Illinois credit package seeks to attract microchip manufacturers

Illinois enacted a package of new income tax credits and other tax incentives to attract microchip and semiconductor manufacturing to the state. The package is similar to the credits and incentives for electric vehicle (EV), EV parts, and EV battery manufacturing under the Reimagining Electric Vehicles in Illinois (REV Illinois) Act.

The Manufacturing Illinois Chips for Real Opportunity (MICRO) Act offers qualifying taxpayers credits equal to:

• 75% or 100% of income tax withholding for new jobs based on the location of the manufacturing facility in the state;
• if new job and investment thresholds are met, 25% or 50% of income tax withholding for retained jobs based on the location of the manufacturing facility in the state;
• 25% or 50% of income tax withholding for construction jobs based on the location of the manufacturing facility in the state;
• 10% of the training costs for new and retained employees; and
• 0.5% of qualified capital investments.

The training credit increases by 15% for:

• training new employees who are graduates, certificate holders, or credential recipients from an Illinois institution of higher education; or
• training new employees who are graduates, certificate holders, or credential recipients from an Illinois institution of higher education; or

How do taxpayers qualify for the credits?

The MICRO Act requires various levels of investment and job creation to qualify for the credits. Eligibility for the credit applies to:

• microchip and semiconductor manufacturers that invest $1.5 billion or more in capital and create 500 or more new jobs in Illinois within 5 years;
• microchip and semiconductor parts manufacturers that invest $300 million or more in capital and create 150 or more new jobs in Illinois within 5 years; and
• semiconductor, microchip, or semiconductor or microchip parts manufacturers that invest $20 million or more in capital and create 50 or more new jobs in Illinois within 4 years.

A manufacturer can also qualify for credits if it expands or converts an existing Illinois facility to semiconductor, microchip, or semiconductor or microchip parts manufacturing. To qualify for the transition credits, the manufacturer must:

• invest 100 million or more in capital; and
• either create 75 new jobs or new jobs equal to 10% of its existing workforce in Illinois within 5 years.

The credit does not apply to manufacturers that:

• hold an active credit agreement under the Economic Development for a Growing Economy (EDGE) Program; or
• relocate jobs from one Illinois location to another location in the state.

What happens to unused credits?

Taxpayers can carryforward unused credits for up to 5 tax years. But the credits are not refundable.

When do the credits sunset or expire?

Illinois cannot enter into any new credit agreements after December 31, 2028.