With layoffs, Sears loses Edge tax credits – Consumer News

on Jun14

13 June 2017 | 7:06 pm

The announcement this morning that Sears Holdings has cut about 400 jobs, mostly at its Hoffman Estates headquarters, puts the company under the employment threshold required to receive the annual tax breaks it brokered in a 2011 deal with the state.

The deal, struck under the Edge program (short for Economic Development for a Growing Economy), provided Sears with state income tax credits worth $15 million a year for 10 years. In order to keep the deal, Sears agreed to stop shopping for a new headquarters location out of state and to keep at least 4,250 local corporate jobs in Hoffman Estates.

“For the first time since our agreement was enacted in 2011, we recently dropped below the required retained job figure for the Edge credit,” Sears spokesman Howard Riefs wrote in an email to Crain’s. He said the company was allowed to count only certain types of jobs under the agreement.

A separate property tax agreement, reached at the same time, extended existing tax credits for 15 years, or until the company recovered $125 million. That agreement also includes a 4,250 job requirement, but the definition of jobs that count is broader than the one within the Edge agreement. Sears remains in compliance with the property tax deal and will continue to receive those credits, according to spokesman Chris Brathwaite.

The retailer had a property tax break dating back to 1992, when it first moved to Hoffman Estates from the formerly eponymous Loop skyscraper now named Willis Tower. That agreement was intended to reimburse Sears for the $200 million it spent to build its suburban campus. Only about $75 million was recaptured in property tax credits through 2011, according to Sears spokesman Chris Brathwaite. The extension was intended to pay back the remainder of Sears’ investment.

At the time of the Edge and property tax deals in December 2011, Sears employed about 6,100 people at its headquarters, including full-time and contract workers. Brathwaite declines to provide the number of currently employed at Sears headquarters. Thought the number of Edge-qualifying employees is now below 4,250, that number does not include contractors, he said. Neither the Edge nor property tax deals count store-level Sears and Kmart employees in Illinois.

Read more:

Special Report: Sears—where America shopped
With Sears’ future in doubt, vendors begin pulling back
Sears’ media-shy CEO lashes out at suppliers

Under the Edge deal, Sears was required to spend $60 million in infrastructure investment by 2015 and $100 million before 2018 to begin collecting credits. The credits are paid two years in arrears. Sears met those million requirement and first collected about $20 million in tax credits in 2016 for the 2014 calendar year. It is currently collecting credits for meeting conditions in 2015. Sears also met conditions in 2016, he said, which means it would be paid out next year.

In the last five years, Brathwaite said, Sears has paid more than $680 million in taxes, invested more than $260 million in its headquarters campus and worked with thousands of vendors across the state.

The state’s Department of Commerce & Economic Opportunity, which oversees EDGE agreement, confirmed that Sears will fall below the minimum number of employees required to receive the credits.

“The Department is planning a books and records examination to ensure taxpayers are not on the hook for an out-of-compliance Edge agreement,” spokeswoman Jacquelyn Reineke wrote in an e-mail.

Sears is one of eight companies who received so-called “special” Edge agreements through a program amendment filed in 2011. CME Group also received one around the same time at Sears. Mitsubishi, which closed its plant in Normal in 2015 and no longer operates in Illinois, received another.

Unlike regular Edge agreements, tax credits already issued under special Edge deals cannot be clawed back if a company falls out of compliance, Reineke said.

Governor Bruce Rauner has worked to add taxpayer protections to the Edge program, she added.



Previous postVerizon takes over Yahoo to complete $4.5 billion deal Next postChicago, Suburbs to See Tax Hikes as High as 10 Percent


Chicago Financial Times


Copyright © 2020 Chicago Financial Times

Updates via RSS
or Email