Explaining How Certain Tax Incentive Programs Work


Over the past few months the media has reported extensively on the State’s use of tax incentives to induce high-profile companies to remain in Illinois and not depart for other locales courting these businesses and the many jobs they sustain. Most people are familiar with how Tax Increment Financing (TIF) works as an economic development tool for municipal government. Fewer, however, are familiar with the other economic development programs utilized at the State level. Two programs often implemented are the Economic Development for a Growing Economy Tax Credit Act (EDGE) and the Economic Development Area Tax Increment Allocation Act (EDA). This FR Alert provides a brief explanation of how these programs work and the benefits they provide in the event that this becomes an issue in your community.

The EDGE tax credit program uses the state income tax to encourage the location and expansion of medium and large companies in Illinois. Under the statute, the Department of Commerce and Economic Opportunity is authorized to enter into agreements with companies that attest to competition from another state for their business location and propose specific projects involving either capital investment or employment opportunities in Illinois. The agreement must describe, among other things, the project to be undertaken and the amount and duration of the income tax credit to be allowed. The credit may be applied either to the company’s own income tax liability or to the withholding tax the company deducts from its employees’ compensation and which would otherwise be turned over to the State. In other words, the EDGE tax credit program allows a company to keep income taxes, either corporate or personal, that the State would otherwise receive. More information on the EDGE tax credit is available here (see full alert below for links).

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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