EDGE tax break resumes, but only through April 30, 2017

By Ken Holub, SVP, Commercial Banking

The Illinois EDGE tax credit has been extended, but only through April 30, 2017. Find out how to take advantage of this opportunity before time runs out, again.

Sometimes when a door closes…it opens back up again. That’s the case for the Illinois EDGE Tax Credit program, which the state’s governor, Bruce Rauner, has extended through April 30, 2017. EDGE, which stands for Economic Development for a Growing Economy, originally expired last December but was renewed temporarily in January, giving companies a second chance to benefit from this financial incentive.

Administered by the Illinois Department of Commerce and Economic Opportunity (DCEO), the EDGE program allows a qualifying firm to reduce its cost of doing business in Illinois when compared to similar costs in other states where it could locate. The tax credit is designed to appeal to companies interested in expanding current operations or establishing new operations in Illinois. The program grants tax credits equal to an amount as high as the total state income taxes a company withholds from the salaries of employees in newly created jobs. They are non-refundable tax credits that can be used to offset corporate income taxes paid up to a 10-year period. While the amount of each annual tax credit cannot surpass a company’s state income tax liability, the credit can be carried forward up to five years.

Qualifying for EDGE

To be eligible, a company must be able to demonstrate that the operations it plans to establish will contribute to the export potential of Illinois. For example, it could be in areas such as manufacturing, assembling, processing, warehousing, distribution, research and development, or tourism sectors. Companies already in Illinois looking to relocate within the state would have to document and substantiate their business reason for why their current location is inadequate in order to qualify.

Qualifying projects must involve both capital improvements and employment of new workers in Illinois at DCEO-determined thresholds. In general, those are:

  • $5 million or more in capital investment and the creation of at least 25 new full-time jobs — for companies with more than 100 employees
  • $1 million in capital investment and the creation of at least five new full-time jobs — for companies with 100 or fewer employees

Applicants also have to demonstrate that, if not for the credit, their project would not occur in Illinois. They have to show that:

  1. They have options in one or more other states that they could reasonably pursue, or
  2. That receiving the credit is a major factor, or entirely essential, to their being able to create or retain jobs in Illinois.

Once a company receives EDGE tax credits, it has to maintain the newly created jobs and the capital investment for as long as it claims those credits.

EDGE tax credits support financing options

Companies can use EDGE tax credits as part of an overall plan to finance business expansion in Illinois. The credits can be used in conjunction with a number of project-finance bundling options, including new market tax credits, SBA 504 loans and industrial revenue bonds.

“We find EDGE credits to be an important element of a larger incentive program as our customers contemplate relocating or expanding within Illinois,” John Sassaris, group president, commercial banking, MB Financial Bank, said. “The credits complement the state’s other assets, including its central location, access to a talented workforce and a strong logistics infrastructure.”

Interested companies should consult their bank to explore bundling options and their tax advisor before applying for EDGE tax credits. There is a written application process through the DCEO, which calculates the amount of the tax credit on a case-by-case basis.

“The door is open briefly again for benefitting from the Illinois EDGE program,” Sassaris notes, “So companies interested in this opportunity should gather their documentation as soon as possible and apply.”