In this time of economic uncertainty, state exemption and credits can assist a company’s bottom line. Illinois manufacturers can take advantage of many Illinois tax exemptions, incentives and credits—all designed to help ease their tax burden.
Early in 2008, the State of Illinois announced a new, limited expansion of the Illinois Manufacturing Machinery and Equipment Exemption to include Production-Related Tangible Property. The State is offering manufacturers a one-time sales and use tax exemption opportunity. Illinois manufacturers may claim a sales or use tax exemption of five percent on the purchase price of production-related tangible personal property used in a manufacturing facility and purchased between July 1, 2007 and June 30, 2008.
What is Eligible?
The items provided below are intended to be examples and may not include all items covered under the limited one-time exemption.
- Equipment or tangible personal property used or consumed in a manufacturing facility related to research and development, preproduction material handling and receiving, quality control, inventory control, storage, staging or packaging.
- Supplies used in a manufacturing facility, such as hand tools, safety supplies, coolants, solvents, oils, lubricants, cleaners and adhesives.
- Materials and fixtures purchased for incorporation within a manufacturing facility.
What is not Eligible?
- Purchases eligible for the ongoing Manufacturing Machinery and Equipment Exemption.
- Purchases used in sales, financial, marketing, administrative functions or landscaping.
- Purchases required to be titled or registered with a state, local or federal agency.
- Purchases claimed under this one-time exemption are ineligible to earn or use the Illinois Manufacturers Purchase Credit.
The claim period is open from July 1, 2008 through September 2, 2008. Total funding for the credit is limited, and if total claims exceed $10 million, the credit will be pro-rated based on the total of dollars claimed by all taxpayers.
Virtually every business decision has a tax consequence. Maximizing after-tax earnings is a major objective and an increasing challenge in the face of state tax laws that seem to change and become more complex each year. As a manufacturer, other state and local issues may exist within your business. It’s recommended a manufacturer conduct an annual review to best utilize tax exemptions, incentives and credits. Additionally, manufacturers operating in a multi-state environment should review multiple states for filing requirements and tax exemptions as well as incentives and credits.
Kenton Bowles is a State and Local Tax Partner at Clifton Gunderson – ranked one of the nation’s largest certified public accounting and consulting firms. Bowles can be reached via email at Kenton.Bowles@cliftoncpa.com or (309) 671-4500.
