Working a food processing plant in Chicago on ComEd. Illinois has the manufacturing machinery and equipment exemption but it only applies to electricity used directly in the manufacturing process, not the entire facility. This plant has offices, a break room, a warehouse, and the production floor all on one meter. How do I calculate what percentage of electricity qualifies for the exemption? ComEd wants a percentage allocation before they'll apply it.
Illinois manufacturing exemption — the partial exemption calculation is tricky
In California I deal with this all the time with PG&E and SMUD. The standard approach is a load analysis — calculate the connected load (in kW) of all manufacturing equipment and divide by the total connected load of the facility. If your production equipment is 400 kW out of a total 500 kW connected load, you claim 80% exemption. Keep documentation showing how you derived the percentage because the Department of Revenue can audit the exemption claim.
Yuri's question and the responses highlight why tax exemption work requires more than just filing a form. Partial exemptions for mixed-use facilities require a defensible allocation methodology. Connected load analysis is the most common and generally accepted approach. Document your methodology thoroughly — the utility and the taxing authority may both want to see your work. For large facilities, sub-metering the production area is the gold standard because it gives you actual usage data instead of an estimate. Some clients find it worthwhile to install a sub-meter just to support the exemption claim.
Used the connected load method — production equipment was 72% of total connected load. Filed with the Illinois DOR and ComEd. Exemption approved at 72%. Retroactive refund for 3 years was about $41,000. Go-forward savings of $1,150/month. The documentation took longer than the filing but it was worth every minute.
Illinois is specifically tricky because the state changed the exemption rules a few times. The current Illinois Manufacturing Exemption under 35 ILCS 120/2-45 requires that the electricity be used primarily (over 50%) in manufacturing to qualify the entire amount. But if it's a mixed-use facility under 50% manufacturing, you can still exempt the manufacturing portion with proper documentation. The Illinois Department of Revenue has guidance on acceptable allocation methods — square footage, connected load, or metered sub-loads. Connected load is usually the most favorable for the taxpayer.