January 10, 2019   //   Tax   //   By Dean Pearson

Summary

The Illinois Economic Development for a Growing Economy tax credit (“Edge Credit”) is the primary business development incentive that the State of Illinois uses to attract new businesses and retain current Illinois employers.  The EDGE credit is one of the more lucrative tax incentives available to businesses with Illinois facilities.

Program Description

The EDGE program provides tax incentives to encourage companies to locate or expand their operations in Illinois when there is active consideration of a competing location in another State. Tax credits are available to qualifying companies, equal to the amount of State income taxes withheld from the salaries of employees in newly created jobs (also known as “payroll taxes”). EDGE credits are income tax credits that are processed on an annual basis and can be earned over a period of ten years. The credits are non-refundable but can be carried forward for a period of five years.

Qualified Applicants

A “qualified applicant” is a taxpayer that currently is operating a business located within the State of Illinois, or that plans to locate a new business within the State of Illinois, and that is engaged in interstate or intrastate commerce, for the purpose of manufacturing, processing, assembling, warehousing, or distributing products, conducting research and development, providing tourism services, or providing services in interstate commerce, office industries, or agricultural processing, but excluding retail, retail food, health, or professional services. However, it should be noted that headquarters expansion may permit otherwise excluded industry taxpayers in obtaining an EDGE award.

An applicant for the EDGE credit must provide documentation that demonstrates competition amongst different States for the business, and, in the case of a company with more than 100 employees, must agree to invest a minimum of $2.5 million in capital improvements. The applicant also must agree to employ a number of employees in the State equal to 10% of the number of full-time employees employed by the applicant world-wide on the date the EDGE application is filed, or agree to create at least 50 new full-time jobs in Illinois (if that number is less than the 10% number noted above). An applicant with 100 or fewer employees is not subject to a capital investment requirement, but the applicant must employ new employees in the State equal to the lesser of 5% of the number of full-time employees employed by the applicant world-wide on the date the application is filed, or 50 new employees in the State.
The EDGE program allows companies to reduce the costs of doing business in Illinois as compared to bearing these similar costs when these business operations are performed in other states. The value of these tax credits is calculated on a case-by-case basis.

Credit Computation

The EDGE “credit” is the amount agreed to between the Illinois Department of Commerce and Economic Opportunity (DCEO) and the applicant under the Act, not to exceed the lesser of: (1) the sum of (i) 50% of the incremental income tax attributable to new employees at the applicant’s project and (ii) 10% of the training costs of new employees; or (2) 100% of the incremental income tax attributable to new employees at the applicant’s project. However, if the project is located in an “underserved” area, then the amount of the EDGE credit may not exceed the lesser of: (1) the sum of (i) 75% of the incremental income tax attributable to new employees at the applicant’s project and (ii) 10% of the training costs of new employees; or (2) 100% of the incremental income tax attributable to new employees at the applicant’s project. Additional credits are also available as reimbursement for qualifying training costs. Ten percent of eligible training costs of newly hired full-time employee positions at the project may also be included as part of the EDGE program.

How to pursue the EDGE Credit?

Potential applicants that wish to propose a project to create new jobs in Illinois must complete an Edge Credit application and enter into an agreement with the DCEO. Any company with hiring and investment growth could be a potential EDGE credit candidate. Mueller can assist you in applying for and securing an EDGE credit from the DCEO. Contact Mueller for a consultation regarding your businesses eligibility for the Illinois EDGE credit.

For more information, please contact Mueller Tax Director Dean Pearson: (E) dpearson@muellercpa.com (D) 708.745.3537.