The Illinois Department of Revenue (IL DOR) amended state regulations to incorporate and further clarify recent legislative changes to the benefits provided by three incentive programs available to businesses with operations in Illinois. They include: the Economic Development for a Growing Economy (EDGE), Reimagining Energy and Vehicles (REV), and Manufacturing Illinois Chips for Real Opportunity (MICRO).
Historically, the credits were generally only available to offset Illinois income tax liabilities. Only certain startup businesses and companies that specialized in manufacturing were eligible to use the credits to offset employee withholding tax liabilities. However, Illinois is prospectively expanding this privilege to include any company that meets the program requirements. In future years, companies may utilize EDGE, REV, and MICRO program benefits to offset Illinois income tax liability, or if eligible, make an election to use such benefits to offset Illinois employee withholding tax liability.
Overview of the Programs
EDGE
The EDGE program provides annual corporate tax credits to qualifying businesses that support job creation and capital investment. The initial qualification criteria will vary depending on the business type, size, and location, but in general, a business must do the following to qualify:
- Job creation (lesser of): 5% worldwide employment, or 50 new full-time jobs
- Investment: between $2.5 million – $50 million
Typically, the credit is equal to 50% of the income tax withholdings of new jobs created in the state, but this can increase to 75% if the project is located in an “underserved area.” Additional credits are also available as reimbursement for qualifying training costs equal to 10% of the eligible costs of training newly hired full-time employees. Typical projects may receive benefits for up to 10 years, but some larger projects may receive credits for up to 15 years.
The program was expanded to include any taxpayer proposing an expansion project or new facility in Illinois. Eligible businesses may make an annual election to utilize the credit to offset withholding tax liabilities, but for the EDGE program, the election is not available if the taxpayer has an Illinois income tax liability at the end of the tax year.
REV
The REV program was established to attract companies in the EV and other renewables sectors. Eligible businesses include those in the manufacturing of EVs, EV component parts, EV batteries, EV charging stations, and electric vertical takeoff and landing aircraft (eVTOL). Like the EDGE program, the initial qualification criteria will vary depending on the business type, size, and location, but in general, a business must do the following to qualify:
- Job creation (lesser of): 10% worldwide employment, or 50 new full-time jobs
- Investment: must exceed $2.5 million within four years
Historically, the tax credit was non-refundable and could generally only be used to offset Illinois income taxes due. Under recent legislation, a company may now be able to elect to utilize REV credits to offset either Illinois income taxes due or claim the credit against its Illinois employee withholding tax liability.
MICRO
MICRO incentives create an environment for eligible companies that manufacture microchips, semiconductors, quantum computers and associated parts, to grow in Illinois. MICRO program incentives are based on minimum capital investment and job creation commitments. Like the EDGE and REV programs, the MICRO program has unique initial qualification criteria depending on the business type, size, and location. In general, the MICRO program’s minimum job creation and investment thresholds match those set forth by the REV program.
A company may now elect to utilize MICRO credits to offset either Illinois income taxes due, or its Illinois withholding tax obligation. MICRO projects may also receive additional credits related to qualified property investment, new employee training credits, or existing employee training credits.
Takeaways
Over the past several years, Illinois has continued to adjust and expand its state tax incentives programs. These most recent changes show a clear message that Illinois intends for more companies to have access to the state’s tax incentive programs. Companies expanding in Illinois may now be able to take advantage of incentives that were not available to them in the past.
The CBIZ Credits and Incentives team is happy to assist with any questions or analyze how these changes might create new opportunities to utilize the incentives programs available in Illinois or any other state where you have operations. If you would like to connect with our team, please contact a CBIZ SALT professional.
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