Bill
SB 3791
Creates a new Illinois Innovation Credit of 1.3% of qualified research expenses incurred in Illinois, usable for tax years ending after 2026 with a 5-year carryforward.
SB3791 Summary – Illinois, 104th General Assembly
Title: INC TX-INNOVATION CREDIT
Jurisdiction: Illinois
Introduced: February 5, 2026
Sponsor: Sen. Donald P. DeWitte (Co-sponsor: Don DeWitte)
Purpose and overall aim
- Establishes a new Illinois Innovation Credit (Illinois Innovation Credit) within the Illinois Income Tax Act.
- Creates a state-level credit equal to 1.3% of qualified research expenses incurred by a taxpayer in Illinois for tax years ending on or after December 31, 2026.
- Allows carryover of unused credits for up to 5 years.
- The bill explicitly states that a taxpayer does not need to claim or receive a federal R&D credit to qualify for the Illinois credit.
Key provisions and changes
- Section amended: 35 ILCS 5/201 (Illinois Income Tax Act).
- New credit established (subsection (q)):
- Credit amount: 1.3% of qualified research expenses (QREs) incurred in Illinois.
- Eligibility: Taxpayers may claim the credit against the Illinois income tax (liability cannot be reduced below zero).
- Carrryover: Unused credit may be carried forward for up to 5 years.
- Election: No requirement to align with federal R&D credits; no special conditions beyond the Illinois calculation.
- Definitions for the Illinois Innovation Credit:
- Qualified research (QR): Activities designed to promote:
- New computer modeling technology
- New 3-D modeling or imaging technology
- New public infrastructure materials
- New public infrastructure design
- Qualified research expenses (QRE): Wages paid or incurred for qualified services, costs of supplies used in qualified research, and amounts paid to third parties for qualified research.
- The bill does not specify a cap on the total credits or a state-wide aggregate cap for this credit (unlike some other credits in the bill such as Blue Collar Jobs Act provisions, which have aggregate caps cited elsewhere in the act).
- Interaction with other credits:
- The Illinois Innovation Credit is standalone within subsection (q); it operates alongside other existing credits (e.g., Research and Development Credit under subsection (k), investment credits under subsection (e) and (f), etc.). The bill text confirms other credits remain intact but does not indicate a formal offset or stacking rule beyond standard statutory carryforwards and nonnegative liability limits.
- Administrative and sunset considerations:
- The text does not include a sunset date for the Illinois Innovation Credit; it contemplates years ending after December 31, 2026, with continuing carryforward provisions for unused credits.
- The Department of Revenue would administer the credit consistent with existing tax-credit administration, though specific rules or regulations are not enumerated in the introduced bill.
Who is affected
- Illinois taxpayers with qualified research activities conducted in Illinois.
- Eligible entities include individuals, corporations, trusts, and estates that incur QR expenses in Illinois.
- Partnerships, Subchapter S corporations, and LLCs treated as partnerships or disregarded entities: the credit can pass through to partners or members as allowed by current statutory treatment (consistent with other credits in the Act). The carryover and application order align with standard credit practice.
Timelines and procedural notes
- Effective for tax years ending on or after December 31, 2026.
- Taxpayers may elect to carry over unused credits for up to 5 years.
- The bill has been assigned to Revenue for consideration, with committee deadlines in mid-to-late April 2026 (as indicated in the action history).
Impact considerations
- Potential effect: Encourages Illinois-based R&D and related activities by providing a state-level tax incentive.
- Administrative: Requires taxpayer tracking of QR expenditures and the allocation of QREs to Illinois projects; DOR would publish guidance and forms consistent with other similar credits.
- Fiscal: The introduction of a new credit may reduce state revenue in the short term due to increased credits claimed against the Personal Property Tax Replacement Income Tax base, subject to the structure of the return in practice and any interaction with other credits.
In short
SB3791 creates a new Illinois Innovation Credit of 1.3% of qualified research expenses incurred in Illinois, available for tax years ending after 2026, with a 5-year carryforward for unused credits and no requirement to have a federal R&D credit. Definitions cover QR activities and QREs in a manner aligned with similar research-oriented credits in Illinois law.
Compiled from official sources — confirm details with the bill’s official record.
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