Parties interested in City of Chicago financial assistance programs are encouraged to meet with representatives of the Department of Planning and Development to determine eligibility. The city reserves the right to appoint a legal team in connection with the issuance of private activity bonds. For additional information, please contact: City of Chicago Department of Planning and Development Development Support Services 121 N. LaSalle St. #1003 (312) 744-4389
TABLE OF CONTENTS Private Activity Bond Programs Industrial Development Revenue Bonds 4 Enterprise Zone Facility Bonds 5 501(c)(3) Bonds 6 CD Float Loan Program 7 Bank Participation Loan Program Industrial Retention & Expansion Loan 8 Commercial Business Development Loan 8 Micro Loan Program 9 Tax Increment Financing (TIF) 10 Streamlined Tax Increment Financing 12 Small Business Improvement Fund (SBIF) 13 Laboratory Facilities Fund 14 Special Service Area Designations 15 Facade Rebate Program 16 Property Tax Incentive programs Cook County Class 6(b) Classification 17 Cook County Class 7(a) Classification 17 Cook County Class 7(b) Classification 17 Cook County Class 8 Classification 18 Cook County Class C Classification 18 Cook County Class L Classification 19 Enterprise Zone Program and Incentives 20 State of Illinois Department of Commerce & Economic Opportunity 22 Enterprise Zone Maps 24 Empowerment Zone Maps 27
Chicago Department of Planning and Development PRIVATE ACTIVITY BOND PROGRAMS INDUSTRIAL DEVELOPMENT REVENUE BONDS The City of Chicago issues tax-exempt Industrial Development Revenue Bonds (IDBs) and lends their proceeds to manufacturing companies to finance qualified projects that involve the acquisition of fixed assets such as land, buildings and equipment. IDB proceeds may be also used for either new construction or renovation. Tax-exempt bond financing offers long-term financing at rates lower than conventional financing. Qualified projects are limited to facilities which are primarily used to manufacture or process tangible products. Final determination of project eligibility and the tax-exempt status are subject to a legal opinion issued by a co-bond counsel appointed by the city. USE OF PROCEEDS: AMOUNT: SECURITY: INTEREST RATE: TERM: FEE: Purchase of land or building Rehabilitation or new construction Purchase of machinery or equipment Up to 100% of eligible project costs. Due to issuance costs, IDB issues for less than $2 million may not be cost effective. IDBs are payable from regular payments from the user of the facility or a credit enhancer (usually a bank letter of credit). Interest on IDBs are exempt from most federal income tax, thereby providing lower interest rates than conventional financing. Up to 120% of the expected economic useful life of the project. The city s administrative fee, equal to 25 basis points on the par amount of the IDB, is due at closing. 4
Financial Assistance for Business ENTERPRISE ZONE FACILITY BONDS The City of Chicago issues tax-exempt Enterprise Zone Facility Bonds (EZ Bonds) to finance qualified businesses located in federally designated Empowerment Zones. EZ Bonds may be used to finance buildings, equipment and land. EZ Bonds offers long-term tax-exempt financing up to 120 percent of the expected economic useful life of the project. Rates lower than conventional financing. Qualified businesses include almost any commercial or manufacturing business, subject to limited exclusions and special rules for certain rental property and certain businesses involving intangibles. Final determination of project eligibility and the tax-exempt status of the EZ Bonds are subject to a legal opinion issued by bond counsel. At the end of 18 months after the issuance date of the bonds, 35 percent of the company s employees must physically reside in an Empowerment Zone. Thereafter, compliance is normally tested each year. USE OF PROCEEDS: AMOUNT: SECURITY: INTEREST RATE: TERM: FEE: Purchase of land or building Rehabilitation or new construction; Purchase of machinery or equipment Up to 100 percent of eligible project costs. (No more than $230 million in bonds may be issued over the life of the Empowerment Zone). EZ Bonds are payable from the facility user or a credit enhancer (usually a bank letter of credit). Interest on qualified EZ Bonds is exempt from most federal income tax, thereby providing lower interest rates than conventional financing. Up to 120 percent of the expected economic useful life of the project. The city charges an administrative fee equal to 25 basis points of the par amount of the EZ Bonds, which is payable at closing. 5
