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Feb. 21--Sears Holdings Corp. CEO Edward Lampert has said the struggling department store chain is "fighting like hell." That includes its dealings with the state of Illinois, public records show.

The company threatened legal action in a monthslong battle over $14.8 million in state tax credits Sears believed it earned in 2016 before it fell short of the minimum employee count required to qualify for future incentives.

Sears and the state settled that dispute in December, with the state granting Sears the 2016 tax credits and the company agreeing not to seek incentives for its 2017 fiscal year. In total, the company qualified for $51.3 million during the three years it was eligible to earn the tax breaks under an incentive deal inked in 2011 -- after Sears threatened to move its Hoffman Estates headquarters out of state.

The deal, part of Illinois' Economic Development for a Growing Economy program, or EDGE, was valued at an estimated $15 million a year for up to 10 years. It required Sears make in-state capital investments and retain at least 4,250 employees at its Hoffman Estates headquarters and Loop office.

The Department of Commerce and Economic Opportunity told Sears in June that agreement was "suspended," citing media reports that Sears had acknowledged falling short of the employment benchmark.

In September, a lobbyist representing Sears -- former Republican state Sen. Matt Murphy -- sought a meeting with Deputy Gov. Leslie Munger, Gov. Bruce Rauner's general counsel, and the director of the Department of Commerce and Economic Opportunity to press the issue, records obtained under the Illinois Freedom of Information Act show.

"We continue to prefer an amicable resolution to this EDGE interpretation disagreement rather than a suit brought by Sears against the state to enforce the EDGE agreement," Murphy wrote in an email.

By Dec. 15, Sears and the state signed a settlement agreement that granted Sears the $14.8 million in tax credits it sought for 2016 while ensuring Sears would not seek credits for 2017.

"We met all of our obligations under the terms of the agreement and are pleased the state agreed," Sears spokesman Howard Riefs wrote Wednesday in an email to the Tribune.

The state also gave Sears permission to use the tax credits through Sept. 30, 2019, even if its employee count remains below the minimum level. The original incentive deal said unused tax credits could be carried forward only while the company was in compliance with the terms of its agreement.

An earlier draft of the settlement gave Sears through Dec. 31, 2018, to use its credits, but Murphy said in an email that he and Sears were "blindsided" by the deadline, which wouldn't allow it to collect the full value of tax credits earned in 2016.

The state began questioning Sears' employment plans in March after the company submitted a request for 2016 tax credits shortly after announcing plans to lay off 120 to 130 corporate employees and filing an annual report in which it said past results point to "substantial doubt" about its ability to remain in business.

"In light of recent developments, the Department asks that the Company demonstrate that it presently employs the required number of Retained Employees and plans to do so for the foreseeable future," the department's general counsel wrote in a letter to Sears, records show.

Sears wrote back reaffirming it met the employment benchmarks with 4,410 employees in April. The company also said it remained confident in its financial position and described steps it was taking to strengthen its performance. But in mid-June, the state told Sears its tax incentive deal was suspended, citing media reports that Sears had acknowledged falling short of the 4,250-employee minimum.

Afterward, Sears acknowledged it fell below that minimum May 31 but said it "strongly disagrees with the Department's conclusion ... that the Department has any basis to refuse to issue" tax credits for 2016, according to correspondence received through the records request.

Sears has declined to say how many people it currently employs at its Hoffman Estates headquarters, but the retailer said it laid off 220 more corporate employees since the start of the year amid ongoing cost-cutting efforts.

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