TITLE 14: COMMERCE
SUBTITLE C: ECONOMIC DEVELOPMENT
CHAPTER I: DEPARTMENT OF COMMERCE AND ECONOMIC OPPORTUNITY
PART 527 ECONOMIC DEVELOPMENT FOR A GROWING ECONOMY PROGRAM (EDGE)
SECTION 527.20 DEFINITIONS
Section 527.20 Definitions
The following definitions are applicable to this Part.
"Accessible and affordable mass transit" means access to transit stops with regular and frequent service within one mile from the project site and pedestrian access to transit stops.
"Act" means the Economic Development for a Growing Economy Tax Credit Act [35 ILCS 10].
"Affordable workforce housing" means owner-occupied or rental housing that costs, based on current census data for the municipality where the project is located or any municipality within 3 miles of the municipality where the project is located, no more than 35% of the median salary at the project site, exclusive of the highest 10% of the site's salaries. If the project is located in an unincorporated area, "affordable workforce housing" means no more than 35% of the median salary at the project site, excluding the highest 10% of the site's salaries, based on the median cost of rental or of owner-occupied housing in the county where the unincorporated area is located.
"Agreement" means the Agreement between a Taxpayer and the Department under the provisions of Section 5-50 of the Act. [35 ILCS 10/5-5]
"Applicant" means a Taxpayer that is operating a business located, or that the Taxpayer plans to locate, within the State of Illinois and that is engaged in interstate or intrastate commerce for the purpose of manufacturing, processing, assembling, warehousing, or distributing products, conducting research and development, providing tourism services, or providing services in interstate commerce, office industries, or agricultural processing, but excluding retail, retail food, health, or professional services. "Applicant" does not include a Taxpayer who closes or substantially reduces an operation at one location in the State and relocates substantially the same operation to another location in the State. This does not prohibit a Taxpayer from expanding its operations at another location in the State, provided that existing operations of a similar nature located within the State are not closed or substantially reduced. This also does not prohibit a Taxpayer from moving its operations from one location in the State to another location in the State for the purposes of expanding the operation, provided that the Department determines that expansion cannot reasonably be accommodated within the municipality in which the business is located or, in the case of a business located in an incorporated area of the county, within the county in which the business is located, after conferring with the chief elected official of the municipality or county and taking into consideration any evidence offered by the municipality or county regarding the ability to accommodate expansion within the municipality or county. [35 ILCS 10/5-5]
"Business Location Efficiency Incentive" means the incentive created by the Business Location Efficiency Incentive Act [35 ILCS 11].
"Capital improvements" shall include the purchase, renovation, rehabilitation, or construction of permanent tangible land, buildings, structures, equipment and furnishings in an approved project sited in Illinois and in expenditures for goods or services that are normally capitalized, including organizational costs and research and development costs incurred in Illinois. For land, buildings, structures and equipment that are leased, the lease must equal or exceed the term of the Tax Credit Agreement and the cost of the property shall be determined from the present value, using the corporate interest rate prevailing at the time of the application, of the lease payments.
"Credit" means the amount agreed to between the Department and Applicant under the Act, but not to exceed the lesser of:
the sum of:
50% of the Incremental Income Tax attributable to New Employees at the Applicant's project; and
10% of the training costs of New Employees; or
100% of the Incremental Income Tax attributable to New Employees at the Applicant's project.
However, if the project is located in an underserved area, then the amount of the Credit may not exceed the lesser of:
the sum of:
75% of the Incremental Income Tax attributable to New Employees at the Applicant's project and
10% of the training costs of New Employees; or
100% of the Incremental Income Tax attributable to New Employees at the Applicant's project.
If an Applicant agrees to hire the required number of New Employees, then the maximum amount of the Credit for that Applicant may be increased by an amount not to exceed 25% of the Incremental Income Tax attributable to Retained Employees at the Applicant's project; provided that, in order to receive the increase for Retained Employees, the Applicant must provide the additional evidence required under Section 5-25(b)(3). [35 ILCS 10/5-5]
"Department" means the Illinois Department of Commerce and Economic Opportunity. [35 ILCS 10/5-5]
"Director" means the Director of the Illinois Department of Commerce and Economic Opportunity. [35 ILCS 10/5-5]
"Employee housing or transportation remediation plan" means a plan to increase affordable housing or transportation options, or both, for employees earning up to the median annual salary of the workforce at the project. The plan may include, but is not limited to, an employer-financed assisted housing program that can be supplemented by State or federal grants or shuttle services between the place of employment and existing transit stops or other reasonably accessible places.
"Existence of infrastructure" means the existence, within 1,500 feet of the proposed site, of roads, sewers, sidewalks, and other utilities and a description of the investments or improvements, if any, that an applicant expects State or local government to make to that infrastructure.
