Tax Increment Financing (TIF)

Tax Increment Financing, or TIF, is a tool that allows a municipality to use future increases in property tax revenue from a designated area to help pay for improvements and development within that area.

A municipality establishes a TIF district when an area meets certain statutory requirements. The property taxes generated by the value that exists when the district is created continue to be distributed to the taxing districts as usual. As property values increase, the additional property tax revenue generated within the district—the increment—can be used for eligible costs associated with development or redevelopment in the TIF district.

TIF can help communities:

• Redevelop vacant, underutilized, or blighted properties
• Pay for public infrastructure and site improvements
• Support commercial, industrial, residential, or mixed-use development
• Address development costs that might otherwise prevent a project from moving forward

TIF is not a separate tax and does not automatically provide a property tax break. Instead, it is a financing mechanism that allows a community to dedicate future growth in property tax revenue to eligible costs within the district.

Learn more: See IEIA's TIF resources for information about establishing, administering, and reporting on TIF districts in Illinois.

Enterprise Zones

An Enterprise Zone is a designated geographic area where certain state and local tax incentives and other benefits may be available to encourage business development, investment, and job creation.

Illinois Enterprise Zones are established by local governments, subject to state requirements. Businesses and development projects located within an Enterprise Zone may qualify for specific incentives if they meet the applicable requirements.

Depending on the project and the taxes involved, benefits may include sales tax exemptions or deductions on qualifying purchases, exemptions related to building materials, and certain local incentives. The specific benefits available depend on the type of transaction, the local government, and the requirements of the applicable program.

Enterprise Zones can be used to:

• Encourage new business investment
• Support business expansion and job creation
• Reduce certain costs associated with construction and development
• Attract development to targeted areas

Unlike TIF, an Enterprise Zone does not capture future property tax growth. Instead, it provides specified tax incentives and other benefits for qualifying activities within the designated area.

Because eligibility and available benefits vary, businesses and developers should review the requirements that apply to a particular project before relying on an Enterprise Zone incentive.

Learn more: See IEIA's Enterprise Zone resources for program requirements, eligible incentives, and administration.

Business Districts

An Illinois Business District is a designated area where a municipality may impose certain additional sales taxes to generate revenue for improvements and activities that support economic development within the district.

Business District revenues can be used for a range of eligible costs, including public infrastructure, property acquisition, improvements to public facilities, and other activities that support development or redevelopment within the district.

Business Districts can help communities:

• Fund infrastructure and improvements in commercial areas
• Support new development or redevelopment
• Improve the appearance, accessibility, or functionality of a business area
• Generate a dedicated revenue source for eligible economic development activities

A Business District is different from TIF. TIF uses the growth in property tax revenue within a designated area, while a Business District generates revenue through sales tax.

Business Districts may be particularly useful when a community needs a dedicated revenue source to support improvements in a commercial area.

Learn more: See IEIA's Business District resources for information about establishing, administering, and using Business District revenues.