Incentives Watch: Will the EDGE and Film Tax Credits Migrate to Illinois for the Winter?

Gov. Bruce Rauner (R-IL)

It can’t be easy being Illinois Gov. Bruce Rauner. Trying to serve as a Republican governor in a heavily Democratic state, Rauner is faced with a budget impasse. The Economist reports that he’s even been losing weight due to stress. But perhaps as we head into the chilly Chicago winters, we will see some thawing in the relationship between Rauner and the state legislature. In the wake of reaching agreement with the legislature on several issues, Rauner announced that Economic Development for a Growing Economy (EDGE) tax credits and film credits would be reinstated in Illinois, according to a Daily Tax Report story by Michael J. Bologna.

However, the governor’s press release details several changes that will be coming to the EDGE credits. One of the major changes is that companies can no longer obtain credits through a loophole where they create jobs in one location and lay off workers in another location.

In order to qualify for the EDGE credit, a company must invest at least $5 million in capital improvements in Illinois and create 25 new jobs or, for companies with less than 100 employees, the company must invest at least $1 million and create five new jobs. The credit is equal to up to 100 percent of the amount invested.

Although the requirements of EDGE seem fairly straightforward, a recent analysis by the Chicago Tribune, as mentioned in Michael J. Bologna’s Daily Tax Report story, found that many companies were able to broker special deals that allowed them to still collect tax credits despite eliminating jobs in Illinois.

The Chicago Tribune analysis comes on the heels of controversy in Massachusetts. In Sept., the state granted IBM a total of $2.5 million in tax incentives to locate an office in Cambridge. However, critics of the tax breaks point out that IBM would have moved to Massachusetts, even without the tax credits, according to the Boston Globe.

Also expected to return is  the Illinois film credit, which is equal to 30 percent of production spending in Illinois plus 15 percent of the labor costs for employment of residents in areas with high unemployment or high poverty.

According to the governor’s press release, applicants for both the EDGE tax credit and the film credit may be approved, but cannot receive any funds until the budget situation in Illinois is resolved. However, there is some confusion on that point as Deadline reports that, at least for the film credit, approved productions will receive funds.

Continue the discussion on LinkedIn:  When a company threatens to relocate to another state, should they be offered tax credits to stay?