With the recent news of the FoxConn multi-billion deal to start operations in Wisconsin, it became apparent to the Illinois legislature that having key incentives in place is an important factor to induce companies to expand operations in Illinois. The Illinois legislature took an important step in that direction on August 13, 2017 when it passed and sent HB 162 to Governor Rauner to be signed into law, which he did yesterday. HB 162 has officially extended and revised the Economic Development for a Growing Economy (EDGE) tax credit, which had previously expired back on April 30, 2017.
As a reminder, the EDGE credit as it existed prior to the changes enacted by HB 162 is a nonrefundable income tax credit equal to a percentage (not to exceed 100%) of the Illinois income tax withholdings from new employees. Companies that wish to take advantage of this credit must first apply for approval and awarding of the credit from the Illinois Department of Commerce and Economic Opportunity (DCEO). The credit can be earned over a ten year period and the application request should be filed with the DCEO before any new investment or hiring occurs at the project site.
Applicants are required to commit to investing at least $5 million in capital improvements and to create at least 25 new full-time jobs. If the company has 100 or fewer employees, the thresholds are lowered to at least $1 million in capital improvements and at least five new full-time jobs. In addition, the company must be able to demonstrate that multiple state options exist for the project; at least one other state is being considered for the project; or that the tax credit is essential to the company’s decision to create and/or retain jobs in Illinois.
Finally, taxpayers in certain industries that met minimal investment and employment thresholds and would not otherwise be able to use the EDGE credit (due to net operating losses) could elect to claim the credit against its income tax withholding obligations.
With the passage of HB 162, the granting of EDGE tax credits has been extended to June 30, 2022. In addition, the following changes have been made to the EDGE program:
The result of the EDGE credit extension bill with revisions mentioned above affords companies with an opportunity to gain a competitive edge by reducing the costs of expanding or initiating new business operations in Illinois. Please feel free to contact your Sikich advisor if you have any additional questions, or wish to discuss this tax credit and its application in more detail.
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