Chicago Department of Planning and Development 501(c)(3) BONDS Issued on behalf of qualified business that are purchasing or rehabilitating buildings, equipment and land. The program offers long-term tax-exempt financing at rates lower than conventional financing. Any private developer, not-for-profit organization, or individual business with an irrevocable letter of credit from a qualified bank may apply. All projects must comply with city and federal regulations associated with the program. USE OF PROCEEDS: AMOUNT: SECURITY: INTEREST RATE: Purchase of land or building Rehabilitation or new construction Purchase of machinery or equipment Up to 100 percent of eligible project costs. Due to issuance costs, IDB issues for less than $2 million may not be cost effective. Bonds are payable from the user of the facility or a credit enhancer (usually a bank letter of credit). Interest on qualified EZ Bonds is exempt from most federal income tax, thereby providing lower interest rates than conventional financing. FEE: The City charges an administrative fee, equal to 25 basis points of the par amount of the bonds, which is payable at closing. The minimum fee is $2,500. 6
Financial Assistance for Business CD FLOAT LOAN PROGRAM Provides financial assistance for up to 100 percent of project costs involving new construction, building renovation and acquisition of fixed assets. Made available through Community Development Block Grant funding, loans are secured through an irrevocable, direct-pay letter of credit from an A-rated bank. with Any private developer, not-for-profit organization, or individual business with an irrevocable letter of credit from a qualified bank may apply. All projects must comply city and federal regulations associated with the program. USE OF PROCEEDS: AMOUNT: SECURITY: INTEREST RATE: TERM: Purchase of land or building Rehabilitation or new construction Purchase of machinery or equipment 100 percent of eligible project costs, up to maximum available float. CD Float Loans must be fully backed by a direct pay letter of credit issued by a financial institution with an AA rating. 40 percent of prime (fixed) Two years. At the end of the term, the city draws down on the letter of credit all principal and accrued interest that is due. 7
Chicago Department of Planning and Development BANK PARTICIPATION LOAN PROGRAM The Bank Participation Loan program responds to the financing needs of small- and mediumsize Chicago businesses that have the potential to create jobs for low- and moderate-income persons. The City of Chicago purchases up to 50 percent participation in bank loans to businesses that require low-interest, long-term financing for projects that involve job creation. Interest rates can be as low as 3 percent. Tthe city takes a subordinate position to the participating bank s collateral. Loan amounts come from Community Development Block Grant (CDBG) money that is made available annually to the City of Chicago from the U.S. Department of Housing and Urban Development (HUD) for the purpose of revitalizing areas in need of development. The Chicago Department of Planning and Development particpates in two types of loans: Industrial Retention & Expansion and Commercial Business Development. INDUSTRIAL RETENTION & EXPANSION Any industrial company located in or moving to Chicago, provided it is creating jobs. Terms and conditions are established on an individual basis. Other federal and local eligibility requirements may apply. USE OF PROCEEDS: Purchase of land or building Rehabilitation or new construction Purchase of machinery or equipment. MAXIMUM PARTICIPATION: Up to 50 percent of the bank loan for the project but no more than $500,000, depending on qualifying criteria and business location. INTEREST RATES: 3 percent (fixed) in Enterprise Zones, Enterprise Communities and Empowerment Zones. The prevailing Federal Reserve discount rate fixed in other City locations. Actual rate dependent on location and/or potential economic impact of the project. TERM: 3 to 15 years COMMERCIAL BUSINESS DEVELOPMENT Any retail or service business located in or moving to Chicago, provided it is creating jobs. Terms and conditions are established onan individual basis. Other federal and local eligibility requirements may apply. USE OF PROCEEDS: Purchase of land or building Rehabilitation or new construction Purchase of machinery or equipment MAXIMUM PARTICIPATION: Up to 50 percent of bank loans for the project, but no more than $250,000; depending on qualifying criteria and business location. INTEREST RATES: 3 percent (fixed) in Enterprise Zones, Enterprise Communities and Empowerment Zones. The prevailing Federal Reserve discount rate fixed in other City locations. Actual rate dependent on location and/or potential economic impact of the project. TERM: 3 to 15 years 8
