MICRO Tax Credit (IITA Section 704A(g-2))

a) On or after January 1, 2025, with respect to any portion of a Manufacturing Illinois Chips for Real Opportunity (MICRO) Illinois Credit that is based on the incremental income tax attributable to new employees or retained employees, a taxpayer may elect to claim a MICRO Tax Credit against its obligation to pay over withholding under the Illinois Income Tax Act (IITA) Section 704A instead of claiming the credit against the taxes imposed under IITA Section 201(a) and (b). (35 ILCS 45/110-30(h))

b) For amounts deducted or withheld after December 31, 2024, a taxpayer who makes an election under the MICRO Act and this Section shall be allowed a credit against payments due under IITA Section 704A and this Section for amounts withheld during the first quarterly reporting period beginning after the certificate is issued equal to the portion of the MICRO Illinois Credit attributable to the incremental income tax attributable to new employees and retained employees as certified by the Department of Commerce and Economic Opportunity (DCEO) pursuant to an agreement with the taxpayer under the MICRO Act for the taxable year. (IITA Section 704A(g-2))

c) The credit may be in the form of a MICRO Illinois Credit. (IITA Section 238(b)(1))

d) Taxpayer Defined. A taxpayer who meets the definition of "applicant" in Section 110-10 of the MICRO Act, as determined by DCEO, and has been issued a tax credit certificate by DCEO may make the election under this Section. For purposes of this section, the term "taxpayer" shall also include taxpayer and members of the taxpayer's unitary business group as defined in IITA Section 1501(a)(27). (IITA Section 704A(g-2))

e) Effect of Election. When an election under this Section is made, the amount of the credit awarded to the taxpayer under Section 110-30 of the MICRO Act for the taxable year of the election shall be allowed as a credit against payments due under IITA Section 704A for the first quarterly reporting period beginning after the end of the quarterly reporting period in which the credit is awarded. No credit awarded in a taxable year for which the election is made shall be allowed under IITA Section 238 and Section 100.2112. EXAMPLE: Taxpayer makes the election under this Section for its taxable year ending June 30, 2026. For its taxable year ending June 30, 2026, Taxpayer is awarded a tax credit certificate under IITA Section 238 in the amount of $15,000. This amount has been certified by DCEO as equal to the incremental income tax attributable to new employees and retained employees. In addition, Taxpayer has a credit carryover under IITA Section 238(b)(4) of $5,000 from 2025. Under IITA Section 704A(g-2) and this subsection, Taxpayer is allowed a credit of $15,000 against withholding payments due under IITA Section 704A(c) in its first quarterly reporting period that begins after the end of the quarterly reporting period in which the tax credit certificate is awarded to the Taxpayer. Taxpayer may not claim a credit against the tax imposed under IITA Section 201(a) and (b) for its taxable year ending June 30, 2026, for the $15,000 credit awarded in that taxable year, but may claim a credit for the $5,000 carried forward from 2025.

f) Manner of Making Election. The election shall be made in the manner prescribed by the Department and once made shall be irrevocable. (MICRO Act Section 110-30(h)) The election shall be made by claiming the credit on the withholding return due under IITA Section 704A for the first quarterly reporting period of the calendar year beginning after the end of the quarterly reporting period in which the tax credit certificate is awarded. The election applies to the amount of the MICRO Illinois Credit that is calculated based on the incremental income tax attributable to new employees and retained employees as shown on the tax credit certificate issued by DCEO to the taxpayer.

g) Partnerships and S Corporations. A partnership or Subchapter S corporation may make an election under this subsection. When a partnership or S corporation makes an election under this subsection, no credit shall pass through to the partners or shareholders for the taxable year under IITA Section 238 and Section 100.2112.

