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Thursday, May 22, 2014 12:01 am

Madigan: Include small business in tax credit

 

House Speaker Michael J. Madigan wants to extend a special tax credit currently available to certain large Illinois businesses to smaller companies too.

Madigan spoke in front of the House Revenue and Finance Committee May 14, when he presented House Bill 3890. The bill proposes that the Economic Development For a Growing Economy (EDGE) tax credit program be expanded to allow smaller businesses to apply.

Companies must meet certain standards, such as making a commitment to invest at least $1 million in capital improvements and create new jobs to qualify for EDGE credits, which are granted to businesses on a case-by-case basis. In some cases, companies receive millions of dollars in incentives. The program has come under criticism, though, as some companies have reportedly been laying off workers while still receiving the credits, which are aimed at rewarding job creation.

Madigan’s proposal aims to offer relief to small businesses by eliminating the $1 million capital investment requirement, but it comes with a list of rules. Under his proposal, a business with fewer than 100 employees would have to create at least five new jobs to qualify. The company would also have to show that without the EDGE credit, the business would not locate the new project or new jobs in Illinois. It also includes a provision that incorporates “high need” areas, such as locations with high poverty or high unemployment rates, so that preference is given to applicants in areas where business expansion would be most beneficial.

The bill passed in committee, but with criticism. Doug Whitley, CEO of the Illinois State Chamber of Commerce, said the proposal is so complicated that it wouldn’t apply to many companies. Adam Pollet, director of the Department of Commerce and Economic Opportunity, however, argued it would allow for job creation in areas of higher need.

Carol Portman of the Taxpayers’ Federation of Illinois said her organization agrees that credits should be available to more businesses, but Madigan’s proposal has too many limits and narrows the pool of companies that qualify.

Portman also said she is concerned few businesses would benefit because a minority of smaller companies pay income tax.

A part of the EDGE program includes companies applying for incentives commonly referred to as “special” EDGE credits, where businesses apply for incentives under special circumstances. For example, in 2013 Decatur’s Archer Daniels Midland asked for a special EDGE so that it could relocate its headquarters from Decatur to Chicago.

Madigan’s proposal requires that companies applying for “special” EDGE credits would have to agree to disclose income tax information, including gross income and net income before and after the credits are applied.

“The introduction … of this public disclosure of what has traditionally been highly confidential income tax data is also troubling,” Portman said. “We don’t like that in there at all.”

Another aspect of the bill that Portman said needs revision is the requirement of companies to promise that without the credit, they would have to relocate outside of Illinois.

“I understand, you don’t want to be throwing money at somebody who has no intention to ever leave and no intention to go anywhere else. That’s the political motivation behind this. But on the other hand, the smaller the business, how likely is it that they’re going to move?” she said.

Earlier this year, Madigan presented another measure aimed at offering businesses relief. On Jan. 30, he proposed the corporate income tax rate of 7 percent be cut in half to 3.5 percent. In April, he stated that he had dropped the bill due to lack of support.

At the committee meeting regarding EDGE credits, Madigan said in relation to the corporate income tax rate reduction: “I’m prepared to advance that bill, but as a part of a balanced package.”

Contact Lauren P. Duncan at intern@illinoistimes.com.

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