Financial Assistance for Business MICRO LOAN PROGRAM Direct loans up to $20,000 to credit-worthy businesses for projects that create or retain low- or moderate-income jobs for Chicago residents. The program addresses the needs of very small businesses that do not have access to conventional loans. Any for-profit, small businesses located in Chicago. Terms and conditions are established on an individual basis. Federal and local eligibility requirements may apply depending on job creation, area benefit, and clientele. The company must be in compliance with all City of Chicago license requirements and must not be delinquent on any city, state or federal obligations. USE OF PROCEEDS: Purchase of land or building Rehabilitation or new construction Purchase of machinery or equipment LOAN AMOUNT: Up to $20,000 INTEREST RATE: TERM: COLLATERAL: 3 percent (fixed) or the prevailing Federal Discount Rate. Actual rate is dependent on project location and/or potential economic impact. Up to 5 years Collateral is determined on a case-by-case basis. Generally, businesses provide 100 percent collateral coverage. Personal guarantees are required of anyone owning 10 percent or more of a business. 9
Chicago Department of Planning and Development TAX INCREMENT FINANCING (TIF) Tax increment financing (TIF) provides financial assitance to businesses that are investing in parts of the city that are blighted or in danger of becoming blighted. Funds are usually in conjunction with private development projects to build and repair roads and infrastructure, clean polluted land and put vacant properties back to productive use. Funding levels for specific projects are coordinated with district plans and goals. Funds are generated by growth in the Equalized Assessed Valuation (EAV) of properties within designated districts over a period of 23 years. When an area is declared a TIF district, the amount of property tax the area generates is set as a base EAV amount. As property values increase, property tax growth above that amount can be used to fund redevelopment projects within the district. Under state law, areas proposed for TIF designation must possess numerous blighting factors to be eligible. The Department of Planning and Development assists businesses with TIF funds through redevelopment agreements. Terms for each agreement are negotiated and presented for approval to the Community Development Commission. If approved by the commission, the department advertises its intention to enter into a redevelopment agreement with the developer. If no responsive alternative proposals are received, the redevelopment agreement is finalized and presented to the Chicago City Council for approval. If approved by City Council, the city is authorized to enter into the agreement. TERMS AND CONDITIONS: Expenses eligible for TIF assistance include: C Studies and surveys C Marketing expenses C Acquisition of land, site preparation and environmental cleanup C Rehabilitation or repair of existing public or private buildings, fixtures and leasehold improvements C Construction of public works improvements C Job training or retraining programs, including welfare to work programs C Certain financing costs C Relocation costs C Payments in lieu of taxes; taxing district capital costs C Daycare services C Up to 50 percent of the cost of construction, renovation and/or rehabilitation of all low and very low-income housing units as defined in Section 3 of the Illinois Affordable Housing Act. 10
Financial Assistance for Business The Chicago Department of Planning and Development examines several factors in evaluating an applicant s request for TIF assistance. Most important are the public benefits of the project, such as the number of jobs retained or created and the project s financial need. The city has several options it can employ to pay for TIF-eligible redevelopment costs: 1. The city can reimburse a developer for TIF-eligible project costs on a pay as you go basis.in this option, the developer pays for entire cost of the project and the City reimburses the developer annually as it receives the incremental property taxes generated by the project. This option reimburses the developer an absolute amount of TIF assistance and bears no interest. 2. The city can reimburse a developer for TIF-eligible project costs through the issuance of TIF developer note. In this option, the developer, again, pays for entire cost of the project and the City reimburses the developer annually as it receives the incremental property taxes generated by the project. However, with this option, the note bears interest to the developer s long-term borrowing rate. 3. The city can reimburse a developer for TIF-eligible project costs by committing available and uncommitted incremental tax revenues that have built up over time in the TIF district. In this option, the City, on a pro rata basis with developer equity and private-lender financing, can make this tax increment available as the project is being constructed. 4. The city can reimburse a developer for TIF-eligible project costs by issuing Tax Increment Allocation Revenue bonds (TIF bonds) supported by the projected property tax increment revenues to be generated within the TIF district. Similar to option 3, the City, on a pro rata basis with developer equity and private lender financing, can make net bond proceeds available as the project is being constructed. This is a more comprehensive approach to development within a TIF district and typically will not used for individual projects, but rather to assist several projects that will have a significant impact on that TIF district and require up front assistance in order to proceed. To apply for TIF assistance, an applicant must complete a TIF application. For further information regarding tax increment financing, please see the state legislation which authorizes it: The Tax Increment Allocation Redevelopment Act of the State of Illinois, 74 ILS 3/11-74.1 et seq., as supplemented and amended. 11
