What are the EDGE Tax Credits?
Economic Development for a Growing Economy (EDGE) Tax Credits are the most commonly awarded and utilized state-level economic incentives in Indiana. EDGE Credits provide a refundable corporate income tax credit, which is calculated as a percentage of the expected increased tax withholdings generated from qualifying net new jobs.
This discretionary state economic development tool turns the jobs created from approved new projects into a value for the supported companies. The refundable corporate income tax credit is calculated as a percentage (not to exceed 100%) of the expected increased tax withholdings generated from new jobs creation. The credit certification is phased in annually for up to 10 years based upon the employment ramp-up outlined by the business.
Who can qualify for the EDGE Tax Credit?
To be eligible for the tax credit, a company must have a project that will result in net new jobs within Indiana that were not previously performed by employees of the applicant. Since the EDGE Tax Credit is designed as a discretionary benefit, a company must present options, challenges and the economic impact their project will have on the state and local community. This process allows officials at the Indiana Economic Development Corporation (IEDC) to consider their options and weigh the total impact on the Hoosier economy.
EDGE credits are generally not available to retail establishments, local service companies and other companies with a purely local client base. Manufacturers, software, technology, logistics, headquarters projects, and multi-state service providers are common recipients of EDGE credits.
What is the value of the EDGE Tax Credit?
Since EDGE Tax Credits are based on the state withholding taxes collected from net new employees, both the number of jobs and wages of new employees will affect potential value. The IEDC has discretionary authority to provide a calculated percentage of the expected increase in tax withholdings of net new jobs. Awards have been known to vary significantly depending on the value of the project and its competitiveness.
The IEDC may consider investment, total economic impact, industry, location and other factors in determining if, and to what extent, they will provide EDGE Tax Credit support. Depending on the situation, the EDGE Tax Credit generally provides somewhere between $4,000 and $10,000 per qualifying net new job. Importantly, unlike some other economic development credits, EDGE Tax Credits are refundable, meaning any certified amounts can not only offset tax liability but will be paid out even in excess of tax liability in a given year.
How can you take advantage of the EDGE Tax Credit?
While EDGE Tax Credits can be extremely valuable, receiving an offer and ultimately receiving value from the EDGE Tax Credit can be a challenge for many businesses. From identifying an opportunity to managing interactions with the IEDC, to meeting compliance requirements, the roadmap to EDGE Tax Credit value is winding. EDGE Credits may be provided on their own, but are often accompanied as a part of a larger state and local economic development package by Skills Enhancement Fund (SEF) training grants, Hoosier Business Investment (HBI) credit and local incentives like property tax abatement and tax increment financing.
Having a site selection and economic incentive advisor who has experience with the IEDC is a great first step. From there, you’ll need to know how to identify a qualifying project. At McGuire Sponsel, we believe that rapidly growing companies, especially multi-state companies, need to have a strategic location and incentive plan. Our planning services focus on multi-state incentive program education, collaborative planning, and ongoing opportunity assessment. If your company is investing and adding jobs, incentives like the EDGE Tax Credit could bring you hundreds of thousands of dollars or more. To schedule your incentive planning session, call McGuire Sponsel at 317-564-5000 or email sbrunson@mcguiresponsel.com or ddalton@mcguiresponsel.com.