March 10th, 2020
Do you know what a High Impact Business Program (HIB) is? Were you aware that it impacts how you file your taxes in the state of Illinois? There are 4 companies in Illinois where the HIB allows you to subtract your dividends from your gross income when you file your taxes. So what does that mean for you? Listen to this episode of Making Finances Fun to find ou
Outline of This Episode
- [0:15] New name—same show!
- [2:35] The ‘Big Scary’ Disclosure
- [3:23] The 4 Stocks whose dividends can be excluded
- [7:45] What does it mean if you own one of these 4 stocks?
- [10:25] Here’s how you file your taxes to exclude the dividends
- [12:38] Verify that your tax professional is aware of these stocks
What is a High Impact Business Program (HIB)?
According to the Illinois Department of Commerce, a HIB program “supports large-scale economic development activities by providing tax incentives to companies that make substantial capital investments in operations and create or retain an above-average number of jobs. Businesses may qualify for: investment tax credits, a state sales tax exemption on building materials and/or utilities, a state sales tax exemption on purchases of personal property used or consumed in the manufacturing process or in the operation of a pollution control facility.”.
On a basic level, to qualify for the program, a business must:
- Invest a minimum of $12 million and create 500 full-time jobs
- OR make a $30 million investment with the retention of 1,500 full-time jobs
Illinois added a few other things that could qualify a company to be part of the program, but those are the need-to-know basics. Essentially, the government is giving them tax credits if they stay, spend, and grow their business in Illinois.
This is important because it allows you to exclude the dividends (from HIB designated companies) from your gross income on your state tax return.
What 4 Companies in Illinois have the HIB designation?
I’ve come across 4 businesses that are part of the HIB program. As of Feb. 25th, each pays a yearly dividend as outlined below:
- Caterpillar Inc.: Pays $4.12 per share per year
- Abbott Laboratories: Pays $1.44 per share per year
- AbbVie Inc.: Pays$4.72 per share per year
- Walgreens Boot Alliance: Pays $1.83 per share per year
If you own stock in any of these companies you will have brought in dividends this year. So what do you do with your tax return?
What to do when you file your taxes
If you live in Illinois, own stock of any of these 4 companies, and receive dividends—you can exclude the dividends from your gross income on your STATE return (you can verify all of this with your chosen tax professional). To clarify, dividends are lumped into gross income. However, they are still federally taxed. This ONLY applies to your state return.
Here’s how you file: attach a Schedule 1299-C to your 1040 to report the subtraction from your gross income. The company you own stock in will send you a 1099 form at the end of the year, which means the IRS gets a copy as well, so they know you’re receiving dividends.
Wouldn’t you like more money in your pocket?
A lot of people aren’t aware of HIB programs and how it affects filing your taxes—even some tax professionals. While it is rare, I have run into it. I recommend going back and looking at previous returns to see if the 1299-C was filed with them.
Most professionals are educated and know their stuff, but it doesn’t hurt to verify. If you use a tax professional, be sure to provide them with the 1099 form and let them know you own stock in one of these 4 companies.
It’s akin to getting a state tax reduction. Illinois is basically saying, “Hey look, it’s cool, we are just gonna pretend you didn’t get these dividends”. Don’t pay unnecessary tax if you don’t have to—keep your money in your pockets.
- High Impact Business Program (HIB)
- Walgreens Boot Alliance
- Caterpillar Inc. Business Designation
- Abbott HIB designation
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