Sales tax rebates remain prevalent in northeastern Illinois

In Illinois, municipalities and counties receive sales tax revenue based on the location of sales. This structure has resulted in the rise of an economic development incentive called a sales tax rebate, in which municipalities and counties agree to rebate a portion of sales tax revenue generated in a business development back to businesses and developers.

Sales tax rebates are one tool that municipalities use to attract retail development. Many municipalities (and counties under certain circumstances) also have an additional local sales tax. Either of these revenues can be rebated to a developer or business to incentivize the business to locate within a municipality. Use of any incentive, including sales tax rebates, has broad implications for the region’s economy.

Cars parked in a parking lot outside Forever 21 and HomeGoods Marshalls

Previous analysis on sales tax rebates reported for an Illinois Department of Revenue sales tax rebate agreement database revealed that these incentives are extremely prevalent in northeastern Illinois. This updated analysis shows increased prevalence. Continued analysis is important because these rebates support developments that have impacts beyond the municipalities in which they are located.

This policy update builds on CMAP’s prior analysis by reviewing the updated sales tax rebate database and examining the location of the developments receiving sales tax rebates relative to municipal boundaries and other jurisdictions’ roadways. Between 2013-15, the region’s total sales tax rebates included in the database increased from 343 to 359. This is a result of some rebates expiring, some being retroactively added that were not entered in to the original database, and some that were recently implemented. The region’s committed rebate total has grown from $433 million to $495.9 million. Mapping the updated data indicates that sales tax rebates are more prevalent on or near municipal boundaries as well as on state and county roads.