The Credit Institution Tax Return is a tax assessed on your business' income. Normally, you cannot expense state and local income taxes on your Schedule C (sole proprietorship) (unlike how you can for a corporation)
However, you can deduct this amount on your Schedule A (Itemized Deductions) if your itemized deductions exceed the standard deduction threshold.
Note that one revenue ruling suggested that the IRS might be open to treating a tax like this tax (directly related to your business) as a business expense. See https://www.thefreelibrary.com/The+deduction+of+state+income+taxes+for+Schedule+C+taxpayers.-a020031...
The article correctly states that if you do this, you need to be prepared to defend it. I would consult a local EA or CPA.
