Incentives Watch: Illinois Diversity and Inclusion Tax Credit Initiatives

Diversity and inclusion initiatives have grown tremendously in the business community over the last 30 years.  Unfortunately, the figures show that despite these efforts, diversity in corporate America does not mirror diversity in the general population.  In an effort to increase diversity in economic development, some states have started to incorporate diversity and inclusion initiatives into their tax credits and incentives. 

As in the business world, diversity and inclusion initiatives for tax credits come in a variety of forms. From credit carve-outs for minority businesses to requiring companies to develop their own diversity and inclusion initiatives, the methods used to promote diversity are endless.

One state making headway with diversity and inclusion initiatives is Illinois. According to the Film Office website, Illinois is the only state to incorporate a diversity standard into their film credit. Several states, including New York and California, are currently entertaining similar proposals. The Illinois Film Services Tax Credit requires companies to make a “good faith” effort to hire minorities and to submit a diversity plan to the Illinois Film Office.  

More recently, the Illinois General Assembly amended several economic development credits to incorporate new diversity and inclusion initiatives. These changes are in line with other initiatives in the state. 

In August the Illinois General Assembly enacted S.B. 2012, which amends the Angel Investor Tax Credit. The Angel Investor Tax Credit provides a credit that is equal to 25 percent of the venture capital investment in a qualified new business venture. The total aggregate amount of credits available for all taxpayers is capped at $10 million per tax year. S.B. 2012 set aside $500,000 of this cap for investment in qualified new business ventures which are minority-owned businesses, female-owned business, or businesses owned by a person with a disability. This carve-out applies for tax years beginning on or after Jan. 1, 2018.

Taking a different approach, the Illinois General Assembly also enacted 2017 S.B. 1567. This legislation amends the Economic Development for a Growing Economy (EDGE) Credit.  The EDGE credit is available for taxpayers that enter into agreements with the Illinois Department of Commerce to locate or expand operations in Illinois that create new full-time jobs. S.B. 1567, effective Aug. 25, 2017, requires taxpayers claiming the EDGE credit to submit annual supplier diversity reports to the Illinois Department of Commerce. The report must outline the taxpayer’s supplier diversity goals and their actual spending with female-owned, minority-owned, veteran-owned, and small business enterprises. Taxpayers are required to submit an action plan that outlines the steps they plan to take in order to meet their supplier diversity goals.

There are numerous other credits and incentives in addition to the wide variety of state initiatives to encourage diversity in the Illinois business community. These three tax credits are just a few examples of Illinois’ efforts to achieve this goal. 

Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Will more states incorporate diversity and inclusion provisions into their tax credits?

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