"Full-time Employee" means an individual who is employed for consideration for at least 35 hours each week or who renders any other standard of service generally accepted by industry custom or practice as full-time employment. [35 ILCS 10/5-5] Annually scheduled periods for inventory or repairs, vacations, holidays and paid time for sick leave, vacation or other leave shall be included in this computation of full-time employment. An individual for whom a W-2 is issued by a Professional Employer Organization (PEO) is a full-time employee if employed in the service of the Applicant for consideration for at least 35 hours each week or who renders any other standard of service generally accepted by industry custom or practice as full-time employment to the Applicant. [35 ILCS 10/5-5] For example, an employee who works 25 hours per week is considered the industry standard for full-time in the package delivery industry and an employee who is employed for a least 35 hours per week during the historical seasonal production is considered the industry standard for full-time in the candy manufacturing industry.
"Incremental Income Tax" means the total amount withheld during the taxable year from the compensation of New Employees and, if applicable, Retained Employees under Article 7 of the Illinois Income Tax Act [35 ILCS 5] arising from employment at a project that is the subject of an Agreement. [35 ILCS 10/5-5]
"Labor Surplus Area" or "LSA" must have an average unemployment rate at least 20 percent above the average rate for all states (plus the District of Columbia and Puerto Rico) during the previous two calendar years. However, the 20 percent ratio is disregarded:
when this 2-year average for all states is 8.3 percent or above, an average unemployment rate of 10 percent or more will qualify an area; and
when the all-states' average is 5.0 percent or less, an area will qualify with a 6.0 percent average.
The U.S. Department of Labor issues the labor surplus area listing on a fiscal year basis. The listing becomes effective each October 1 and remains in effect through the following September 30, but may be updated at any time during the fiscal year based on exceptional circumstance petitions. LSAs are classified on the basis of civil jurisdictions (cities with a population of at least 25,000 and all counties). LSAs are authorized by Public Law 96-302 and 20 CFR 654.
"Local workforce investment area" means a single county or multiple counties designated by the Governor, which allows for the receipt of an allotment of funds under Sections 127(b) or 132(b) of the Workforce Innovation and Opportunity Act, PL 113 through 128 (2014) (WIOA), with considerations consisting of the extent to which the areas:
are consistent with labor market areas in the State;
are consistent with regional economic development areas in the State; and
have available the federal and non-federal resources necessary to effectively administer activities under subtitle B and other applicable provisions of WIOA,
including whether the areas have the appropriate education and training providers, such as institutions of higher education and area career and technical education schools.
"Location efficient" means a project that maximizes the use of existing investments in infrastructure, avoids or minimizes additional government expenditures for new infrastructure, and has nearby housing affordable to the permanent workforce of the project or has accessible and affordable mass transit or its equivalent or some combination of both.
"Location efficiency report" means a report that is prepared by an applicant for increased State economic development assistance, under Section 10 of the Business Location Efficiency Incentive Act [35 ILCS 11/10] and follows that Act, and that describes the existence of affordable workforce housing or accessible and affordable mass transit or its equivalent. [35 ILCS 11/5]
"New Employee" means a full-time employee first employed by a Taxpayer in the project that is the subject of an Agreement and who is hired after the Taxpayer enters into the tax credit Agreement and who continues to be employed by the Taxpayer on the last day of the taxable year for which the Taxpayer seeks a Credit under this Act.
The term "New Employee" does not include:
an employee of the Taxpayer who performs a job that was previously performed by another employee, if that job existed for at least 6 months before hiring the employee;
an employee of the Taxpayer who was previously employed in Illinois by a Related Member of the Taxpayer and whose employment was shifted to the Taxpayer after the Taxpayer entered into the tax credit Agreement;
any individual who has a direct or an indirect ownership interest of at least 5% in the profits, equity, capital, or value of the Taxpayer or a child, grandchild, parent, or spouse, other than a spouse who is legally separated from the individual, of any individual who has a direct or an indirect ownership interest of at least 5% in the profits, equity, capital, or value of the Taxpayer; or
an employee of the Taxpayer who was previously employed in Illinois by the Taxpayer and whose employment was shifted to the project after the Taxpayer entered into the tax credit Agreement.
Notwithstanding the first indented paragraph under the employees that are not included in the term "New Employees", an employee may be considered a New Employee under the Agreement if the employee performs a job that was previously performed by an employee who was:
treated under the Agreement as a New Employee; and
promoted by the Taxpayer to another job. [35 ILCS 10/5-5]
Notwithstanding the first paragraph of this definition, the Department may award a Credit to an Applicant with respect to an employee hired prior to the date of the Agreement if:
the Applicant is in receipt of a letter from the Department stating an intent to enter into a credit Agreement;
the letter described in the first indented paragraph under the employees that are not included in the term "New Employees" is issued by the Department not later than 15 days after the effective date of the Act; and
the employee was hired after the date the letter described in the first indented paragraph under the employees that are not included in the term "New Employees" was issued.
An employee shall be considered a new employee under the Agreement if the employee fills a job vacancy that had been continuously vacant for the 184 day period immediately preceding the date of the Agreement. A job vacancy whose incumbent is on approved leave, is locked out or is on strike is not a vacancy.
