FGMK Tax Alert: Illinois EDGE Credit Reinstatement

Summary

The Illinois Economic Development for a Growing Economy tax credit ("Edge Credit") has just been reinstated as of September 18, 2017 pursuant to Governor Rauner signing House Bill 162. The Edge Credit is the primary business development incentive that the State of Illinois uses to attract new businesses and retain current Illinois employers.

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”).

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.

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 are 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.

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. FGMK can assist you in applying for and securing an EDGE credit from the DCEO. Contact FGMK for a consultation regarding your businesses eligibility for the Illinois EDGE credit.

For more information, please contact FGMK Tax Director Dean Pearson: (E) dpearson@fgmk.com (D) 312.638.2901.

About FGMK

FGMK is a leading professional services firm providing assurance, tax and advisory services to privately held businesses, global public companies, entrepreneurs, high-net-worth individuals and not-for-profit organizations. FGMK is among the largest accounting firms in Chicago and one of the top ranked accounting firms in the United States. For more than 40 years, FGMK has recommended strategies that give our clients a competitive edge. Our value proposition is to offer clients a hands-on operating model, with our most senior professionals actively involved in client service delivery.

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