United States

Illinois restores EDGE and Angel Investment Tax Credit programs

Both credit programs had previously expired

TAX ALERT  | 

EDGE credit extension

On Sept. 18, 2017, Illinois Gov. Bruce Rauner signed House Bill 162, extending the sunset date of the Illinois Economic Development for a Growing Economy Tax Credit Act (EDGE) an additional five years, from April 30, 2017 to June 30, 2022.

The Illinois EDGE credit program is operated by the Illinois Department of Commerce and Economic Opportunity (DCEO) and designed to offer a special tax incentive to encourage larger companies to locate or expand operations in Illinois when there is active consideration of a competing location in another state. The program can provide tax credits to qualifying companies, equal to the amount of state income taxes withheld from the salaries of employees in the newly created jobs.

In addition to extending the EDGE credit, House Bill 162 provides a number of technical and substantive changes to the credit amount and eligibility requirements. Accordingly, the amended law provides that the credit cannot exceed the lesser of:

  1. the sum of 50 percent of the incremental income tax attributable to new employees at the applicant's project and 10 percent of the training costs of new employees; or
  2. 100 percent of the incremental income tax attributable to new employees at the applicant's project.

More recipient-friendly credit caps are available if a project is located in an “underserved area.” Underserved areas are new to the EDGE credit and are defined as a geographic area that meets one or more of the following conditions: The area has a poverty rate of at least 20 percent, 75 percent or more of the children in the area participate in the federal free lunch program, at least 20 percent of the households in the area receive assistance under SNAP or the area has an average unemployment rate that is more than 120 percent of the national unemployment average.

Applicants for the credit with more than 100 employees must commit to a $2.5 million capital investment as a result of the project, a reduction from the previous $5 million requirement. Applicants with 100 or fewer employees have no capital investment requirement.

Additionally, a new provision provides that if the applicant has more than 100 employees, the applicant must employ a number of new employees in the state equal to the lesser of 10 percent of the number of full-time employees or 50 new employees. If the applicant has 100 or fewer employees, the applicant must employ a number of new employees in the state equal to the lesser of 5 percent of the number of full-time employees or 50 new employees.

House Bill 162 also provides for a claw-back for credit recipients who cease principal operations in the state with the intent to shut down the EDGE project during the term of the agreement. In those cases, the credit awarded to the recipient prior to the end of operations is recaptured by the state and reallocated to the local workforce investment area where the project was located.

Finally, the amended provisions prohibit credit awarded under agreements entered into on or after Jan 1, 2015, to be credited against the applicant’s withholding tax liability.

Angel Investment Tax Credit extension

Gov. Ranier also recently signed Senate Bill 2012, extending the sunset date of the Illinois Angel Investment Credit Program from Dec. 31, 2016 to Dec. 31, 2021. The Illinois Angel Investment Credit Program attracts and encourages investment dollars into early-stage, innovative companies throughout Illinois. Investments provide these companies with working capital to further their growth in Illinois.

New to the credit is a minimum investment requirement of $10,000 in any single business. The amount of the credit is equal to 25 percent of the investment made directly in a qualified new business venture. Additionally, a number of registration requirements have changed.

Takeaways

House Bill 162 makes a number of changes to the EDGE credit, some of which may provide easier eligibility and more benefits for taxpayers. Taxpayers considering the EDGE tax credit program or investing in Illinois businesses should speak to their tax advisors about eligibility and application requirements.

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