SPRINGFIELD HIGHLIGHTS - NOVEMBER 30, 2001

Tax Package Defeated in House

After weeks of negotiation, a $250 million tax relief package passed the Senate with bipartisan support before being soundly defeated in the House of Representatives among questions regarding specific tax breaks for the Chicago Mercantile Exchange.  The defeat of HB 1883, sponsored by the respective chairs of the House and Senate Revenue Committees, raises doubt about when an extension of the Research & Development tax credit and partial reinstatement of the Net Operating Loss provision could occur.  Both items were contained in the package at the urging of the Illinois Manufacturers’ Association.

Following defeat of HB 1883, negotiators in both chambers met behind closed doors with opponents to try and reach consensus.  Ideas that were floated ranged from a longer-term R & D credit and increased NOL deductions to removing the Local Theatre tax credit or eliminating the increase in the Earned Income Tax Credit.  Each of these possible changes greatly impacts the dynamics of the proposal and its support or opposition.

The current package in HB 1883 that was defeated included: (1) five-year extension of the Research & Development tax credit with a five-year carry-forward; (2) reinstatement of the Net Operating Loss with a maximum $100,000 deduction until it’s fully reinstated in 2014; (3) increase in the Estate Tax deduction from $2 million to $3 million (2012) and $3.5 million (2013); (4) extension of the tax credit for ethanol and biodiesel; (5) new tax exemption for pre-Broadway shows with an maximum annual cap of $2 million for the program; (6) automatic extension of all credits and exemptions scheduled to sunset between 2011 and 2013; (7) an increase in the Earned Income Tax Credit from 5 percent to 7.5 percent (2012) and 7.5 percent to 10.0 percent (2013); increase in the personal exemption tied to the Consumer Price Index; and specific tax deals for Sears and the Chicago Mercantile Exchange.  Each of these specific deals would require set minimum job thresholds and require the repayment of incentives if these goals are not met.   Finally, the legislation creates an independent tax tribunal on July 1, 2013 and eliminates the Department of Revenue from ruling on cases in which they had a finding.

The IMA is continuing to work with the Governor’s office and lawmakers of both chambers to ensure passage of these tax incentives critical to the manufacturing sector.  The R & D credit expired on December 31, 2010 and companies have faced uncertainty this year in trying to plan for future activities.  In similar fashion, companies that suffered losses in the last few years during the recession have lost their ability to write off these losses while paying the higher income tax rate.

Prior to adjourning, lawmakers announced that they will come back to Springfield immediately if they can reach a resolution.

Senate Votes to Raise Electric Rates

On the fourth attempt, the Senate passed legislation with no votes to spare that will raise electric rates in Illinois by $286 million annually for the next thirty years.  Under the terms of SB 678, sponsored by Senate President John Cullerton, residents and businesses will be asked to pay more than $8 billion over the next three decades to finance an experimental “clean coal” facility in downstate Illinois.  It guarantees a double-digit return on equity for Tenaska and their investors while sticking ratepayers with the bill, regardless of cost.  To provide some political cover, lawmakers capped rate hikes on residential customers while providing for unlimited electric rate hikes on commercial and industrial ratepayers. This is arguably one of the worst pieces of legislation to pass the Senate in recent years and the IMA is extremely disappointed in the 30 members of the Senate who voted “yes” to raise electric rates on Illinois businesses during one of the worst economic times in our nation’s history.

Senators voting to hike your electric rates include the following members.  Each person should be held responsible for providing the single deciding vote on an $8.6 billion total electric rate hike on Illinois residents and businesses:

Sen. Larry Bomke (R-Springfield)

Sen. James Clayborne (D-East St. Louis)

Sen. Anazette Collins (D-Chicago)

Sen. Maggie Crotty (D-Oak Forest)

Sen. John Cullerton (D-Chicago)

Sen. Gary Forby (D-Benton)

Sen. Mike Frerichs (D-Champaign)

Sen. Don Harmon (D-Oak Park)

Sen. Linda Holmes (D-Aurora)

Sen. Mattie Hunter (D-Chicago)

Sen. Toi Hutchinson (D-Olympia Fields)

Sen. Mike Jacobs (D-Moline)

Sen. John O. Jones (R-Mt. Vernon)

Sen. Dave Koehler (D-Peoria)

Sen. Dan Kotowski (D-Park Ridge)

Sen. Steven Landek (D-Bridgeview)

Sen. Terry Link (D-Lake Bluff)

Sen. Dave Luechtefeld (R-Okawville)

Sen. Sam McCann (R-Carlinville)

Sen. John Mulroe (D-Chicago)

Sen. Tony Munoz (D-Chicago)

Sen. Mike Noland (D-Elgin)

Sen. Kwame Raoul (D-Chicago)

Sen. Martin Sandoval (D-Cicero)

Sen. Jeff Schoenberg (D-Evanston)

Sen. Ira Silverstein (D-Chicago)

Sen. Heather Steans (D-Chicago)

Sen. John Sullivan (D-Rushville)

Sen. Donne Trotter (D-Chicago)

Sen. A.J. Wilhelmi (D-Joliet)

The IMA has strongly opposed the Tenaska legislation for two years because it requires Illinois ratepayers to fund an experimental plant for the 15^th largest privately-owned company in the United States.  According to Tenaska’s own study, confirmed by the independent Illinois Commerce Commission, the cost of their power will be 21 cents per kWh that is 400-500 percent higher than the current market price of power.

SB 678 now moves to the House of Representatives for consideration. With the General Assembly adjourning today, the earliest action on Tenaska would likely be in early 2012.  In the interim, the IMA encourages member companies to call House members and ask them to vote NO on SB 678.