SPRINGFIELD HIGHLIGHTS - NOVEMBER 23, 2001

Tentative Framework Reached on Tax Package

Earlier today, the Governor and four legislative leaders reached an agreement on a tax package that includes two items sought by the Illinois Manufacturers’ Association; an extension of the Research & Development tax credit and a reinstatement of the Net Operating Loss provision.  An amendment containing the agreement will be heard in the House Revenue Committee on Monday, November 28 and final passage in both the House and Senate could follow on Tuesday when the General Assembly reconvenes for the extra day of veto session.

While the IMA sought a permanent or long-term extension of the R & D Credit, the final package contains a five-year extension, retroactive to January 1, 2011, with a five-year carry forward provision.  The credit allows companies to get a 6.5 percent credit for increasing R & D expenditures.

The Net Operating Loss provision will be reinstated effective January 1, 2012, albeit it with a new cap until it’s fully restored in 2014.  Under the proposed scenario, companies would be able to deduct $100,000 of net losses for the next three years.  The NOL was suspended for a four-year period of time when lawmakers hiked the income tax in January.

With respect to the Estate Tax deduction, the current $2 million level will be increased to $3 million in 2012 and increased to $3.5 million in 2013 and subsequent years.

Other provisions of the measure include tax packages for both Sears and the Chicago Mercantile Exchange.  The Sears package is a compromise reached by Sears, School District 300, and Hoffman Estates.

Under the plan, the Earned Income Tax Credit will be increased from 5.5 percent to 7.0 percent while the personal exemption will be increased by the Consumer Price Index.  This increase in the personal exemption is one year – it will not be compounded annually.

A new tax exemption is created to attract pre-Broadway shows to Chicago and the cost will be capped at a total of $1 million.  A number of small regulatory tax changes will also be incorporated that will increase efficiency and the ease of business tax reporting.

Finally, under the framework, all revenue in excess of the current spending cap will be used exclusively to pay down old debt.  Illinois currently has a $5.5 billion backlog of old bills owed to state vendors.

While this framework was reached by negotiators, including the Governor’s office, Revenue Chairman John Bradley (D-Marion) and Republican Spokesman David