Illinois —Corporate, Personal Income Taxes: Recovery and Mental Health Employment Credit Enacted
Jun. 14, 2022
Effective for tax years beginning on or after January 1, 2023, Illinois is providing a corporate and personal income tax credit to employers in the state who hire eligible individuals in recovery from a substance use disorder or mental illness. A partnership, S corporation, and limited liability company must distribute the credit to its:
- shareholders; or
- members based on their distributive share of income.
How Do Taxpayers Qualify for the Credit?
To qualify for a credit, an employer must employ an eligible individual in a full or part-time position for 500 or more hours during the calendar year. Employers cannot combine the hours of 2 or more employees to reach the minimum number of hours.
An eligible individual is an individual who is in a state of wellness and recovery and can demonstrate to their employer that he or she:
- has completed a course of treatment for a substance use disorder or mental illness; or
- is currently receiving that treatment.
A relapse in an individual’s state of wellness does not impact eligibility, if he or she shows a continued commitment to recovery that aligns with a relapse prevention plan, discharge plan, or recovery plan.
If an employee works more than 500 hours between the date of hiring and the end of the calendar year, the employer can compute the credit based on the hours worked by the end of the year. Alternatively, the employer can elect to compute the credit based on the hours worked from the date of hire to the earlier of:
- the last day of employment; or
- December 31 of the next year.
How Much Is the Credit?
The credit is $1 for each hour worked by an eligible individual up to $2,000. Illinois caps total credits at $2 million each year.
How Do Taxpayers Apply for the Credit?
A taxpayer can apply for a credit certificate to the Illinois Department of Revenue.
Can Taxpayers Carryforward Unused Credits?
Taxpayers cannot carryforward unused credits.
Is the Credit Refundable?
The credit is nonrefundable.
When Does the Credit Sunset or Expire?
There is no credit sunset or expiration date. The credit is also exempt from the state’s automatic sunset provision.
P.A. 101-1053 (S.B. 3617), Laws 2022, effective June 10, 2022, and as noted.
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