THE ILLINOIS EDGE TAX CREDIT – DOES YOUR BUSINESS QUALIFY TO SAVE YOU MONEY?
The State of Illinois recently brought back the EDGE tax credit for companies that conduct business in Illinois, which means there is a chance your business could save a significant amount of money in the coming year. Find out whether your business is eligible, how much you can save, and the steps you need to take in order to apply.
WHAT IS EDGE?
EDGE stands for Economic Development for a Growing Economy. It is a tax credit offered in the State of Illinois to attract new businesses and keep current employers in the state. It is meant to incentivize businesses to conduct their development projects in Illinois, rather than in other states. The credit is available to businesses for up to a total of 10 years.
DOES MY ILLINOIS BUSINESS QUALIFY FOR THE EDGE TAX CREDIT?
While not an exhaustive list, the following is a quick snapshot of a few qualifying criteria you should be aware of.
In order to qualify, your business must meet certain job creation and investment thresholds related to a development project. For companies that employ 100 or fewer people, the project must involve new full-time employees who make up either 5% of the company’s world-wide employment, or total 50 people – whichever is less. For this sort of business, the future cumulative tax credits may not exceed the project’s capital investment.
For companies that employ more than 100 people, the project must involve new full-time employees who make up either 10% of the company’s world-wide employment, or total 50 people – whichever is less. This sort of company must agree to invest at least $2.5 million in capital improvements in the state of Illinois.
In either case, you must also show that (1) your company has another viable project site outside the state of Illinois, (2) there is a cost differential between doing the project there versus here, and (3) without the EDGE credit, you would not conduct the project in Illinois.
HOW MUCH WILL I SAVE WITH THE EDGE TAX CREDIT?
The tax credit will amount to the lesser of either (1) 50% of the payroll withholding taxes from the new employees and 10% of the costs associated with training them or (2) 100% of the payroll withholding taxes from the new employees. Training costs can include curriculum development, domestic travel expenses for trainees, training materials, instructor costs (e.g. wages and travel), and training equipment.
There is the potential to save even more if your project is located in an “underserved area” – the 50% of payroll withholding taxes from option (1) would increase to 75%. Locations that meet one or more of the following criteria are considered “underserved”:
- the surrounding area has at least a 20% poverty rate according to the latest census
- at least 75% of the children in the area are enrolled in the federal free lunch program according to State Board of Education statistics
- 20% or more of households in the area utilize the federal Supplemental Nutrition Assistance Program (SNAP), or
- the area has an average unemployment rate greater than 120% of the national average for at least 2 years prior to applying for the EDGE credit, as determined by reports from the Illinois Department of Employment Security and the S. Department of Labor
However, it is important to note, your business can be disqualified if you cease operations on the project during the term of the agreement. Once the project is abandoned, the State of Illinois is entitled to collect the entire credit amount that was awarded under the agreement. The recaptured amount will then be distributed to the local workforce investment area in which the project was originally located to expand opportunities for women, minorities, and unemployed people and other workforce development initiatives.
If you think your business has a qualifying project in the future, consider applying for the EDGE credit. Legislation has only extended its availability to June 30, 2022, so it is in your best interest to apply sooner rather than later. Contact Waltz, Palmer & Dawson, LLC for a consultation to see whether you are eligible and how the EDGE credit might benefit you.
RELATED EDGE TAX CREDIT RESOURCES
- You can find the full text of H.B. 162, the legislation that created the EDGE credit, on the state’s website, here.
- The State of Illinois has a list of EDGE agreements that have been made by businesses since January 20, 2015. Click here to see the estimated value of credit that other businesses in Illinois are getting through EDGE.
- For more information on the EDGE credit, and to view supplemental documents such as the Corporate Accountability report, please click here.
- For information on other incentives offered by the State of Illinois, click here.
- For more information on federal tax incentives and other job creation tax credits across the states, see WPD blog posts.
Should you have questions regarding the Illinois EDGE credit or other legal needs for your business or would like to schedule a no-charge initial consultation to discuss questions you have about your business, please contact Waltz, Palmer & Dawson, LLC at (847) 253-8800 or contact us online.
Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law, Collaborative Divorce & Mediation.
This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.