SPRINGFIELD HIGHLIGHTS - DECEMBER 16, 2011

General Assembly Passes, Governor Signs $340 Million Tax Relief Package

After several weeks of negotiation, the General Assembly passed a $340 million tax relief package with strong bipartisan support in both the House of Representatives and Senate.  Supported by the Illinois Manufacturers’ Association, the final agreement included two provisions sought by the IMA including an extension of the Research & Development tax credit and partial reinstatement of the Net Operating Loss deduction. Governor Quinn is signing the package (SB 397, SB 400) into law today.

The tax package was contained in two separate pieces of legislation. The first, SB 397 contained the business tax relief while the second bill, SB 400, included tax benefits for individuals.

SB 397, sponsored by Rep. John Bradley and Sen. Toi Hutchinson, the respective chairs of the House and Senate Revenue Committees, contained the following pieces: (1) 5-year extension of the Research & Development Credit with a  five-year carry forward that is retroactive to January 2, 2011; (2) reinstatement of the Net Operating Loss provision effective on January 1, 2012 with a $100,000 cap; (3) increase in the Estate Tax deduction from $2 million to $4 million over two years; (4) apportionment rule change for the Chicago Mercantile Exchange; (5) EDGE tax credit for Sears and Champion Laboratories; (6) new independent tax tribunal to hear contested cases with the Department of Revenue; (7) 5-year extension of all sunsets and credits set to expire in 2011-13 which includes an employer credit for hiring veterans; (8) a new pre-Broadway theatre tax credit limited to an annual $2 million cap and (9) a five-year extension of the ethanol and biofuels tax credit.  SB 397 passed the House on a vote of 81-28-7 followed by a Senate vote of 44-9-0. 

SB 400, sponsored by Majority Leader Barbara Currie  and Sen. Hutchinson, increased the Earned Income Tax Credit for low-income families from 5 percent to 10 percent over a two-year phase in period.  Additionally, this bill increases the personal exemption from $2,000 to $2,050 with additional annual increases tied to the Consumer Price Index.  SB 400 passed the House on a vote of 67-49-0 with a Senate vote of 48-4-0. 

While not a perfect bill, the IMA applauds Governor Pat Quinn, President John Cullerton, Speaker Michael J. Madigan, Senate Republican Leader Christine Radogno, House Republican Leader Tom Cross, House Revenue Chairman John Bradley, Senate Revenue Chairman Toi Hutchinson, Revenue Spokesman David Harris, and all members of the General Assembly who supported this tax package. 

The IMA will continue working on further reform of the tax code including a reduction in income tax rates, permanent extension of the R & D credit, full reinstatement of the NOL provision, and extension of Enterprise Zones.

Income Tax Rollback Proposed

Hours after the General Assembly passed the tax package this week, competing proposals from Democrats and Republicans emerged in the House of Representatives seeking to repeal or roll back the income tax increase passed in January with all Democrat votes during the final hours of the 96^th General Assembly.  The IMA strongly supports comprehensive reform of the tax code including elimination of the corporate income tax rate and reduction of the individual tax rate that impacts many small and medium-sized companies.   Illinois needs to reduce it’s tax rate and institute major reforms to create a strong economy and create jobs.

Democrat Rep. Jerry Costello, along with a handful of Democrat members, filed HB 3917 that seeks to immediately repeal the massive income tax increase passed by the last General Assembly.  Under this proposal, the individual tax rate would be reduced from 5 to 3 percent on January 1, 2012 with the corporate rate falling from 7.2 to 4.8 percent.

House Republican Leader Tom Cross, along with members of the Republican Caucus, filed their own proposal (HB 3918) that seeks to roll back the income tax increase over a two-year period of time.  The rates would decrease by one percentage point on January 1, 2012 with a final reduction to the original, pre-tax increase levels in 2013.  Their legislation also includes an automatic 0.25 percent reduction any time the three-month average unemployment rate increases by 0.3 percent.  In a press conference, Leader Cross pointed out that Illinois’ unemployment rate has risen by 1.1 percent and cost 90,000 jobs since the income tax increase took effect in January. Republicans proposed some spending reforms in Medicaid and other state programs to account for the reduction in revenue.

While these two proposals were introduced, it remains doubtful that they will pass the General Assembly and be signed into law by Governor Quinn who campaigned last year in support of the income tax increase.  Illinois currently faces a nearly $5.5 billion budget deficit while another $1.5 billion in Medicare bills was shifted from FY11 to FY12.  If passed by the General Assembly and signed into law by Governor Quinn, it would force the state to cut nearly $7 billion in spending from a roughly $32 billion budget which is not politically popular in an election year.

Court Denies Republican Challenge to Congressional Map

A week after upholding the state political map drawn by the ruling Democrat majority, a three-member panel of federal judges ruled against a challenge by Republicans and some minority groups to the Congressional map governing the seventeen districts.  While the Court agreed with the claims of “political gerrymandering” which was a “blatant political move to increase the number of Democrat congressional seats” the legal opinion noted that the plaintiffs could not prove that the state legislature intentionally discriminated against Latinos.  In a press release, Republicans expressed disappointment and are considering their legal options.   It is very unlikely that decision on either the state or Congressional map will be appealed further meaning that the maps passed by the General Assembly (P.A. 97-0006, P.A. 97-0014) will exist for the next decade.

While candidates for the General Assembly had filed their petitions by Monday, December 5, the court had delayed filing by Congressional candidates.  With this week’s opinion, federal candidates will have to file their petitions by the first week in January.

Click here to see a list of candidates who have filed for the General Assembly.