The Economic Development for a Growing Economy (or “EDGE”) Tax Credit is an economic development tool used by the state of Indiana to encourage job creation, improve the opportunities for Indiana residents, and grow the state’s capital investments. The EDGE tax credit is awarded to businesses that are considering expansion or relocation in Indiana and based on a percentage of the expected tax withholdings from new job creation. To help our clients, prospects, and others understand the benefits and requirements of the EDGE tax credit, Barnes Dennig has provided a summary of key information below.
For businesses that are interested in new capital investment in Indiana with the creation of full-time, permanent jobs, certain eligibility requirements exist in order to qualify for the EDGE credit. To be eligible, the project must:
- Result in net new jobs that were not previously performed by employees of the applicant.
- Be economically sound and benefit the people of Indiana by increasing opportunities for employment and strengthening the economy of Indiana.
- Be reliant on receiving the tax credit (i.e., the EDGE credit should be a major factor in whether the applicant proceeds with the project, and not receiving the tax credit will result in the applicant not creating new jobs in Indiana).
- Have the support of any political subdivisions or municipalities affected by the project in the way of significant incentives offered to the business.
The EDGE credit is designed to reward competitive private business projects that are deemed to be beneficial for the state and local economies and is commonly awarded to companies that have other viable out-of-state alternatives for their expansion project. Each project that meets the criteria will be evaluated on its individual merits and with a cost-benefit analysis to determine if the EDGE tax credit will be awarded, and in what amount.
Available Credit Amount
The corporate income tax credit is calculated as a percentage (not to exceed 100%) of the expected increased tax withholdings generated from new jobs creation. It is phased in annually for up to 10 years based upon the employment ramp-up outlined by the business. Because of how the credit is calculated, both the number of jobs and wages of new employees will affect the credit’s potential value. In addition, the Indiana Economic Development Corporation (IEDC) has the discretion to choose the percentage of tax withholdings used in the calculation based on the project’s value, competitiveness, total investment, economic impact, industry, location, and other factors.
However, unlike other credits, EDGE tax credits are refundable, meaning that any certified amounts will not only offset the current year’s tax liability, but will be paid out even in excess of tax liability. This can turn any job creation project into a significant tax savings plan for the company.
The EDGE tax credit is an extremely valuable incentive for businesses that qualify. However, understanding what projects are eligible, choosing a location, and meeting compliance and reporting requirements calls for the insight of a qualified advisor. If your company is investing and considering adding jobs in Indiana, Barnes Dennig can help! For additional information about this or other Indiana tax credits and incentives, call us at 317.572.1130 or click here to contact us. We look forward to speaking with you soon!