Illinois Enacts Invest In Kids Credit

Illinois has enacted the Invest in Kids credit that may be claimed against income tax liability for contributions to organizations that grant scholarships. In addition, Illinois has amended the Property Tax Extension Limitation Law (PTELL).

Invest in Kids Credit

Both corporations and individuals may take the Invest in Kids credit. Taxpayers will receive an Invest in Kids credit from the Department of Revenue when:

  1. they make a contribution to a nonprofit organization;
  2. the organization uses at least 95% of the contributions received each year for scholarships; and
  3. the organization gives the scholarships to low-income elementary or high school students.

The credit is effective for tax years starting January 1, 2018, and ending December 31, 2022.

S corporations, partnerships, and limited liability companies (LLCs) classified as partnerships for income tax purposes may claim the credit. If they do, the credit will pass through to shareholders, partners, and members.

Contributions by corporations, S corporations, partnerships, and trusts, will not qualify for the credit if they directed to a particular:

  • subset of schools;
  • school;
  • group of students; or
  • student.

Individuals can take credits for contributions directed to a particular subset of schools or a particular school. However, they may not take credits for contributions directed to a particular group of students or a particular student.

Credit Amount

The credit equals 75% of the total amount of qualified contributions made by the taxpayer during a tax year. However, the credit cannot exceed $1 million. The total amount of all credits the department may award in any calendar year may not exceed $75 million. If the annual cap is not reached by June 1 of a given year, remaining credits will be awarded on a first-come, first-served basis.

Application Procedures

A taxpayer must apply to the department for a contribution authorization certificate before making a contribution to an organization that grant scholarships.

Recordkeeping Requirements

Taxpayers must maintain records each tax year of:

  • contribution authorization certificates obtained from the department; and
  • certificates of receipt from organizations that grant scholarships.

Carryforward Provisions

Taxpayers can carry forward and apply unused credits to their tax liability for up to five years.

Federal Tax Deduction

Taxpayers cannot claim the Invest in Kids credit for a contribution if the taxpayer claims a federal income tax deduction.

Property Tax Extension Limitation Law

The PTELL amendment allows a school district to reduce its extension for educational purposes under certain circumstances. The issue must be submitted to and approved by voters. The reduced extension cannot either be:

  • more than 10% lower than the amount extended for education purposes in the previous levy year; or
  • cause the school district’s adequacy target to fall below 110% for the levy year for which the reduction is sought.

Once the question is submitted to voters, it may not be submitted again for the same school district at any of the next two consolidated elections.

P.A. 100-0465 (S.B. 1947 ), Laws 2017, effective August 31, 2017 and as noted

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All stories by: CCHTaxGroup