DCEO Signing EDGE Tax Credit Agreements; Still Will Not Disburse; Film Credits, Enterprise Zones Also Impacted
After reaching economically-responsible compromises on Unemployment Insurance Reform, the Child Care Assistance Program and DON Score legislation, the Rauner Administration announced on November 10 that it is taking some steps forward on EDGE Tax Credits as well as re-instituting the Film Tax Credit approvals. Both credits were suspended for new projects at the beginning of the fiscal year.
Since taking office, the Administration has been implementing policies to ensure a more fiscally-responsible approach to EDGE agreements in order to balance investment in Illinois with taxpayer benefits. Policy changes include:
- No longer supporting “Special EDGE” agreements (see below for more information) that only benefit certain companies that can afford lobbyists.
- No longer providing tax credits for job retention, only for capital investment and net new job creation.
- Requiring that tax credits can only be obtained for jobs created above a baseline of all existing employees located within the state, rather than just the baseline of employees located at the specific project location. In the past, a company that signed an EDGE agreement for an expansion project in a certain location only needed to maintain a requisite number of employees at that specific facility in order to meet its requirements. Laying off employees at a different facility in the state, or even closing it, would not have impacted its ability to continue receiving taxpayer funded benefits for the facility for which it was receiving the EDGE agreement.
- Prohibiting more than one tax credit on the same facility. Previous administrations would allow multiple EDGE deals on jobs created at the same facility.
- Focusing on marketing the assets of the State, rather than leading with our incentives.
“It’s important to recognize the value in responsible use of EDGE Credits. DuPage County supports accountability, consolidation, and transparency in government. The steps taken by the Department of Commerce and the Rauner administration will stimulate economic growth in a manner that aligns with these values.” DuPage County Board Chairman, Dan Cronin
With these policy changes now firmly established at Department of Commerce, signs of progress with the legislature and a number of job-creating projects in the pipeline, the Administration will now allow Department of Commerce to make an EDGE offer to companies, confirm eligibility and enable companies to demonstrate that they’ve met all the requirements necessary to receive credits. Actual EDGE and film tax credits for new projects will still not be certified or able to be claimed until an FY16 budget is enacted. These changes will allow the Administration to better recruit new investment to Illinois without impacting the budget.
EDGE Tax Credit Process
- Outreach & Negotiations: Department of Commerce engages with a company to determine financials, need, competing offers and benefit of the project to the State; this is where the process had been suspended.
- EDGE Offer: If the Department finds that providing an incentive is in the best interest of the State, it sends a letter to the company officially offering the incentive and outlining the requirements it must meet (i.e. specific job creation & investment); at that point, a company may begin creating jobs and investments that will count toward meeting its agreement requirements.
- Eligibility Approval via Signed Agreement: Once the company elects to move forward with the project, the Department and the Company sign a binding EDGE agreement which confirms EDGE eligibility.
- Company Reporting: Each year the company qualifies to earn the credit, it sends a report and third-party audit to the Department demonstrating it has met the requirements.
- Department of Commerce Credit Certification: The Department reviews the report and if sufficient, provides the company with a certification that it has met all the necessary requirements and earned the credits; This is where the suspension will continue until a budget is enacted to ensure no budget impact during this time.
- Company Credits Claimed with Illinois Department of Revenue: The company provides the Department certification to the IL Department of Revenue in order to the claim the credit against its income taxes.
The Department will also commence certification of the 49 Enterprise Zones the Illinois Enterprise Zone Board approved in August. Enterprise Zones will become effective January 1, 2016.