Chicago Department of Planning and Development STREAMLINED TAX INCREMENT FINANCING Chicago s Streamlined tax increment financing (TIF) program provides expedited TIF assistance for small- and medium-sized improvements to industrial, commercial, retail or residential mixeduse properties in city tax increment financing districts. The program incorporates an easy-to-use application form and efficient approval process to pay up to 25 percent of renovation, expansion, or redevelopment costs. Proposals must demonstrate a need for TIF assistance. Assistance ranges from $25,000 to $1,000,000. Grants are paid in annual installments to participants following project completion. The grants do not have to be repaid. Expenses eligible for Streamlined TIF assistance include: Land acquisition, clearance and site preparation Certain environmental remediation measures Building rehabilitation and repair Signs or awnings that are permanently affixed to the building Rehabilitation and remodeling of existing tenant improvements Streets, streetscaping and other public infrastructure improvements Professional fees related to the redevelopment project Up to 30% of an applicant s construction period interest costs Job training and Welfare-to-Work programs TERMS AND CONDITIONS Properties must be located in a city TIF district. Expenses not eligible for grants include: new construction, initial tenant build outs, minor repairs or improvements, purchase of equipment and minor site improvements. Wholly residential projects are not eligible for the Streamlined process. Applicants must be in compliance with all City of Chicago license requirements and must not be delinquent on any city, state or federal obligations. 12
Financial Assistance for Business SMALL BUSINESS IMPROVEMENT FUND (SBIF) Funding assistance for improvements to small business properties. The program uses TIF revenues to help owners of commercial and industrial properties within specific TIF districts repair or remodel their facilities for their own business or on behalf of tenants. Program participants can receive matching grants to cover half the cost of remodeling work, with a maximum grant amount of $50,000. The grant does not have to be repaid. Expenses eligible for SBIF assistance include: New windows, floors or roof Sign removal and replacement Tuck pointing New heating, ventilation and air conditioning Improvements to accommodate disabled patrons or workers Purchase of adjacent property for building expansion or parking Residential property, residential components of mixed-use buildings, and property leased to fastfood chains and certain other businesses are not eligible for the program. Vacant business property is eligible, but grants are not paid until the space is occupied by a business tenant. TERMS AND CONDITIONS: Industrial properties: Commercial properties: A maximum of 40 full-time equivalent employees. Maximum sales of $1.5 million annually for the prior three years, or equivalent average. SBIF grants are provided to property owners after remodeling work is completed and all expenses are paid. Applicants must be in compliance with all City of Chicago license requirements and must not be delinquent on any city, state or federal obligations. Applications are selected by lottery and processed by SomerCor 504 Inc., a federally certified Small Business Administration lender. For more information, contact SomerCor at (312) 360-3163. 13
Chicago Department of Planning and Development LABORATORY FACILITIES FUND (LFF) Fund assistance for improvements to small business properties in designated Chicago neighborhoods. The program uses tax increment financing revenues to fund up to 25 percent of eligible base lab construction costs. The fund promotes the growth of second-stage or graduate technology firms by providing grants to help tconstruct lab space ranging in size from 5,000 to 25,000 square feet. Assistance of up to $1.4 million is provided as a conditional grant at project completion. Companies involved in the following industries are eligible to apply: Nanotechnology Biotechnology Medical devices and services Environmental technology Food technology Pharmaceuticals and other related technologies TERMS AND CONDITIONS: Landlords and tenants must submit applications jointly, with tenants agreeing to minimum five-year occupancy terms. Projects must be located in existing buildings within select City of Chicago TIF districts. The LFF cannot be used for construction of new buildings or additions or for the improvement of office or ancillary space. Large companies and publicly traded corporations are excluded. Applicants must be in compliance with all City of Chicago license requirements and must not be delinquent on any city, state or federal obligations. 14
