State extends expiration dates on two tax credit programs
IBJ Staff Report
The extension of two different tax credit programs in Illinois is looked upon by supporters as critical for continuing development of depressed communities in the state, including East St. Louis.
One of the measures was Senate Bill 1783, legislation to extend the River Edge Redevelopment Zone Program from its current sunset of Jan. 1, 2017, until the end of 2021. The program allows for an income tax credit to be awarded for the restoration and preservation of a qualified historic structure located in a River Edge Redevelopment Zone. Those zones are located in East St. Louis, Rockford, Aurora, Elgin and Peoria. The program is administered by the Illinois Department of Commerce and Economic Opportunity.
The other measure was House Bill 162, which allows the state to award EDGE tax credits to businesses through June 30, 2022. EDGE is an acronym for Economic Development for Growing Economy. The tax credits are awarded to companies expanding in the state or moving to Illinois and creating jobs. The legislation requires businesses that receive the tax credit through the EDGE program to repay the entire amount to the state if they move or cease operation during the term of the agreement.
State Rep. Dan Beiser, D-Alton, supported House Bill 162, which allows the state to award EDGE tax credits to businesses.
“When legislators extended the EDGE tax credits, we also focused on making improvements that will hold these businesses accountable to taxpayers,” Beiser said. “This measure requires businesses that don’t follow through on their agreement to pay back the value of the tax credit to the state. That’s an important step that will increase the accountability of the EDGE tax credits.”
EDGE tax credits and the River’s Edge Redevelopment Zone are two different things but they have similar economic goals.
The River Edge Redevelopment Zone Program is a tool for municipalities to spur economic development while saving and restoring historic buildings, Gov. Bruce Rauner has said.
Senate Majority Leader James F. Clayborne Jr., D-Belleville, co-sponsored the bipartisan legislation and represents East St. Louis.
“This legislation is a common sense measure, given the state of our economics in East St. Louis,” Clayborne said. “I thank the governor for getting behind this and signing it into law. With that being said, I challenge the business community to come together in moving East St. Louis in the right direction, toward sustaining itself economically.”
East St. Louis hasn’t done much with the program to date, but other communities have.
“This vital program has meant millions of dollars in private sector investment in Rockford’s urban core, spurred direct and indirect job growth in our community, and is returning millions of dollars in tax revenue back to the State of Illinois and the five Illinois River Edge communities,” said Larry Morrissey, mayor of Rockford. “The River Edge Historic Tax Credit has become a major part of the economic foundation that has led to explosive growth in Downtown Rockford. It has led to a level of private investment in our Downtown not seen since the 1950s.”
“The State Historic Tax Credits have been THE driving force for redevelopment in Peoria. The HTC’s have leveraged over $32 million dollars in investment creating over 150 new residential units and thousands of square feet of retail and office space,” said Jim Ardis, mayor of Peoria. “Additionally, hundreds of construction jobs have been generated in the renovation of these buildings. The HTC program has been the cornerstone of our redevelopment efforts in downtown and the Warehouse District.
More on the EDGE
The purpose of the EDGE tax credit program is to provide tax incentives that inspire companies to either build a new location or expand existing operations in Illinois.
To partake in this program, taxpayers must apply for designation and enter into a written agreement with the Illinois Department of Commerce and Economic Opportunity.
The reinstated EDGE Tax Credit Program has several important changes.
The previous EDGE Tax Credit was offered as a percentage of up to 100 percent of personal income tax withheld of new employees in connection with a project. Credit awards are now capped at the lesser of 50 percent of the incremental personal income tax withheld attributable to new employees plus 10 percent of the training costs for new employees, or 100 percent of the incremental personal income tax withheld attributable to new employees at an EDGE applicant’s project.
For projects in “underserved areas,” the 50 percent option is increased to 75 percent. Underserved areas are geographic areas that meet one or more of the following conditions:
– 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 households in the area receive assistance under the Supplemental Nutrition Assistance Program (SNAP), and/or
– the area has an average unemployment rate that is more than 120 percent of the national unemployment rate for a period of at least two consecutive calendar years preceding the date of application.
In very unique circumstances, applicants may be eligible for up to 25 percent of the incremental personal income tax withheld attributed to retained employees for a project.
To be eligible for the EDGE Tax Credit, applicants must have a project that achieves one of the following criteria:
1. Companies with more than 100 employees must:
– Employ a number of new employees in Illinois equal to the lesser of 50 new full-time jobs or 10 percent of their full-time world-wide employees at the date of application.
– Make at least $2.5 million in capital investment in Illinois. This update reduces the amount of required investment of $5 million.
2. Companies with less than 100 employees must:
– Employ a number of new employees in Illinois equal to the lesser of 50 new full-time jobs or 5 percent of their full-time worldwide employees at the date of application. There is no minimum capital investment required.
In addition to the updates above, to qualify for the EDGE Tax Credit, applicants must demonstrate that the project would not occur in Illinois but for the EDGE credit.
The reinstatement of the EDGE Tax Credit will be used to enhance economic development opportunities throughout Illinois.