h) The credit or credits may not reduce the taxpayer's obligation for any payment due under IITA Section 704A to less than zero. If the amount of the credit or credits exceeds the total payments due under IITA Section 704A with respect to amounts withheld during the quarterly reporting period, the excess may be carried forward and applied against the taxpayer's liability under IITA Section 704A in succeeding quarterly reporting periods for the 20 quarterly reporting periods following the initial excess credit period, as allowed to be carried forward under IITA Section 211(4), or until it has been fully utilized, whichever occurs first. The credit or credits shall be applied to the earliest quarterly reporting period for which there is a tax liability. If there are credits from more than one quarterly reporting period that are available to offset a liability, the earlier credit shall be applied first. (IITA Section 704A(g-2)) EXAMPLE: Taxpayer makes an election under this Section for its taxable year ending December 31, 2026. For its taxable year ending December 31, 2026, Taxpayer is awarded a tax credit certificate under IITA Section 238 of $10,000 during its withholding quarterly reporting period ending June 30, 2026. This amount has been certified by DCEO as equal to the incremental income tax attributable to new employees and retained employees. Under Section 704A(g-2) and this Section, Taxpayer is allowed a credit of $10,000 against withholding payments due under IITA 704A(c) in its quarterly reporting period ending September 30, 2026. Taxpayer withheld tax during its withholding quarter ending September 30, 2026, of $4,000. Under Section 704(A)(g-2) and this Section, Taxpayer's credit may not exceed $4,000. Taxpayer is allowed to carry forward the $6,000 excess credit for application against its withholding liability in the succeeding quarterly reporting periods for 20 quarterly reporting periods following the initial excess credit period, or until the first succeeding quarterly reporting period that utilizes the remaining excess credit, whichever occurs first. If Taxpayer withheld tax during its withholding quarter ending December 31, 2026, of $1,000, then Taxpayer is allowed to carry forward the $5,000 excess credit to its withholding liability for the March 31, 2027, reporting period.

i) No credit shall be allowed under IITA Section 704A(g-2) and this Section with respect to any payment due under IITA Section 704A after the date a notice of noncompliance is issued to the Department under Section 110-70 of the MICRO Act, as stated in the notification. If any credit has been allowed for a payment due after the date of the notice of noncompliance, any refund paid to the taxpayer for that taxable year shall, to the extent of the credit allowed, be an erroneous refund within the meaning of IITA Section 912. (IITA Section 238(b)(5))

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

k) This credit is exempt from the sunset provisions of IITA Section 250. (IITA Section 704A(g-2)) (Source: Added at 49 Ill. Reg. 3115, effective February 26, 2025)

Section 100.7382 MICRO Tax Credit (IITA Section 704A(g-2))

a) On or after January 1, 2025, with respect to any portion of a Manufacturing Illinois Chips for Real Opportunity (MICRO) Illinois Credit that is based on the incremental income tax attributable to new employees or retained employees, a taxpayer may elect to claim a MICRO Tax Credit against its obligation to pay over withholding under the Illinois Income Tax Act (IITA) Section 704A instead of claiming the credit against the taxes imposed under IITA Section 201(a) and (b). (35 ILCS 45/110-30(h))

b) For amounts deducted or withheld after December 31, 2024, a taxpayer who makes an election under the MICRO Act and this Section shall be allowed a credit against payments due under IITA Section 704A and this Section for amounts withheld during the first quarterly reporting period beginning after the certificate is issued equal to the portion of the MICRO Illinois Credit attributable to the incremental income tax attributable to new employees and retained employees as certified by the Department of Commerce and Economic Opportunity (DCEO) pursuant to an agreement with the taxpayer under the MICRO Act for the taxable year. (IITA Section 704A(g-2))

c) The credit may be in the form of a MICRO Illinois Credit. (IITA Section 238(b)(1))

d) Taxpayer Defined. A taxpayer who meets the definition of "applicant" in Section 110-10 of the MICRO Act, as determined by DCEO, and has been issued a tax credit certificate by DCEO may make the election under this Section. For purposes of this section, the term "taxpayer" shall also include taxpayer and members of the taxpayer's unitary business group as defined in IITA Section 1501(a)(27). (IITA Section 704A(g-2))

e) Effect of Election. When an election under this Section is made, the amount of the credit awarded to the taxpayer under Section 110-30 of the MICRO Act for the taxable year of the election shall be allowed as a credit against payments due under IITA Section 704A for the first quarterly reporting period beginning after the end of the quarterly reporting period in which the credit is awarded. No credit awarded in a taxable year for which the election is made shall be allowed under IITA Section 238 and Section 100.2112.