Financial Assistance for Business SPECIAL SERVICE AREA (SSA) DESIGNATIONS The Special Service Area program is a mechanism for funding services and programs within contiguous industrial, commercial and residential areas through localized property tax levies. The enhanced services and programs are in addition to services and programs currently provided through the city. Applicants eligible for participation in the Special Service Area program include established not-for-profit development corporations, chambers of commerce and business/industrial groups operating within clearly defined areas. Interested organizations are stronglyencouraged to schedule a pre-application meeting early in the year (January through March) with DPD staff to allow the interested organization to prepare for start-up costs and implementation. TERMS AND CONDITIONS: SSA funded projects could include but are not limited to: Maintenance and beautification Business retention/recruitment Marketing and advertising Safety programs Promotional activities such as parades and festivals Small scale capital improvements An appointed commission comprised of local property and business owners oversee the SSA scope of services and budget as managed by a local service provider. Applicants must be in compliance with all City of Chicago license requirements and must not be delinquent on any city, state or federal obligations. 15
Chicago Department of Planning and Development FACADE REBATE PROGRAM Provides rebates to eligible commercial and industrial tenants and property owners who complete qualified facade rehabilitation projects. Industrial buildings: Eligible for rebates equal to of 50 percent of approved costs up to $40,000 per application. Commercial retail buildings: Eligible for rebates equal to 75 percent of approved costs up to $40,000 per application. Eligible improvements include: Facade renovation Exterior lighting Masonry repairs and tuck pointing Signs and graphics Windows and doors Purchase of adjacent property for building expansion or parking Windows displays and awnings Passive security and energy conservation systems Truck docks TERMS AND CONDITIONS: The program is federally funded and must meet federal and city requirements. Projects must be approved prior to beginning construction to participate in the program. Applications are available from local neighborhood business organizations. Applicants must install a minimum of $2,000 in facade improvements to be eligible for the program. New construction is not eligible. Applicants must be in compliance with all City of Chicago license requirements and must not be delinquent on any city, state or federal obligations. 16
Financial Assistance for Business COOK COUNTY PROPERTY TAX INCENTIVES CLASS 6(b) CLASSIFICATION Offers reduced property tax rates on industrial properties as a means of promoting private investment. Properties must be used for industrial purposes and the project must involve new construction, substantial rehabilitation, or the re-occupancy of abandoned industrial property. TERMS AND CONDITIONS: Qualifying properties can receive a 12-year reduction in real estate assessments from the standard Cook County industrial rate of 36 percent. Qualifying properties are assessed at 16 percent for the first 10 years, 23 percent for the 11th year and 30 percent for the 12th year. Qualifying applicants may also apply to renew their tax reduction for an additional 10 years at 16 percent. CLASS 7(a) and 7(b) CLASSIFICATIONS: Offers real estate tax incentives for commercial projects in specific areas. The area must be designated as a Redevelopment Area, Empowerment Zone or Federal Enterprise Zone within the past 10 years. A real estate tax analysis must be completed showing that in the last six years taxes have declined, remained stagnant or have not been fully realized. A financial analysis must show the project will not move forward without a tax incentive and that it will increase employment opportunities and property tax revenues. Class 7(a): Total project costs are less than $2 million. Class 7(b): Total project costs are more than $2 million. TERMS AND CONDITIONS: Qualifying properties can receive a 12-year reduction in real estate assessments from the standard Cook County commercial rate of 38 percent. Both Class 7a and Class 7b properties are assessed at 16 percent for the first 10 years, 23 percent for the 11th year and 30 percent during the 12th year. 17
