Tax Candi

I am a woman, therefore, it almost goes without saying that shopping is a favorite pastime.   Growing up in Dallas, and now living in Chicago, I've always enjoyed great shopping opportunities. 

Now, Chicago has two substantial disadvantages from Dallas: 

1. Walking around Magnificent Mile is unpleasant due to weather for 3/4 of the year, and
2. a 10.25% (9.75% come July) sales tax.

Today, Cook County helped lessen consumer's burden, the county also passed an incentive just over a year ago to attract and maintain major retail projects called, fittingly the...

Cook County Retail Economic Development Incentive

The incentive is fairly easy to understand and compute:  In order to entice major retailers (or shopping centers) to locate within Cook County, rather than locating to a collar county with significantly less tax rates, Cook County and the municipality can rebate a portion of their sales tax revenue from the project with the retail.  (Cook County's participation is dependent upon the city's.)

 The portion rebated is negotiated, and the process to apply for this incentive is rather lengthy (much like the Class 7B property tax abatement).  Cook County's Department of Planning and Economic Development oversees the applications, and they require a number of analysis, including a persuasive argument that without the sales tax revenue rebate, the project would not locate within Cook County.  (But retailers, since you're not actually paying the sales tax out of your own pocket, its really no skin off your nose to collect an extra 2+% from your customers and recieve up to 50% of that back!)

Eligible companies must demonstrate that they will create or maintain jobs and increase sales tax revenue.  Additionally, the rebated money cannot go back into profits, but instead must be used to pay for improvements, expand operations, or increase inventory, etc. 

Happy First Day of Summer! In honor of Chicago's weather finally matching the season, let's take a look at one of the most interesting incentives Cook County offers.

The Cook County Assessor offers real property tax abatements to encourage new commercial construction projects. These abatements are subdivided into Class 7A (for projects with costs totalling under $2 million) and Class 7B (for projects with total development costs over $2 million).  Commercial property in Cook County is normally assessed at 25% of its market value, however projects receiving a Class 7 incentives will be assessed at reduced assessment levels.  Class 7 properties are assessed at 10% of fair market value for the first 10 years, 15% for the 11^th year, and 20% for the 12^th year.

For new construction or reoccupied abandoned property, the incentive will apply to the project in its entirety. Projects involving substantial rehabilitation of existing structures will only qualify for the added value which is attributable to the rehabilitation. The reduced assessment continues for 12 years from the date the new construction or substantial rehabilitation is completed or initially assessed.

The process to receive this incentive is rather involved--the property must be designated as an area in need of commercial redevelopment by the local municipal government, and the historical property taxes must demonstrate that the value of the property has decline or is not on par with the development of the surrounding area, among other requirements.   Cook County, ever the height of efficiency, subjects the application through numerous rounds of review.   However the property savings can be substantial for those projects which are awarded a Class 7 status.

If you're interested in this property tax abatement, be sure to check out the Class 7 bulletins.

To kick off this blog about Credit & Incentives, I’ll begin with a tax credit of my current home state… So without further ado...

The Illinois EDGE

The Economic Development for a Growing Economy (“EDGE)” program offers a tax credit to encourage companies to locate or expand operations in Illinois. Eligible companies must make capital investments of at least $5 million and create at least 25 new (to Illinois) full-time jobs. (Companies with less than 100 employees need only invest $1 million and create 5 jobs.) Note: Especially in this current economy, the EDGE credit may be available to companies needing assistance to retain jobs already in the state.

The amount of the credit is negotiated on a case-by-case basis and may equal to the state income withholdings of the new employees. While non-refundable, the credit may be taken for up to ten years.

Companies receiving a tax credit under the EDGE Program must file (lengthy) annual reports. Interested companies must file an application with the Illinois Department of Commerce and Economic Opportunity.