Every so often, a state incentive comes along that is worth rearranging a capital plan, and Illinois may have one in its Advancing Innovative Manufacturing (AIM) Tax Credit. AIM offers Illinois income tax credits of up to 7% of qualified capital improvement investment to manufacturers and research-driven businesses that build, modernize, or relocate operations in the state. This Illinois manufacturing tax credit takes effect for taxable years beginning on or after January 1, 2026.
For a company weighing where to put its next plant or invest a minimum of $10 million of capital, that is not a rounding error but a real variable in the site selection model. While the credit is not refundable, it has a 10-year carry-forward period.
Illinois created the AIM Tax Credit to draw significant manufacturing and research capital into the state. The credit is worth up to 3%, 5% or 7% of qualified capital improvement investment, depending on project size. It is effective for taxable years beginning on or after January 1, 2026, and is awarded through an agreement negotiated with the Illinois Department of Commerce and Economic Opportunity (DCEO).
AIM is built on a simple idea: the more a company invests in qualifying Illinois operations, the larger the credit rate it earns. The program runs on three investment tiers:
| Qualified Capital Improvement Investment | Maximum Credit Rate |
|---|---|
| $10 million to less than $50 million | 3% |
| $50 million to less than $100 million | 5% |
| $100 million or more | 7% |
The entry point is $10 million of qualified capital improvements within a five-year period, and the rate steps up as the project scales. The tax credit amount is a negotiated incentive and is fixed in an agreement with DCEO that also sets placed-in-service dates and ongoing conditions, including limitations if the company is participating in other Illinois incentive programs.
Some state economic development programs are built around headcount: add jobs, earn credits. AIM is centered on capital investment instead. The program supports projects that modernize, automate, upgrade or streamline production, and that strengthen Illinois’ position in industries tied to public health, economic security, infrastructure and supply chain resiliency. Many of the most important manufacturing projects underway right now, from robotics and automation to plant modernization and advanced materials capacity, do not add hundreds of employees. AIM takes a different approach.
Eligibility comes down to three core tests. An applicant generally must:
A common misread is that this is a recruitment program aimed only at companies moving into the state. It is not. Existing Illinois manufacturers undertaking a significant expansion, automation, or modernization project may qualify on the same terms. A manufacturer retooling a line in Rockford after forty years stands in the same doorway as a newcomer evaluating its first Illinois site.
Entity structure is no barrier either. If the taxpayer is a partnership or a Subchapter S corporation, as opposed to a C corporation, the credit is allowed to the partners or shareholders, benefiting closely held and private equity-backed manufacturers or even large public filers.
Because the credits are available for several years, and the $10 million threshold is measured across a five-year window, companies are not being asked to decide in a hurry. There is room to fold AIM into business expansion plans already under development, and to weigh it deliberately when evaluating alternative locations and the timing of capital spend. This extended runway may allow companies to incorporate AIM into longer-term capital planning.
Withum has a dedicated team serving companies in the industrial and consumer products space, providing tax, advisory and audit support to manufacturers through growth, expansion and relocation. We can answer questions surrounding eligibility, credit modeling, agreement negotiation and multistate selection.
If you are weighing a capital project, an expansion or a location decision that could touch Illinois, reach out to discuss whether AIM belongs in the analysis.
For more information on this topic, please contact a member of our team.
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