Chicago Department of Planning and Development CLASS 8 CLASSIFICATION Offers reduced property tax rates on commercial and industrial projects in areas experiencing severe economic depression. Projects must be unable to move forward without the tax assistance and involve new construction, substantial rehabilitation, or re-occupancy of an abandoned property. TERMS AND CONDITIONS: The project area must: Include aggravated abandonment, deterioration and underutilized properties. Lack viable industrial and commercial buildings and be at least 10 contiguous acres Show a clear pattern of decline in real estates taxes and substantial unemployment. Be in need of substantial revitalization or be located within an Enterprise Community. Qualifying properties can receive a 12-year reduction in real estate assessments from the standard Cook County industrial rate of 36 percent and commercial rate of 38 percent. Qualifying properties are assessed at 16 percent for the first 10 years, 23 percent for the 11th year and 30 percent for the 12th year. Qualifying applicants may also apply to renew their tax reduction for an additional 10 years at 16 percent. Qualifying industrial applicants may also apply to renew their tax reduction for an additional 10 years at 16 percent. CLASS C CLASSIFICATION Offers reduced property tax rates on commercial and industrial properties that have substantial environmental contamination. The property must be used for industrial and/or commercial purposes. The applicant must obtain a No Further Remediation Letter from the Illinois Environmental Protection Agency and submit a Class C application within one year. The remediation and other directly related costs must total at least $100,000 or 25 percent of the market value of the real estate in the year prior to the remediation. TERMS AND CONDITIONS: Qualifying properties can receive a 12-year reduction in real estate assessments from the standard Cook County industrial rate of 36 percent or commercial rate of 38 percent. Qualifying properties are assessed at 16 percent for the first 10 years, 23 percent for the 11th year and 30 percent for the 12th year. Qualifying applicants may also apply to renew their tax reduction for an additional 10 years at 16 percent. Qualifying industrial applicants may also apply to renew their tax reduction for an additional 10 years at 16 percent. 18
Financial Assistance for Business CLASS L CLASSIFICATION Encourages development of commercial, industrial, and multi-family properties, and properties used for not-for-profit purposes, which have been designated as official city landmarks or contributing buildings in designated landmark districts. Real estate must be used for commercial, industrial, multi-family residential or not-forprofit purposes and be designated as a landmark or contributing building in a designated landmark district. For purposes of this incentive, a landmark does not include a facade or other architectural elements that have been preserved and designated as historic structures if the remainder of the building has been demolished or replaced. Assistance depend s on the owner s investment in an extensive renovation or building systems replacement that exceeds 50% of the building s market value. Work must meet or exceed the U.S. Department of the Interior s standards for rehabilitation, preservation, and reconstruction of Historic Properties and be completed in accordance with local permits and licences. TERMS AND CONDITIONS: Qualifying properties can receive a twelve year reduction in real estate assessments from standard levels. Qualifying properties are assessed at 16 percent for the first 10 years, 23 percent for the 11th year and 30 percent for the 12th year. Qualifying applicants may also apply to renew their tax reduction for an additional 10 years at 16 percent. Qualifying applicants may also apply to renew their tax reduction for an additional 10 years at 16 percent. A completed application and supporting documents must be submitted to the Cook County Assessor s Office prior to but no more than one year before the start of substantial rehabilitation. An application but must be filed with the assessor s office no later than the date an assessment appeal requesting a class change to Class L is filed. The assessor shall review the application and supporting documents to determine eligibility for the Class L classification. For each triennial reassessment period all Class L recipients must file an affidavit attesting to the continued Landmark status of the property and the number of persons employed at the site. 19
