Next session dates: February 20-22, 2008

Download this document in .pdf format  

This week...

Governor Appears Poised to Announce New Energy Tax

On February 20, as required by the Constitution, Governor Rod Blagojevich will stand before a joint session of the General Assembly and provide his sixth State of the State address which will reportedly also include his proposed budget for fiscal year 2009. The major address comes at a time when the state's finances, built on a house of cards, are in a precarious position and appear ready to fall, threatening Illinois' fiscal health. According to recent reports from Illinois Comptroller Dan Hynes and the Government Commission on Forecasting and Accountability, Illinois has a $1.7 billion backlog of bills in addition to a reported revenue shortfall of $750 million in the current budget.

With a fiscal crisis in Illinois, and a recession appearing imminent, Governor Blagojevich will offer his comments regarding the State of the State and propose a budget, which by law, must be balanced. In order to meet this requirement, many sources are indicating that the Governor plans to call for a multi-billion energy tax (carbon tax) that could generate between $1.4 and $2.7 billion depending on the tax rate. At a tax of $10 per ton of emissions from industrial and electric generation sources, revenue would reach about $1.4 billion according to 2003 data from the Governor's Illinois Climate Change Advisory Group (table 4, page 19).

POTENTIAL COST OF A CARBON TAX ON ILLINOIS INDUSTRY

At a time when the economy is struggling and many families and businesses are facing financial pressures, imposing an energy tax will only exacerbate problems in the economy. The energy tax that is reportedly going to be offered by the Governor will increase the cost of electricity, manufactured goods, and possibly even gasoline. It will certainly make it more difficult for employers to compete in the United States and across the world.

Governor Calls for Elimination of Job Creation Incentives

In what appears to be a repeat from 2007, Governor Rod Blagojevich is once again calling for the elimination of tax incentives that lead to job creation and growth in Illinois. Instead of making tough spending decisions and holding the line on new state programs, Blagojevich is calling for repeal of more than $500 million incentives that help Illinois employers compete in today's marketplace. Business incentives that have previously been placed on the chopping block by the Governor include the Single Sales Factor, Research & Development credit, Manufacturers Purchase Credit, and Machinery & Equipment exemption. In addition to these incentive programs, nearly twenty additional incentives are set for elimination if the Governor's plan would be adopted.

IMA Legislative Agenda Introduced in General Assembly

Despite having to play a lot of defense against anti-business legislation, the Illinois Manufacturers' Association continues to move forward with a pro-growth, pro-jobs agenda that will help the Illinois economy grow. To help manufacturers meet the growing need for a qualified workforce, two pieces of legislation have been introduced in the General Assembly including a proposal offered by Rep. Chapin Rose (R-Mahomet) to provide $10 million to the Illinois Community College Board for a new manufacturing curricula and workforce development program. The second bill, sponsored by Rep. Ruth Munson (R-Elgin), chair of the Illinois Legislative Manufacturing Caucus, would appropriate $25 million to the Department of Commerce & Economic Opportunity for the Employer Training Investment Program (ETIP). The ETIP program allows companies and unions to be reimbursed for up to fifty percent of their qualified costs incurred when providing employee training.

In addition to dollars, the IMA, in conjunction with Rep. Fred Crespo (D-Hoffman Estates) and Sen. Matt Murphy (R-Palatine), have introduced legislation that will protect businesses and employees participating in the ETIP program from possible ID theft. Under the current program, employers are required to provide employee names and social security numbers to the state. However, given the security breaches and lost data that result in identity theft, HB 4470 and SB 2495, will allow employers to submit a signed legal affidavit in lieu of social security numbers. This mechanism will continue to ensure that the program benefits Illinois residents while protecting the workers.

Finally, the IMA continues to push for a tax credit that will lower the cost of energy for employers. SB 1697, sponsored by Sen. Mike Jacobs (D-Moline) and Rep. Pat Verschoore (D-Milan) would create a tax exemption for energy used in the manufacturing process. Currently, Illinois is the only state in the Midwest that does not provide this type of pro-business incentive for its industrial companies. The measure passed the Senate unanimously (55-0) last year and the House may take up the bill this year.

SB 1180, sponsored by Sen. Terry Link (D-Vernon Hills) and Rep. Jack Franks (D-Woodstock) will improve the current state Research & Development tax credit. The current law only provides a credit for R & D expenditures that exceed the previous year's costs. Under the new legislation that mirrors federal law, employers have the option of choosing an alternative credit that rewards all R & D activity conducted in Illinois. SB 1180 passed the Senate unanimously last year (56-0) and may be considered in the House this session.

Businesses Benefits from Federal Economic Stimulus Package

Despite the media focus on the rebate checks authorized by the recent passage of the federal economic stimulus bill by Congress and the President, there are a couple of provisions that will benefit employers and help the economy. Please contact your tax advisors if you believe that your company can benefit from these concepts.

The first provision allows companies that purchase less than $800,000 of capital assets in a year to expense the first $250,000 (currently $128,000) of capital investment in 2008.

The second provision is set to save businesses approximately $50 million in near-term taxes through a temporary change in the Tax Code that will allow American businesses that purchase equipment to deduct an additional 50 percent of the cost of their investment in 2008. This "bonus depreciation" was included to encourage business expansion and investment in item such as equipment, software, and tangible property. In order to qualify, three requirements must be met:

1. The property must be one of the following: 1) property to which the general rules of the  Modified Accelerated Cost Recovery System (MACRS) apply having a recovery period of 20 years or less; 2) water utility property; 3) some computer software; or 4) be qualified leasehold improvement property.

2. The original use of the property must commence with the taxpayer after December 31, 2007

3. The property must be purchased within the applicable time period (after December 31, 2007 but before January 1, 2009)

IMA Mourns the loss of Sen. Adeline Geo-Karis

State Senator Adeline Geo-Karis, a long-time Republican legislator, trailblazer for women, and friend of the business community, passed away this week at the age of 89. "Geo" as she was affectionately known, served as the Mayor of Zion before embarking on an illustrious career in the General Assembly that spanned nearly three decades. During her career, Geo was the first woman to be named assistant states' attorney in Lake County and also the first woman – Republican or Democrat – to be named to Senate leadership. Born in Greece, she emigrated to the United States at the age of four and later served as a lieutenant commander in the U.S. Naval Reserves. A true icon in political circles who reached the pinnacle of success, Geo was an outstanding public servant and the IMA mourns her loss and extends our best wishes to her family and friends.

---

Other Springfield Highlights available online