By Caitlin Rydinsky
After months of discussion on tax reform, the House Revenue and Finance Committee on Wednesday passed an amendment that would tighten the rules on a high-profile tax incentive for businesses.
The legislation, House Bill 3890, will change the requirements for the Economic Development for a Growing Economy (EDGE) tax credit. House Speaker Michael Madigan, who sponsored the bill, said it would allow smaller businesses to apply for the credits, retain jobs within businesses and help spur development in communities with high rates of poverty and unemployment.
Madigan admitted before the committee that the legislature “fell into a habit” of treating companies individually who could not use their EDGE credit—because they had no tax liability to the state—despite meeting all of the other negotiated qualifications within the credit. Lawmakers began evaluating the incentive, as well as others, after several businesses lined up for Special EDGE credits, to use the credit toward other tax liabilities.
The legislation would eliminate the $100 million capital spending requirement for small businesses that employ fewer than 100 employees. The bill would require them to hire five new employees to gain the incentive.
Many opponents said they support eliminating the spending requirement for smaller companies, but that they do not agree with how it is being done.
Doug Whitley, president and chief executive officer of the Illinois Chamber of Commerce, who opposes the changes, said, “This labyrinth of exceptions and limitations is so lengthy that I would suggest to you that almost no one is going to comply with this EDGE credit.” Whitley was critical that the measure would still require that lawmakers approve special EDGE credits. “ I thought you were trying to get out of that business,” he said.
While supporters of the tax credit said that it would increase the amount of small businesses that qualify, Carol Portman of the Taxpayers’ Federation of Illinois said that many small businesses don’t pay state income taxes, so she doesn’t see how much it would actually help.
Madigan’s legislation would give special preference to businesses in economically depressed areas. Some argue this may limit development throughout the state.
Mark Denzler, vice president and chief operating officer of the Illinois Manufacturers Association, said that because the legislation looks at Census tracks instead of entire communities, a business in a struggling town might not qualify just because of its address. Denzler said that growth in depressed areas is important but that lawmakers should not turn away jobs in more affluent areas. “A job is a job. Do we really want to be discriminant against jobs?”
The most controversial piece of the proposal would require businesses receiving the special EDGE credit to publicly release tax information. Madigan said “the business must agree to disclose income tax information during the term of its EDGE agreement, including gross income, the amount of income allocated to Illinois and net income before and after credits are applied.”
Denzler and others in the business community are fundamentally opposed to requiring companies to release tax information. Denzler noted that tax disclosure has been a popular subject for some Democrats, and he said he thought that the requirement might be “throwing a bone” to those who would like to see corporations have to open up their books to the public.
“I will say that what they what the speaker has done is limit … those entities that are going to come to the state and ask for that special treatment in allowing the credits to be used for withholding,” said the ranking Republican on the committee, Rep. David Harris, who is from Arlington Heights. “The way that it’s going to be limited is that those entities are not going to want to disclose all the kind of information that is asked to be disclosed. I have a problem even asking for that, but it’s limited strictly to the [special EDGE tax credit], so I don’t think this is a harmful move and [it] makes some positive reforms.”