Chicago Department of Planning and Development ENTERPRISE ZONE PROGRAM An Enterprise Zone is a specific area designated by the City of Chicago and certified by the State of Illinois to receive various tax incentives and other benefits that stimulate economic activity. Existing businesses or businesses relocating to one of Chicago s six Enterprise Zones can lower operating expenses and increase profits by taking advantage of the many incentives offered through the program. INCENTIVES: Sales Tax Exemption: A combined Chicago, Cook County and Illinois sales tax exemption is available on building materials purchased from an Illinois retailer for the renovation or new construction of real estate located within a Chicago Enterprise Zone. Contact the Department of Planning and Development s Development Support Services Division to obtain a Certification of Eligibility for Sales Tax Exemption and Purchaser s Sales Tax Exemption Statement to receive the exemption from retailers. Investment Tax Credit(s): An Illinois Tax credit of 0.5 percent is available for investment in machinery, equipment, and/or buildings in an Enterprise Zone. The tax credit is in addition to the 0.5 percent available to businesses located within Illinois that increase their employment by 1 percent. Companies may also obtain a Replacement Tax Investment Credit of 0.5 percent for the qualified property placed in service in Illinois. Call the Illinois Department of Revenue at 1-800-356-6302 for the appropriate form(s). Jobs Tax Credit: A $500 Illinois Income Tax credit is available for each job created by a business in an Enterprise Zone. In order to claim the tax credit on its state income tax, a business must hire at least fice individuals certified by the state as dislocated or disadvantaged. The certification can be done through the Mayor s Office of Workforce Development at (312)744-8787 before the person is hired. Some City of Chicago Enterprise Zones overlap the City of Chicago Federal Empowerment Zones. Contact the Department of Planning and Development to determine eligibility for Empowerment Zone job tax credits. Companies may use only one type of Jobs Tax Credit per employee. Machinery and Equipment Sales Tax Exemption: The State of Illinois provides a 6.25 percent state sales tax exemption on all tangible personal property which is used within an Enterprise Zone for manufacturing or assembling tangible personal property for wholesale or retail sale or lease, or in the operation of a pollution control facility. Eligibility is limited to businesses certified by the Illinois Department of Commerce and Economic Opportunity as making an investment which either creates a minimum of 200 full-time jobs in Illinois, retains a minimum of 2,000 full-time jobs in Illinois, or makes an investment of $40 million that results in the retention of at least 90 percent of the full-time jobs in place on the date the exemption is granted. A majority of the jobs created or retained must be located in the Enterprise Zone in which eligible the investment is made. 20
Financial Assistance for Business Utility Tax Exemption: A state utility tax exemption on gas, electricity and administrative charges is available to certified businesses that are located in Enterprise Zones. Eligibility requires an investment of at least $5 million and the creation of a minimum of 200 full-time jobs, 150 new full-time equivalent jobs if the company made an eligible investment of $175 million, or makes an investment of at least $20 million in an Enterprise Zone and has retained a minimum of 1,000 full-time jobs. For more information, contact the Illinois Department of Commerce and Economic Opportunity at (217) 785-6145. Illinois Gas Use Tax Exemption: A Gas Use Tax is imposed on the purchase of natural gas from outside of Illinois for use or consumption (not for resale) in Illinois. The tax amount is 5 percent of the purchase price or 2.4 cents per therm of gas (whichever is less). A business must be located in an Enterprise Zone established by a county or municipality under the Illinois Enterprise Zone Act. Contact the Department of Planning and Development s Development Support Services at (312) 744-0920 to obtain a Gas Use Tax Exemption Certificate and certification verifying that the property is located within a City of Chicago Enterprise Zone. Real Estate Transaction Tax Exemption: A Chicago Transaction Tax Exemption is available within an Enterprise Zone for transfer of title of real property that s used primarily for commercial or industrial purposes. The Chicago Transaction Tax is currently $7.50 per $1,000 of acquisition price. This exemption can be taken by checking off the appropriate box on the City of Chicago Transaction Tax Real Property Transfer form at the time of closing. Income Tax Deduction for Financial Institutions: Financial institutions in Illinois, such as banks and savings and loans, are eligible for a special deduction from their Illinois corporate income tax return. Such institutions may deduct from their taxable income an amount equal to the interest received from a loan for development in an Enterprise Zone. The amount is limited to the interest earned on loans secured by properties which are eligible for the Enterprise Zone investment tax credit. Corporate Contribution Deduction: The Illinois Enterprise Zone Act provides that a municipality may designate one or more community-based organizations to be a Designated Zone Organization ( DZO ). When authorized by local ordinance, and with the approval of the Department of Commerce and Economic Opportunity, an approved DZO may solicit and receive cash or in-kind corporate contributions for approved projects. Corporations that make donations to a qualified Designated Zone Organization may claim in their State of Illinois tax returns, an income tax deduction at double the value of the contribution. The contribution must qualify as a charitable contribution under section 170, Subsection (C), of the Internal Revenue Code. In addition, the state must approve the amount and type of the contribution that may be claimed as a deduction. 21
