Illinois Credit Incentive Changes for Projects That Create Construction Jobs

August 2019

Summary

On June 5, 2019, Illinois passed the Blue Collar Jobs Act (H.B. 5864) into law, creating four new income tax credits for construction projects:
  • High Impact Business Construction Jobs Credit
  • Enterprise Zone Construction Jobs Credit
  • New Construction Economic Development for a Growing Economy (EDGE) Credit
  • River Edge Construction Jobs Credit
 
The credits will be available for tax years beginning on or after January 1, 2021.  Despite maintaining different eligibility requirements, the credits are equal to up to 75 percent of the incremental income tax attributable to eligible construction jobs, as defined under each program. The credit can be used to offset the recipient’s Illinois corporate income tax liability. While the value of the credit cannot exceed the taxpayer’s liability, unused credits may be carried forward for up to five years. The total aggregate amount of credits awarded under the Blue Collar Jobs Act cannot exceed $20 million in any Illinois fiscal year.
 

Details

Historically, Illinois has used programs such as the EDGE Tax Credit Program to encourage economic development across the state and the creation of permanent, full-time jobs. However, after seeing changes among major corporations across Illinois, the state recognized the importance and need for capital improvement and rehabilitation projects to encourage business creation and expansion in Illinois.
 
The Blue Collar Jobs Act tax credits are based on a portion of the withholding tax paid to Illinois on behalf of eligible construction workers. The tax credit that a company receives is based upon its physical location within Illinois. Typically, the credits are valued at 50 percent of the incremental income tax attributable to eligible construction jobs.  However, in more distressed areas, known as “underserved” areas, within the state, the credit increases to 75 percent. Tax credits may be awarded to businesses designated as a High Impact Business by the Department of Economic Development, businesses entering into an agreement under the EDGE Program, and businesses located within a certified Enterprise Zone or River Edge Redevelopment Zone.
 
Taxpayers will not be eligible to receive credits until the proposed projects have been finished and all eligible construction workers have been paid. Because the withholding happens first, there is no risk of not fulfilling the program requirements, and therefore no clawback provisions are in place. None of the tax credits are refundable; however, unused tax credits may be carried forward and applied against the taxpayer’s Illinois corporate income tax liability for the subsequent five-year period.
 
While the value of the tax credit is the same across each of the four programs, each maintains its own eligibility requirements. Please see below for a high-level overview of each:
 
High Impact Business Construction Jobs Credit Enterprise Zone Construction Jobs Credit New Construction
EDGE Credit
 River Edge Construction Jobs Credit
  • Must qualify under the High Impact Business Program
  • Must invest at least $12 million in qualified property
  • Must be located in a certified Enterprise Zone
  • Must invest at least $10 million in an Enterprise Zone Construction Jobs Product
  • Must be certified by the Department of Economic Development
  • Must invest at least $10 million in New Construction EDGE Project
  • Must be located in a River Edge Redevelopment Zone
  • Must invest at least $1 million in a qualified rehabilitation plan
 
 

BDO Insights

Illinois has made significant changes to its existing High Impact Business, Enterprise Zone, EDGE, and River Edge tax credit programs by allowing eligible projects to benefit from new tax credits that focus on incentivizing eligible construction jobs across the state. These changes strengthen Illinois’s incentive toolbox by further enticing companies and developers to undergo capital improvement and rehabilitation projects, which are essential to driving economic development.
 

CONTACT:
 
Tim Schram
National Practice Leader Credit & Incentive Services Managing Director
  Brooklin Salemi
Credits & Incentives Manager