Illinois Updates Credits & Incentives Programs
Illinois Updates Credits & Incentives Programs
Illinois Governor J.B. Pritzker signed new legislation (P.A. 102-1125) on February 3, 2023, that makes significant enhancements to a variety of Illinois credit and incentive programs. The changes include modifications to the Economic Development for a Growing Economy (EDGE) Tax Credit Act, Reimagining Electric Vehicles (REV) in Illinois Act, and the Manufacturing Illinois Chips for Real Opportunity Program.
Economic Development for a Growing Economy
The EDGE income tax credit program was amended to remove language that specifically required evidence to support the “But For” test requirement. The “But For” test was a requirement to provide evidence that had it not been for the use of the EDGE credit, Illinois would not have been selected as the site for the expansion project. Further, for projects in underserved areas, the new legislation increases the maximum amount of credit that may be utilized each year – as long as the applicant agrees to hire the required number of new employees – by an amount not to exceed 50% of the incremental income tax attributable to retained employees.
The EDGE income tax credit program is Illinois’ flag-ship incentive program and may provide eligible taxpayers a discretionary, non-refundable tax credit that can be claimed each year for up to 10-years. The EDGE program is administered by Illinois Department of Commerce and Economic Opportunity (DCEO). The program allows qualified applicants to claim income tax credits against Illinois Income and Replacement Tax for expansion projects that include capital investment and job creation activities. The level of credits and overall eligibility for the credit are based on the number of new jobs, capital investment and size of the business applying for benefits. Credits are awarded at the sole discretion of DCEO and are earned annually for up to a 10-year period. Unutilized credits can be carried forward for a period of five years.
Reimagining Energy and Vehicles (REV) in Illinois Act
First introduced during 2021, the incentive program formerly known as the Reimagining Electric Vehicles in Illinois Act, has been renamed and expanded as the “Reimagining Energy and Vehicles (REV) Act”. REV has been expanded to also include renewable energy manufacturers and other products essential to the growth of the renewable energy sector. Previously the REV was only available to qualified manufacturers of electric vehicles and electric vehicle components.
The amendment further establishes a definition for a qualified Renewable Energy Manufacturer: “a manufacturer whose primary function is to manufacture or assemble: (1) equipment, systems, or products used to produce renewable or nuclear energy; (2) products used for energy conservation, storage, or grid efficiency purposes; or (3) component parts for that equipment or those systems or products.”
The REV act is a highly competitive, discretionary incentive program that provides a multitude of benefits for applicants who meet the definition of a Renewable Energy Manufacturer and are creating new jobs within the state. Benefits include the retention of withholding taxes, utility tax exemptions, sales tax exemptions, and training credits and grants.
Manufacturing Illinois Chips for Real Opportunity (MICRO) Program
The Manufacturing Illinois Chips for Real Opportunity (MICRO) that was signed into law in April 2022 has been amended to provide that the average wage requirement associated with the program will now be determined by the Illinois Department of Commerce & Economic Opportunity, as opposed to the U.S. Bureau of Labor Statistics. Also, the maximum amount of credit allowed has been updated and now cannot exceed 75% of the incremental income tax attributable to retained employees at the project site (previously 25%).
The MICRO program is a highly competitive, discretionary incentive program with a multitude of benefits for eligible companies manufacturing microchips, semiconductors, and associated component parts. Benefits associated with the program including the retention of state withholding taxes attributable to net new job creation, credits for training costs, investment tax credits, exemptions from state utility and/or telecommunication excise tax, and credits for the creation of construction jobs.
Summary of Program Updates
Economic Development for a Growing Economy (EDGE)
Prior to 2023, eligible applicants were required to submit an in-depth, comparative analysis to DCEO demonstrating the need for incentives what was referred to as the “But For” test.
All applications submitted on or after February 3, 2023, may attest to their need for EDGE incentives without the But For test analysis.
Projects in underserved areas are eligible for a retention credit not to exceed 50% of the incremental income tax attributable to the retained employees.
Reimagining Energy and Vehicles (REV)
New program guidelines expanded the REV definition of an “Eligible Applicant” to also include manufacturers of solar, renewables, and energy storage components.
Companies with agreements in a Tier 1 can apply to renew their REV agreement for one additional term for a total of 20 years. Companies with agreements in a Tier 2 can apply to renew their REV agreement for a total of 30 years.
Manufacturing Illinois Chips for Real Opportunity (MICRO)
The program has been amended to increase the value of the tax credits for qualified retained jobs:
BDO’s National Credits & Incentives team has professionals in the Chicago office and several other resources across the U.S. The Chicago team has strong relationships with DCEO officials and is able to address any questions you may have about the program updates in this alert.