Summary
The Illinois Economic Development for a Growing Economy Tax Credit Program ("EDGE”) has been reinstated and revised as of September 18, 2017 pursuant to House Bill 162. The EDGE program is the centerpiece and 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 relocate or expand their operations in Illinois when there is active consideration of a competing location in another state. Tax credits are awarded to qualifying companies, equal to the incremental Illinois payroll withholding income taxes withheld from the wages and salaries of employees with newly created jobs.
Who Qualifies?
A “qualified applicant” is a taxpayer currently 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 in Illinois. The applicant also must agree to employ a number of employees in the state equal to ten percent 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 ten percent number noted above). An applicant with 100 or fewer employees is not subject to a capital investment requirement, but must employ new employees in the state equal to the lesser of five percent 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 otherwise higher costs of doing business in Illinois, when compared with lower costs in other states where operations might have been located instead. Tax credits amounts are calculated on a case-by-case basis depending on the applicant’s needs.
How is the Credit Computed?
An applicant’s EDGE credit is an 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) ten percent 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) ten percent 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?
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 has assisted companies in applying for and obtaining EDGE credits, and can assist you in applying for and securing an EDGE credit from the DCEO.
For more information, please contact FGMK Tax Partner Matthew T. Fuller at mfuller@fgmk.com or 847-444-8491, or Tax Director Dean Pearson at dpearson@fgmk.com or 312.638.2901.