EDGE Tax Credit Program Reform

While the state faces huge budget challenges and small businesses pay their fair share of taxes, the Illinois Department of Commerce and Economic Opportunity (DCEO) awards large tax breaks to primarily large companies threatening to leave the state or to entice businesses to move here in exchange for an agreement to retain or create jobs and put money into the infrastructure of their businesses. Through the EDGE tax credit program, the state awarded companies $161 million in such tax breaks in 2011.

 A 2012 national survey by the Pew Center on the states called Evidence Counts found Illinois’ program to be in the bottom tier of transparency for whether EDGE tax credits actually generated the jobs that justify the tax break.

Skepticism of EDGE tax credits has grown in recent years and the EDGE tax credit program has been called into question by Republicans and Democrats alike. Some folks cannot condone government officials choosing specific companies deemed worthy of receiving special tax breaks and thereby inserting themselves into the free market by picking winners and losers. Others believe these lavish tax breaks constitute corporate welfare benefiting primarily large companies at the expense of the state’s taxpayers. Small business owners, of all political persuasions, understand there are inherent problems with EDGE and are looking for a level playing field so that companies, both large and small, pay their fair share of whatever income tax the state levies.

Legislation and Resolution SBAC Supports:

House Resolution 107, filed by Representative Kelly Cassidy, directs the Auditor General to conduct a program audit of DCEO to examine the operations and management of the Department as it relates to the administration of the EDGE tax credit program. For full text and status, click here.

HB 3743, filed by Representative Ron Sandack, puts a moratorium on awarding further EDGE tax credits by the 99th General Assembly. For full text and status, click here.

Status:

In November 2015, policy changes were made to Illinois’ EDGE Tax Credit Program.

Policy changes include:

  1. No longer supporting “Special EDGE” agreements (see below for more information) that only benefit certain companies that can afford lobbyists;
  2. No longer providing tax credits for job retention, only for capital investment and net new job creation;
  3. 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;a.       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;
  4. Prohibiting more than one tax credit on the same facility. Previous administrations would allow multiple EDGE deals on jobs created at the same facility;
  5. Focusing on marketing the assets of the State, rather than leading with our incentives.

Read DCEO’s press release on these changes here.

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Supporters