SPRINGFIELD HIGHLIGHTS - February 17, 2012
Friday, February 17, 2012 at 4:25PM IMA Poised to Advance Manufacturing Renaissance
In 2011, for the first time since 1998, Illinois actually experienced a net gain in manufacturing jobs. While the 20,000 new jobs is a relatively small number, there is growing optimism in the industrial sector and Illinois needs to be positioned to take advantage of the manufacturing renaissance. Today, Illinois employs 575,000 workers and contributes the single largest share – 12.4 percent – of the state’s Gross Domestic Product. As we move forward, the IMA will be the leading advocate on a number of issues that are critical to the manufacturing sector including tax reform, increasing exports, reforming our tort system, enacting pension reform, balancing the budget, and implementing stackable career credential to create a strong pipeline of qualified workers to replace aging baby boomers. Over the next few weeks, the IMA will be announcing several of our key initiatives and we will be asking for your help and support.
IMA Unveils Major Enterprise Zone Bill
Working with a bipartisan group of lawmakers, the Illinois Manufacturers’ Association unveiled a comprehensive Enterprise Zone extension bill that will serve as the base for discussions during the spring legislative session. Working in concert with the IMA, President John Cullerton and Republican Leader Christine Radogno are creating a six-member bipartisan committee co-chaired by Sen. Mike Frerichs (D-Champaign) and Sen. Pam Althoff (R-Crystal Lake) that will conduct four hearings around the state (Carbondale, Chicago, Peoria, and Rockford) beginning on March 13. This comprehensive bill (SB 3688) extends enterprise zones by an additional 25 years, creates 10 new enterprise zones over the next decade, increases the geographic size of current zones, and improves transparency.
Extending and improving Illinois enterprise zones is a top priority of the Illinois Manufacturers’ Association. These economic development zones, located in ninety-seven communities across the state, are one of the best tools to incent job creation and capital investment. According to the Department of Commerce & Economic Development, in the thirty years since their inception, the Enterprise Zone program has been extremely successful. More than 890,000 jobs have been created or retained with $49.9 billion invested in these areas. DCEO calls the program “one of the most successful economic development tools.”
Without action from the Governor and General Assembly, these zones begin expiring in 2013. The first seven enterprise zones that are set to expire are located in Canton/Fulton County, Chicago I, Chicago II, Decatur/Macon County, Des Plaines River Valley, East. St. Louis, Peoria, and Rockford. Every year thereafter, between 8-12 zones will expire annually.
The IMA-initiated legislation modernizes the Enterprise Zone program while providing a 25-year, long-term extension that provides stability for businesses and economic development officials. It creates ten new zones over the next decade, with no more than two zones created in one year allowing DCEO to choose good development locations. Current law, passed in the 1980s, capped the size of enterprise zones at 12 or 15-square miles depending on location that will be increased to 18 and 20-square miles respectively. High-impact businesses that employ full-time contractual employees will be able to count these individuals in their headcount if they work at least 1,820 hours annually.
In an effort to increase transparency, lawmakers will be notified of potential changes in boundaries, maps of zones will be posted electronically, and DCEO will work with the Department of Revenue to aggregate the tax incentives by zone on the current EZ annual report. No company-specific information will be provided. Fees required by enterprise zone administrators will be capped and they will be required to provide a final report on the cost of the sales tax exemption for building materials at the end of the project (currently only an estimate is provided at the beginning).
The Illinois Manufacturers Association is leading the effort to extend and reform Enterprise Zones in Illinois. We appreciate the bipartisan efforts of Sen. Frerichs, Sen. Althoff, Sen. Toi Hutchinson (D-Olympia Fields), Sen. Sue Rezin (R-Morris) and Sen. Dave Koehler (D-Peoria) who are co-sponsoring the legislation and fighting to preserve these key incentives.
If you support our effort and would like your company’s name to be added to the rapidly growing list of supporters, please email the IMA’s VP & Chief Operating Officer Mark Denzler at mdenzler@ima-net.org.
Enhanced Research & Development Tax Credit Offered by IMA
While the IMA successfully led an effort to extend the state’s Research & Development tax credit in the fall veto session, the current tax credit is antiquated and in need of modernization. Working with Senator Mike Jacobs (D-Moline), the IMA has introduced an enhanced R & D Credit that both increases the credit for companies growing their expenditures while also providing an alternative credit for companies that conduct R & D albeit at a stable rate. Most importantly, the IMA legislation makes the credit refundable and permanent so businesses engaged in long-term planning get a sense of stability. It’s critical for the 450 corporate R & D facilities in Illinois and a manufacturing sector that is responsible for using more than 70 percent of the credit.
SB 3600 increases the current credit from 6.5 percent of increasing R & D expenditures to 10 percent. An alternative credit is created that is based on the federal credit calculated by companies. After determining the federal credit, an Illinois employer would apportion a share of the R & D to Illinois and be able to claim a 20 percent credit on the Illinois portion of Research & Development. While lawmakers may not be ready to work on an enhanced R & D credit after passing a short extension last year, the IMA will continue to educate lawmakers about this issue.
New Manufacturing Tax Credit and Reformed MPC
Sponsored by Senator Dave Syverson (R-Rockford), the IMA is pushing new legislation modeled after a recent Wisconsin law that creates a new income tax credit for all manufacturing companies – large and small. The Manufacturing Tax Credit (SB 3562) is a credit for all manufacturers based on their qualified production activities income occurring in Illinois. Phased in over a three-year period of time, this new economic development incentive will reduce a company’s income tax rate to 1 percent to encourage production in the state of Illinois.
Alternatively, another IMA bill (SB 3664) sponsored by Sen. Sue Rezin (R-Morris) will eliminate the current Manufacturers Purchase Credit and replace it with a new sales tax exemption for tangible personal property that is incorporated into real estate within a manufacturing or graphic arts facility or consumed in research and development. It further allows for a sales tax exemption for property used or consumed in activities including preproduction material handling, quality control, inventory control, staging, and packaging for shipping and transportation. This will replace the confusing and difficult to administer MPC with a new, streamlined sales tax exemption.
Governor’s Budget Address on Tap
Governor Patrick Quinn will address a joint session of the General Assembly next week and give a key budget message at a time when the state’s finances are in dire straits. Illinois faces a backlog of $8.5 billion that includes at least $1.5 billion in deferred Medicaid payments, $5.5 billion owed to vendors and $600 million in corporate tax refunds dating back to 2008. Governor Quinn has indicated he plans to call for at least $2 billion in cuts to the skyrocketing Medicaid program and has empaneled a committee to study pension reform. The IMA previously reported that the Governor will call for elimination of “tax loopholes” including the continental shelf exclusion and for closure of multiple state facilities. The IMA will provide a complete budget wrap-up following the budget address which we hope will actually reduce spending and balance the budget without kicking the can down the road.