Is your company growing? Are you planning to invest in capital improvements along with hiring new employees? If so, then your company could be eligible for significant Illinois tax incentives.

Background

For Illinois to remain competitive with other states’ business incentive packages, it created the Economic Development for a Growing Economy (EDGE) Program. This program essentially seeks to attract businesses contemplating relocation or expansion in Illinois when they are considering a competing location in another state. The Illinois EDGE incentives are intended to persuade qualifying companies to locate or expand in Illinois.

The Illinois EDGE has been administered by the Illinois Department of Commerce and Economic Opportunity (DCEO) since 2001. It has become one of the largest income tax incentives for companies in Illinois. It is designed to authorize income tax credits for companies that invest in facilities and hire and/or retain employees in Illinois. The size of the tax credit is generally limited by the number of qualifying employees and the amount of Illinois income tax withholding applicable to them.

According to the 2013 EDGE Tax Credit Program Annual Report, between December 22, 1999 and December 31, 2013, DCEO approved $832.7 million in EDGE credits.

The amount of the tax credit is calculated on a case-by-case basis. The tax credits could be as high as the amount of tax receipts collected from the Illinois income taxes paid by newly hired and/or retained employees of the company as they connect  to the growth of the company.

The credit would be available to a company for up to a total of ten years for each project.

While each annual tax credit amount cannot be greater than the company’s state income tax liability (the income tax credits would not be refundable), the credit can be carried forward for up to five years.

Each company receiving competitive credits would have to maintain the jobs created and/or retained along with the capital investment concurrent with the period in which it claims the credits.

Eligibility

A general overview of the EDGE program company eligibility requirements include:

• First, the development project must add to the export potential of Illinois. For example, if a company is expanding its facilities to increase its manufacturing capabilities, then that would be a qualifying activity. Retail trade or personal services would not be qualifying activities.
• Once it has been determined that the intent of the project is a qualifying activity, then the company must meet one of the quantitative project requirements below (depending on the size of the company):
  • For a company with 100 or fewer employees, the company must agree to make a capital investment of $1 million and create at least five new full time jobs in Illinois.
  • For larger companies (i.e., more than 100 employees), the company must commit to making a capital investment in the state of at least $5 million and create at least 25 new jobs.
  • If the company’s development/expansion project does not meet either of the above parameters, then the project must meet the investment and job creation and/or retention requirements as set forth specifically by the DCEO.
• The company must also demonstrate that if it were not for the credit the company could not proceed with the project in Illinois.

Due to recent budget cuts implemented by Illinois Governor Bruce Rauner, the EDGE tax credit program has been temporarily suspended until the state budget is balanced. It is expected to be a short-term suspension of the program. Based on a recent conversation I had with one of the officials at DCEO, they are still providing companies with the EDGE application. However, they will not issue a credit acceptance letter until the suspension is lifted.

Illinois does not make it “easy” to obtain this credit. The EDGE application form alone is daunting. Even though there are some hoops to jump through to obtain the credit, the credit amount can be significant. We can guide you through the process along with the related tax planning and analysis.

For more information, contact us at 312.670.7444.