"Noncompliance Date" means, in the case of a Taxpayer that is not complying with the requirements of the Agreement or the provisions of the Act, the day following the last date upon which the Taxpayer was in compliance with the requirements of the Agreement and the provisions of the Act, as determined by the Director, pursuant to Section 5-65 of the Act. [35 ILCS 10/5-5]
"Pass Through Entity" means an entity that is exempt from the tax under Section 205(b) or (c) of the Illinois Income Tax Act. [35 ILCS 10/5-5]
"Placed in service" means the state or condition of readiness and availability for a specifically assigned function.
"Professional Employer Organization" or "PEO" means an employee leasing company that is an individual or entity contracting with a client to supply or assume responsibility for personnel management of one or more workers to perform services for the client on an on-going basis rather than under a temporary help arrangement, as defined in Section 206.1(A)(2) of the Illinois Unemployment Insurance Act [820 ILCS 405]. [35 ILCS 10/5-5]
"Professional services" means a taxpayer engaged in the practice of law or medicine.
"Project" means a for-profit economic development activity or activities at a single site, or of one or more taxpayers at multiple sites if the economic activities are vertically integrated.
"Project costs" includes cost of the project incurred or to be incurred by the taxpayer including: capital investment, including, but not limited to, equipment, buildings, or land; infrastructure development; debt service, except refinancing of current debt; research and development; job training and education; lease costs or relocation costs, but excludes the value of State incentives, including discretionary tax credits, discretionary job training grants, or the interest savings of below market rate loans. [35 ILCS 10/5-30]
"Related Member" means a person that, with respect to the Taxpayer during an portion of the taxable year, is any one of the following:
An individual stockholder, if the stockholder and the members of the stockholder's family (as defined in section 318 of the Internal Revenue Code (26 USC)) own directly, indirectly, beneficially, or constructively, in the aggregate, at least 50% of the value of the Taxpayer's outstanding stock.
A partnership, estate, or trust of any partner or beneficiary, if the partnership, estate, or trust, and its partners or beneficiaries own directly, indirectly, beneficially, or constructively, in the aggregate, at least 50% of the profits, equity, capital, stock, or value of the Taxpayer.
A corporation, and any party related to the corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under the attribution rules of section 318 of the Internal Revenue Code, if the Taxpayer owns directly, indirectly, beneficially, or constructively at least 50% of the value of the corporation's outstanding stock.
A corporation and any party related to that corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under the attribution rules of section 318 of the Internal Revenue Code, if the corporation and all such related parties own in the aggregate at least 50% of the profits, equity, capital, stock, or value of the Taxpayer.
A person to or from whom there is attribution of stock ownership in accordance with section 1563(e) of the Internal Revenue Code, except, for purposes of determining whether a person is a Related Member under this paragraph, 20% shall be substituted for 5% wherever 5% appears in section 1563(e) of the Internal Revenue Code. [30 ILCS 10/5-5]
"Retained Employee" means a Full-Time Employee employed by a Taxpayer during the term of the Agreement whose job duties are directly and substantially-related to the project. For purposes of this definition, "directly and substantially-related to the project" means at least two-thirds of the employee's job duties must be directly related to the project and the employee must devote at least two-thirds of his or her time to the project. The term "Retained Employee " does not include any individual who has a direct or an indirect ownership interest of at least 5% in the profits, equity, capital, or value of the Taxpayer or a child, grandchild, parent, or spouse, other than a spouse who is legally separated from the individual, of any individual who has direct or indirect ownership interest of at least 5% in the profits, equity, capital, or value of the taxpayer.
"Taxpayer" means an individual, corporation, partnership, or other entity that has any Illinois Income Tax liability. [35 ILCS 10/5-5]
"Training costs" means costs incurred to upgrade the technological skills of Full-Time Employees in Illinois and includes: curriculum development; training materials (including scrap product costs); trainee domestic travel expenses; instructor costs (including wages, fringe benefits, tuition and domestic travel expenses); rent, purchase or lease of training equipment; and other usual and customary training costs. "Training costs" do not include costs associated with travel outside the United States (unless the Taxpayer receives prior written approval for the travel by the Director based on a showing of substantial need or other proof the training is not reasonably available within the United States), wages and fringe benefits of employees during periods of training, or administrative cost related to Full-Time Employees of the Taxpayer.
"Underserved area" means a geographic area that meets one or more of the following conditions:
the area has a poverty rate of at least 20% according to the latest federal decennial census, the most recent American Community Survey released by the U.S. Census Bureau, or other appropriate data source produced by the U.S. Census Bureau;
75% or more of the children in the area are eligible to participate in the federal free lunch or reduced-price meals program according to reported statistics from the State Board of Education;
at least 20% of the households in the area receive assistance under the Supplemental Nutrition Assistance Program (SNAP) according to data from the U.S. Census Bureau; or
the area has an average unemployment rate, as determined by the Illinois Department of Employment Security, that is more than 120% of the national unemployment average, as determining by the U.S. Department of Labor, for a period of at least two consecutive calendar years preceding the date of the application. [35 ILCS 10/5-5]
(Source: Amended at 42 Ill. Reg. 6320, effective March 20, 2018)