Lawsuit filed against state agency for awarding millions in excessive business tax credits

January 9, 2015

Liberty Justice Center files lawsuit to strike down regulation allowing EDGE tax credits for Illinois companies that do not create new jobs

CHICAGO (Jan. 9, 2015) – Like many other states, Illinois regularly awards tax credits to attract and keep businesses and jobs in the state. Illinois has a law that allows tax credits for companies that create new jobs. However, for more than a decade the state agency that hands out these tax credits has exceeded the authority of the law by awarding credits for jobs “retained” – not created. The Liberty Justice Center has filed a lawsuit today asking the courts to end this practice. At stake in this lawsuit is millions of dollars in excessive tax credits.

The Illinois Department of Commerce and Economic Opportunity administers the Economic Development for a Growing Economy, or EDGE, tax-credit program. The intention of the EDGE program is to attract new business to the state, or encourage existing businesses to expand and create new jobs. The terms of this program are written into state law. What has happened instead is the agency has written a regulation allowing the agency to issue credits to companies that do not create any new jobs in the state of Illinois.

“The EDGE Act requires DCEO to award tax credits based on businesses hiring new employees in the state,” said Jacob Huebert, senior attorney at the Liberty Justice Center. “But the DCEO has made its own rules for awarding EDGE tax credits and is giving tax credits based on existing (or “retained”) employees rather than new employees.”

The Liberty Justice Center believes the state may have awarded as much as $500 million to businesses in excess of what the law allows.

“What the DCEO has done here is illegal,” Huebert said. “A government agency cannot expand its power by enacting rules that contradict a statute passed by the General Assembly.”

The Liberty Justice Center filed a lawsuit today in Sangamon County Circuit Court. The lawsuit seeks to make the DCEO follow the law. It is asking the court to strike down the regulation that increases the limit for tax credits above what the law allows, and it is asking the court to order DCEO to immediately stop issuing excessive tax credits.

Download video for use in news broadcasts here.

Download the Motion for Preliminary Injunction here. 

Download the complaint here.