Illinois Speaker of the House Attempts to Extend EDGE Tax Credits to Small Businesses

tax credits, EDGE program, Illinois small business lawyer, Illinois small business attorneyThe Economic Development for a Growing Economy (EDGE) tax credit program provides tax credits and incentives to companies operating in Illinois. EDGE has served as a key bargaining tool that has allowed the legislature to persuade companies to relocate to Illinois, while also making sure that corporations already operating within the state stay put. Critiques of Illinois’ treatment of small businesses abhor the credit, sometimes even going so far as equating EDGE with corporate welfare. Last week Illinois House Speaker Michael J. Madigan submitted a proposal to the legislature that intends to extend the EDGE tax credit to Illinois small businesses.

What is the EDGE Tax Incentive Program?

The EDGE program is designed to incentivize companies to either relocate to Illinois, or to expand existing operations in Illinois. In an attempt to provide Illinois with a competitive advantage over other states,  EDGE tax credits are given to qualifying companies, who agree to create at least 25 brand new full-time work positions in the state, and to also make an investment of at least $5 million for capital improvements.

To qualify, a company must also submit documentation as evidence that competition for the company exists within another U.S. state. In exchange, the company can receive non-refundable tax credits that are equal to the amount of Illinois income taxes withheld from new employees. Qualification standards for companies with fewer than 100 employees require only a $1 million capital investment, and the creation of only five new jobs.

Critiques of the current EDGE program believe that the program disproportionately incentivizes large corporations while ignoring small, but viable local businesses that can cannot commit to million-dollar contributions. Reports have also surfaced that companies have circumvented the job creation mandate of the program by still receiving EDGE credits, even after they have laid off workers. In certain situations, this has resulted in large corporations receiving millions of dollars in tax breaks. However, the EDGE program has been proven to be the tipping point in certain situations that motivates on-the-fence companies to relocate to Illinois instead of to other states.

Madigan’s Proposal to Extend Edge Credit to Small Businesses

On May 14th, Speaker Madigan presented House Bill 3890 to the Illinois House Revenue and Finance Committee. The crux of Speaker Madigan’s proposal is to make the EDGE program more inclusive to all businesses looking to relocate, or already operating in Illinois. The proposal would eliminate the $1 million capital investment prerequisite, in order to allow companies with 100 or fewer employees to participate in the program. In order to qualify for the EDGE tax credits these companies must create five new jobs, and also provide proof that without these credits, the company would be unable to create new jobs or commence new work in Illinois. The bill passed through the committee, but not without criticism. Critiques of the proposal claimed that it was too complicated to make a significant impact, while others lauded the proposal as assisting with the creation of jobs in areas of Illinois with high poverty and unemployment rates.

Interested in learning about any relevant state or federal tax credits that could apply to your small business? Contact the small business law attorneys here at the Gierach Law Firm in Naperville, Illinois today for any small business law-related issues that you may be facing.