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Illinois Enterprise Zone Program and Taxation Essay

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Updated: Jul 1st, 2021

Introduction

Opportunities for enterprise development and the growth of their financial potential depend on a number of factors, for example, competitiveness, management, and other aspects of the work. Nevertheless, not all ventures are able to be profitable, and some of them work at a loss and cannot cope with difficulties. In order to overcome the crisis, there are special programs that include the division of the territory into so-called enterprise zones. The program in Illinois, which aims to help unprofitable and financially unsuccessful enterprises, is designed to prevent regression and provide possible development assistance.

The Concept of the Illinois Enterprise Zone and the Program’s Goals

The theory of the Illinois Enterprise Zone concept lies in a special form of government participation in the financing of this state and tax benefits distribution. Particular attention is paid to “economically depressed areas” that need support from the authorities and cannot independently and fully develop (“Illinois Enterprise Zone Program”). The objectives of such a program are the introduction of appropriate practices in Illinois, the identification of the least developed areas, and the monitoring of operations carried out by enterprises.

Economic Conditions for the Development of the Enterprise Zone

In order to successfully implement the relevant development program, it is required to provide necessary economic conditions. Thus, for example, to avoid problems with the supply of certain raw materials, it is possible to re-establish a transportation network (The Civic Federation 4). Also, it is required to analyze the spectrum of the problem, that is, to assess the liquidity of a particular enterprise, its assets, and available resources. In case the company has sufficient funds, the program can be gradually implemented by controlling its impact on production and making appropriate adjustments if necessary.

Illinois’ Tax Incentives and Their Goal

The Government of Illinois provides tax initiatives to businesses that need to improve their financial situation. Coyne and Moberg cite the example when the authorities twice helped the Sears company – in 1989 and 2011 (346). These initiatives include «exemption on retailers’ occupation tax paid on building materials,” exemption from payment of utility taxes, the lack of an administrative fee for the state, as well as increased opportunities for the acquisition of personal property (“Illinois Enterprise Zone Program”). Achieving the goals for strengthening the position of enterprises occurs through significant benefits provided by the state. It is possible to shift the supply curve and create normal market conditions by reducing costs.

Designating a TIF District

The local government would consider the issue of designating tax increment financing (TIF) because many enterprises in the region have financial difficulties. In accordance with the provisions of the Illinois Enterprise Zone, the territory is entitled to rely on the authorities’ support regarding the aspects of restructuring the tax payment system (The Civic Federation 15). According to Fischer and Marsh, these actions “have become a fairly standard instrument employed by state and local governments to attract businesses to the area” (54). Therefore, the actions of the authorities can be viewed as a logical and reasonable move aimed at developing the economy through assistance.

But for” Condition and Its Importance

The government would not provide help to develop enterprises but for its interest in strengthening the state’s economy and real income. Thus, for instance, Loomis et al. note that wind farms generated “$13 million annually in extra income for Illinois landowners who lease their land to wind farm developers” (3). Such a financial investment is significant, and the “but for” condition needs to be taken into account. Depending on the degree of problems of this or that enterprise, the authorities determine the amount of assistance and designate an appropriate procedure for cooperation. The development would not have occurred but for TIF designation, and the possibility to allocate funds is of great value for the venture that cannot fully improve its performance and achieve market sustainability. Strengthening the position of specific business sectors provides the state government with the confidence that unprofitable ventures will be able to overcome their crises and start providing the local economy with a stable income.

Generation of the TIF Property Tax Increment

The TIF property tax increment works in accordance with state law. The authorities evaluate a certain object from the point of view of its value, check compliance with the norms of exploitation, and issue a verdict regarding the price of the tax. According to Monaghan et al., the Illinois Enterprise Zone program includes a whole set of procedures aimed at calculating charges (404). The package of measures provides for a fair and lawful acquisition of an appropriate property at the declared price. In case disputes arise, special boards review cases and decide on the legality of specific measures.

Conclusion

The Illinois Enterprise Zone program can promote business development in a particular region and assist those ventures that experience difficulties. Relevant economic conditions should be created to implement the provisions of the concept. The order of taxation is determined by the government agencies and implies significant benefits for companies in need of assistance. The generation of procedures takes place in the evaluation and implementation modes.

Works Cited

The Civic Federation. Illinois Enterprise Zones: A Civic Federation Issue Brief. The Civic Federation, 2012.

Coyne, Christopher J., and Lotta Moberg. “The Political Economy of State-Provided Targeted Benefits.” The Review of Austrian Economics, vol. 28, no. 3, 2015, pp. 337-356.

Fischer, Mary, and Treba Marsh. “Tax Abatements: Evaluation and Reporting.” Journal of Accounting and Finance, vol. 15, no. 5, 2015, pp. 54-65.

Illinois Department of Commerce & Economic Opportunity, 2017, Web.

Loomis, David G., et al. “Economic Impact of Wind Energy Development in Illinois.” Journal of Business Valuation and Economic Loss Analysis, vol. 11, no. 1, 2016, pp. 3-23.

Monaghan, Philip, et al. “Ecological Empowerment and Enterprise Zones: Pain Free Transitions to Sustainable Production in Cities or Fool’s Gold?” Journal of Cleaner Production, vol. 134, 2016, pp. 395-405.

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