November 19, 2021
Illinois adopts 20-year net loss deduction carryover, establishes new tax credit for electric vehicles
On November 16, 2021, Illinois Governor Pritzker signed 2021 IL House Bill 1769, the Reimagining Electric Vehicles in Illinois Act (Public Act 102-0669) (the "Act"), which changes the state's net loss deduction (NLD) carryover period from 12 years to 20 years for tax years ending on or after December 31, 2021, and creates new Illinois tax credits.
NLD carryover period
Previously, for tax years ending on or after December 31, 2003, Illinois allowed an NLD carryover for 12 years following the tax year in which a loss was generated. The Act extends the carryover period from 12 years to 20 years for tax years ending on or after December 31, 2021. The 20-year carryover period also applies to any net loss generated before December 31, 2021, if the statutory carryover period has not expired. This includes those losses that still may be available due to the NLD limitation for tax years 2011 through 2013 imposed by Illinois statute.
Modifying the carryover period from 12 to 20 years does not otherwise impact upcoming limitations on NLD carryover usage. The NLD limitation of $100,000 applies to corporations (excluding S corporations) for tax years ending on or after December 31, 2021, and before December 31, 2024. Please see Tax Alert 2021-1154 for more detail.
The Act creates new Illinois income tax credits for electric vehicle manufacturers, electric vehicle component suppliers and electric vehicle power unit suppliers (qualifying taxpayers) that make certain investments in assets and workforce in Illinois. Additional detail on these credits will be provided in a forthcoming Alert.
Taxpayers may want to consider the impact of the modified NLD carryover period on their NLD carryover balances and expected usage in subsequent tax years (as well as address any other limitations that may apply in a future tax year).
As the forthcoming Alert will discuss in more detail, qualifying taxpayers may also want to consider their eligibility for the new Illinois credits available for electric vehicle manufacturers and component suppliers.