Thursday, May 29, 2014

Committee evaluating business taxes releases report, but reaches no consensus

By Caitlin Rydinsky

A House committee released a report Wednesday evaluating the tax climate for business in the state, but the group struggled to find common ground on several major issues.

The House’s Revenue and Finance Committee and State Government Administration Committee spent months assessing the tax incentives the state offers businesses months after House Speaker Michael Madigan requested a review at the end of last year. Madigan made the call after several businesses approached the legislature seeking specially tailored versions of the economic development for a growing economy (EDGE) tax credit.

The report looked at various taxes and tax credits, but the 28 committee members were unable to reach a consensus on several of the tax breaks they scrutinized. Some they agreed needed further evaluation were the franchise tax, the economic development for a growing economy (EDGE) tax credit and fees for limited liability corporations. Marion Democrat Rep. John Bradley, who chairs the revenue committee, said that the group found that the collection of some fees and taxes was not being enforced by the state. “The franchise tax are not being audited by the state; companies are not paying the fees and having no consequences, or they are placing taxable stock in other states in order to avoid paying taxes.”

Bradley and other lawmakers agreed it was not benefiting the current economy of the state, and said in the report “although the committee members have not reached a consensus on how to replace the current corporate franchise tax revenue, the working groups have agreed to repeal the corporate franchise tax.” Lawmakers and advocates for the industry and businesses felt that the bipartisan report could potentially provide more competitiveness between companies large and small and generate job growth. Representatives of the business community had generally positive reactions to the report. “I think it’s a very impressive report, and there hasn’t been a legislatively generated report of this sophistication in I don’t know how long,”said Dan Johnson, president and lobbyist of Progressive Public Affairs a company that represents small businesses and not-for profits. “It’s a very thorough report and on that it’s great. And I hope that there’s some action taken in the next few days.” However, members of the committees were unsure if their proposals would become legislation in the near future. “We made recommendations that are being presented in a bipartisan manner,  and it will be up to leadership to decide what, if anything, would be part of a final package and make those decisions,” said Bradley of the findings.

While the EDGE credit is the incentive that likely spurred the group’s hearings on the issue, it was unable to reach any agreement on changing the credit. “No consensus was reached in regard to changes needed to the EDGE credit; however, all members feel that it is imperative to ensure that Illinois remains competitive in today’s economy,“ the report said. The credit has become controversial as several large businesses have threatened to leave the state if lawmakers would not adapt an EDGE credit specifically to them. Some who got the credit, which is meant to spur job growth, made layoffs after. Marengo Democratic Rep. Jack Franks said, “I wanted to focus on the small businesses that really are the job creators in the state of Illinois that have not been able to avail themselves of the EDGE credits.” Franks is the chair of the state government administration committee.

 Madigan proposed House Bill 3890 earlier this month. The proposal would remove a requirement that businesses spend $1 million on capital investments to get the EDGE credit. The move would allow smaller companies to take advantage of the EDGE program. Franks said members of the committee are waiting to see what happens with the speaker’s bill. The legislation in its current form, could not make it through the standard legislative process and to the governor’s desk before session is scheduled to adjourn on Saturday. Franks said that he hopes that the committees’ ideas will take the form of bills sometime soon, perhaps in the fall veto session.

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