Incentives for Chicago Businesses

March 29, 2007

As business increasingly expands into new burgeoning global markets, the City of Chicago continues to work diligently with federal and state departments and agencies (and occasionally on its own) toward keeping existing businesses in the City and attracting new businesses. The mayor's office encourages businesses to expand or locate in the area through a variety of economic incentives. Businesses may qualify for a package of assistance depending on a number of factors that include the size and location of the proposed project, and the number of jobs created or retained by the proposed project. This article briefly outlines a few of the incentive programs available for qualified businesses in the City.

Tax Increment Financing (TIF)

One of the mayor's favorite economic incentive programs, and one widely used across the country, is tax increment financing (otherwise known as TIF). There are reportedly over 100 TIF districts in the City of Chicago. The TIF program provides financial assistance to encourage private investment in designated locales in the City. Typically, those locales are underserved and deteriorating. TIF districts are not supposed to reduce property tax revenues. Instead, one of the goals of the TIF program is to distribute property taxes collected on properties included in the TIF district at the time of its designation on the same or similar basis as if the TIF district did not exist. The incremental increases in property tax revenues generated by the incremental increase in the value of such properties after TIF designation are available for use by the private investor.

Empowerment Zone Program

The Empowerment Zone (EZ) program is the result of efforts on federal, state and Citywide levels to bring development to more than 100 distressed urban and rural areas nationwide. The City of Chicago is one of only a few major U.S. cities to receive federal aid for specially designated communities through the Office of Economic Development of the U.S. Department of Housing and Urban Development. The EZ program offers special financing and tax incentives for qualified businesses in order to stimulate private investment and create jobs within designated communities.

Enterprise Zone Program

The Enterprise Zone program is administered at the state level by the Illinois Department of Commerce and Economic Opportunity. By 2004, there were 94 Enterprise Zones in Illinois with six of those zones located in the City of Chicago. Enterprise Zones in Chicago are geographic areas designated by the City and certified by the State of Illinois to receive various tax incentives and other benefits.

Property Tax Incentives

Amongst other real estate tax assessment reductions available to City businesses, Class 6(b), Class C, Class 7(a), Class 7(b) and Class 8 are a few enacted by the Cook County Real Property Assessment Classification Ordinance that substantially reduce property tax assessment levels. Property tax classification is administered through the Cook County Assessor's Office (and is applicable to properties located in broader Cook County, including the City of Chicago and its surrounding suburbs). The City of Chicago Department of Planning and Development has the authority to pre-qualify certain projects.

Class 6b. This designation is for properties that are used primarily for industrial purposes where the owners have developed or will develop a new facility, rehabilitate an existing facility or reoccupy an abandoned one.

Class C. This classification is a real estate tax incentive for the Incentives for Chicago Businesses remediation of contaminated properties including abandoned properties or vacant land that will be used for industrial or commercial purposes.

Class 7. This classification is available for commercial projects located in areas determined to be in need of commercial development that would not be economically feasible without the incentive.

  • Class 7(a) - total development costs, exclusive of land, up to $2 million.
  • Class 7(b) - total development costs, exclusive of land, in excess of $2 million.

Class 8. This classification is available for both commercial and industrial properties located in areas experiencing severe economic stagnation. Class 8 permits the assessor, upon application of the City of Chicago, to certify that such areas are either in need of substantial revitalization or are located in an EZ.

If you have any questions regarding the various economic incentives available to businesses in the City of Chicago discussed in this article, or any other economic incentives that may be available to you, please contact the author for additional information.

Jeff Friedman is a partner in Levenfeld Pearlstein, LLC's Real Estate Practice Group. He can be reached at 312.476.7511

©2007 Law Bulletin Publishing Co www.rejournals.com March 2007

Reprinted with permission from the March 2007 supplement to Illinois Real Estate Journal.

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