Chicago Department of Planning and Development As a supplement to programs offered by the City of Chicago, the Illinois Department of Commerce and Economic Opportunity offers the following programs: Participation Loan Program: Works through banks and other conventional lenders to provide subordinated financial assistance to small business that employ Illinois workers. The state participates in loans between $10,000 and $750,000, up to 25 percent of a project s cost. Minority, Women and Disabled Participation Loan Program: Similar to the Participation Loan Program except funding ranges from $10,000 to $50,000 with a 50 percent maximum participation. Enterprise Zone Financing Program: Provides favorable interest rates to business either locating in or expanding in one of the 94 certified Enterprise Zones in the state. Development Corporation Participation Loan Program: Provides financial assistance through a Development Corporation to small businesses that provide jobs to workers in the region. The state participates in loans between $10,000 and $750,000, up to 25 percent of a project s cost. Capital Access Program (CAP): Encourages financial institutions to make loans to new and small businesses that do not qualify for conventional financing. A reserve fund is established at the lending bank and is available to draw upon should any of the bank s CAP loans default. Maximum loan amount is $100,000. Community Services Block Grant Loan Program (CSBG): Provides long-term, fixed-rate financing to new or expanding businesses that create jobs and employment opportunities for low-income individuals. The program links federal, state and private financing by using CSBG funds at low interest rates in combination with banks funds and equity. Illinois Large Business Development Progam (LBDP): Provides incentive financing to encourage large out-of-state companies to locate in Illinois or existing large companies to undertake substantial job expansion or retention projects. Funds available through the program can be used by large businesses (500 or more full-time employees) for typical business activities, including financing the purchase of land and building, construction or renovation of fixed assets site preparation and purchase of machinery and equipment. LBDP funds are targeted to projects that will result in substantial private investment and the creation and/or retention of 300 or more full-time jobs. 22
Financial Assistance for Business Employer Training Investment Program (ETIP)/Large Company Component (LCC): State-funded training or skill-upgrading assistance for Illinois companies with 250 or more full-time employees. Grants may be awarded to individual companies, multicompany efforts and intermediary organizations offering multi-company training. Illinois Technology Enterprise Center (ITEC) Program: Provides operational support for regional centers that serve technology entrepreneurs, innovators and small businesses. The program also provides investments to or on behalf of young or growing companies in cooperation with private-sector investments. Centers assist entrepreneurs in high growth, high technology fields to further technical and/or managerial skills and assist with new product development and marketing in support of new venture formations. Recycling Expansion and Modernization (REM) Program: Provides matching grants for modernization projects that divert materials from landfills while improving the competitiveness of Illinois firms. Projects may vary in focus and scope. REM projects divert solid waste materials from landfills through best practices in solid waste management, such as source reduction and waste reduction, including recycling and reuse activities. Grants up to $250,000 are available. Specific funding levels are contingent upon needs-based issues and potential economic benefits such as job retention and creation. The program replaces previous programs, including the RIM Program, the Recycling Market Development Program and the Technology and Practices Demonstration Program. For further information on these and other programs, contact the Illinois Department of Commerce and Economic Opportunity at (312) 814-7179. 23
Chicago Department of Planning and Development ENTERPRISE ZONE MAPS Zone #1 Zone #2 24
Financial Assistance for Business ENTERPRISE ZONE MAPS Zone #3 Zone #4 25
Chicago Department of Planning and Development ENTERPRISE ZONE MAPS Zone #5 Zone #6
Financial Assistance for Business EMPOWERMENT ZONE MAPS West Southwest 26
Chicago Department of Planning and Development EMPOWERMENT ZONE MAPS South 27