EXAMPLE: Taxpayer makes the election under this Section for its taxable year ending June 30, 2026. For its taxable year ending June 30, 2026, Taxpayer is awarded a tax credit certificate under IITA Section 238 in the amount of $15,000. This amount has been certified by DCEO as equal to the incremental income tax attributable to new employees and retained employees. In addition, Taxpayer has a credit carryover under IITA Section 238(b)(4) of $5,000 from 2025. Under IITA Section 704A(g-2) and this subsection, Taxpayer is allowed a credit of $15,000 against withholding payments due under IITA Section 704A(c) in its first quarterly reporting period that begins after the end of the quarterly reporting period in which the tax credit certificate is awarded to the Taxpayer. Taxpayer may not claim a credit against the tax imposed under IITA Section 201(a) and (b) for its taxable year ending June 30, 2026, for the $15,000 credit awarded in that taxable year, but may claim a credit for the $5,000 carried forward from 2025.

f) Manner of Making Election. The election shall be made in the manner prescribed by the Department and once made shall be irrevocable. (MICRO Act Section 110-30(h)) The election shall be made by claiming the credit on the withholding return due under IITA Section 704A for the first quarterly reporting period of the calendar year beginning after the end of the quarterly reporting period in which the tax credit certificate is awarded. The election applies to the amount of the MICRO Illinois Credit that is calculated based on the incremental income tax attributable to new employees and retained employees as shown on the tax credit certificate issued by DCEO to the taxpayer.

g) Partnerships and S Corporations. A partnership or Subchapter S corporation may make an election under this subsection. When a partnership or S corporation makes an election under this subsection, no credit shall pass through to the partners or shareholders for the taxable year under IITA Section 238 and Section 100.2112.

h) The credit or credits may not reduce the taxpayer's obligation for any payment due under IITA Section 704A to less than zero. If the amount of the credit or credits exceeds the total payments due under IITA Section 704A with respect to amounts withheld during the quarterly reporting period, the excess may be carried forward and applied against the taxpayer's liability under IITA Section 704A in succeeding quarterly reporting periods for the 20 quarterly reporting periods following the initial excess credit period, as allowed to be carried forward under IITA Section 211(4), or until it has been fully utilized, whichever occurs first. The credit or credits shall be applied to the earliest quarterly reporting period for which there is a tax liability. If there are credits from more than one quarterly reporting period that are available to offset a liability, the earlier credit shall be applied first. (IITA Section 704A(g-2))

EXAMPLE: Taxpayer makes an election under this Section for its taxable year ending December 31, 2026. For its taxable year ending December 31, 2026, Taxpayer is awarded a tax credit certificate under IITA Section 238 of $10,000 during its withholding quarterly reporting period ending June 30, 2026. This amount has been certified by DCEO as equal to the incremental income tax attributable to new employees and retained employees. Under Section 704A(g-2) and this Section, Taxpayer is allowed a credit of $10,000 against withholding payments due under IITA 704A(c) in its quarterly reporting period ending September 30, 2026. Taxpayer withheld tax during its withholding quarter ending September 30, 2026, of $4,000. Under Section 704(A)(g-2) and this Section, Taxpayer's credit may not exceed $4,000. Taxpayer is allowed to carry forward the $6,000 excess credit for application against its withholding liability in the succeeding quarterly reporting periods for 20 quarterly reporting periods following the initial excess credit period, or until the first succeeding quarterly reporting period that utilizes the remaining excess credit, whichever occurs first. If Taxpayer withheld tax during its withholding quarter ending December 31, 2026, of $1,000, then Taxpayer is allowed to carry forward the $5,000 excess credit to its withholding liability for the March 31, 2027, reporting period.

i) No credit shall be allowed under IITA Section 704A(g-2) and this Section with respect to any payment due under IITA Section 704A after the date a notice of noncompliance is issued to the Department under Section 110-70 of the MICRO Act, as stated in the notification. If any credit has been allowed for a payment due after the date of the notice of noncompliance, any refund paid to the taxpayer for that taxable year shall, to the extent of the credit allowed, be an erroneous refund within the meaning of IITA Section 912. (IITA Section 238(b)(5))

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

k) This credit is exempt from the sunset provisions of IITA Section 250. (IITA Section 704A(g-2))

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