As a new year begins, many Chicago and Illinois companies spend time reviewing their performance and profitability over the past 12 months. It’s often a time for candid reflection about where the organization met or exceeded goals and where efforts fell short. There is also a review of key financial metrics, overall performance and budget preparation for 2020. At the same time, many business owners also use this time to review year-end tax planning to ensure all opportunities have been leveraged. While these are essential steps necessary to maintain the vitality of the company, it’s important not to forget about tax saving incentives offered by the state. To help clients, prospects and others learn more about these programs, Selden Fox has provided a summary of key items below.

Illinois Enterprise Zone Program

This program is designed to encourage investment in economically challenged areas by offering qualifying companies expanding to, or located in, a zone with various incentives. The most notable is the Enterprise Zone Investment Credit which provides qualifying companies with a .5% credit against state income tax for investments in property placed into service within an enterprise zone. Beyond this, businesses may also qualify for the sales tax exemption, equipment sales tax deduction, utility tax exemption, and various property tax incentives. There are currently 140 zones located within the city of Chicago and dozens more across the metropolitan area.

Illinois Angel Investment Tax Credit

This incentive encourages investment in early stage companies to provide the capital needed to drive growth. Investments made in Qualified New Business Ventures (QNBV) are eligible to receive a state tax credit equal to 25% of the total investment (limit $2 million). In general, the business must be principally engaged in innovation, and the business must have the potential for increasing jobs in the state. To be considered as a QNBV, companies must meet the additional following criteria:

  • The principal place of business must be located in Illinois;
  • Registered in good standing with the Secretary of State;
  • At least 51% of employees must be located in the state;
  • Have fewer than 100 total employees;
  • Maintained operations in Illinois for less than 10 consecutive years; and,
  • Agree to maintain a minimum employee number within the state for three years from issuance of state credit certificate.

Since qualification requires state certification, it’s important to note Illinois will start accepting QNBV applications on January 2, 2020.

Illinois Film Tax Credit

This incentive provides film producers a credit of 30% of all qualified expenditures including those incurred during postproduction. The credit is available for qualified Illinois production spending, salaries of up to $100,000 per worker and an additional 15% credit on salaries of individuals that live in economically depressed areas (where unemployment is 150% of the state’s annual average).

Economic Development for a Growing Community (EDGE)

The EDGE Program provides annual corporate tax credits to qualifying businesses which support job creation, capital investment, and improve the standard of living for all Illinois residents. Qualifying companies can receive a credit equal to 50% of state income tax withheld from the salaries of employees in newly created positions. In addition, 10% of training costs can be added to the overall incentive. The credit is non-refundable but can be carried forward over a period of five years.

Withholding Tax Credit For Small Employers

This credit is designed to help small businesses cope with the increase in the state’s minimum wage. Employers with 50 or fewer employees that make minimum wage may qualify for the credit. Note that employees who have worked less than 90 days before the reporting period are excluded. To be eligible, the employer’s average wage paid to each employee must have increased over the average wage paid in the prior year for those earning less than $55,000. The credit is non-refundable and is a percentage of the difference between prior and increased wages under the new law.

Contact Us

Not every Chicago business will qualify to take advantage of these programs. However, for organizations that meet qualifying criteria, a significant savings often results. If you have questions about the incentives outlined above or need assistance with a tax or accounting issue, Selden Fox can help. For additional information call us at 630.954.1400 or click here to contact us. We look forward to speaking with you soon.

John Wojcik

John Wojcik is a Certified Valuation Analyst and a member of the National Association of Certified Valuators and Analysts (NACVA). John earned his bachelor's degree in accounting and finance from Illinois State University and his MST in taxation from Northern Illinois University - College of Business.