Amazon, Tax Credits, and Your Business

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Professionals

When Amazon announced its search for a second headquarters, the e-commerce giant set off a frenzy among cities looking to reap the benefits of a generation-defining business opportunity. According to Amazon, the eventual winner can expect $5 billion in construction investments and 50,000 high-paying jobs, along with tens of thousands of additional jobs and tens of billions of dollars in additional investment in the community. In their HQ2 pitches, 238 different cities pulled out all the stops. One Georgia city’s mayor even offered to create a new town named Amazon. 

Chicago, which has recently secured the corporate headquarters for McDonald’s, Motorola Solutions, and ConAgra Foods, was one of the cities to submit an HQ2 bid. Along with Governor Rauner, numerous city and state officials and several influential businesspeople, Mayor Emanuel submitted Chicago’s bid, billing Chicago as “an extraordinary opportunity for Amazon.” The bid touted Chicago’s talented pool of potential employees, accessibility to public transportation and international airports and wide-ranging tax incentives. Chief among the tax incentives in Chicago’s proposal is $1.32 billion in Illinois EDGE tax credits.

The Illinois Economic Development for a Growing Economy (EDGE) program previously expired last spring, but a new bill extended it through June 30, 2022. The purpose of the EDGE program is to stimulate job growth, encourage capital investment and promote entrepreneurship. A company’s EDGE tax credit eligibility depends upon, among other things, the number of employees that the company has. If the company has over 100 employees, the company must make a capital investment of at least $2.5 million in Illinois. Additionally, the company must create 50 full-time jobs or increase its full-time, worldwide employee headcount by 10%. If the company has less than 100 employees, there is no minimum capital investment requirement. However, the company must create the lesser of 50 full-time jobs or 5% of its full-time, worldwide employee headcount.

Companies seeking EDGE tax credits submit applications to the Illinois Department of Commerce and Economic Opportunity (DCEO). The application must include, among other information, a summary of the project and the investment amount, the planned number of full-time employees involved and financial statements. The company must also demonstrate that the project would not occur but for the EDGE credits. If the company qualifies, it must enter into an agreement with the DCEO, which specifies the terms and conditions regarding the credits. The DCEO determines the amount of EDGE credits granted based on its review of the application.

While the renewed EDGE program is currently undergoing administrative review regarding certain procedural aspects, the DCEO is now accepting EDGE applications from companies already in Illinois and those looking to relocate here. If you are interested in learning more about the legal requirements of the EDGE program, please contact Tim Dondanville at tdondanville@burkelaw.com or 312/843-5824. 

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