Governor Pritzker delivers State of the State Address
On Wednesday, Governor Pritzker delivered his annual State of the State Address. The required annual address to the legislature is usually delivered via joint-session at the Capitol building, this year's speech was delivered virtually.
The Governor discussed a wide range of topics, many of which were received negatively by the Illinois business community. The following statement is, in part, Illinois Chamber President & CEO Todd Maisch's response to the Governor's address.
"The Illinois Chamber is opposed to the massive tax increase proposed by the Governor’s budget plan under the guise of "closing corporate loopholes." We understand that the state has fiscal problems to address, however, the Governor’s plan will have a long-term negative impact on job creation and tax revenues for the state as it produces an unfair increase on taxpayers after they resoundingly defeated the graduated income tax. This not only will expand what will get taxed, but will also reduce key tax credits for vital sectors of the economy."
The Chamber was pleased to hear the Governor speak of the need for additional relief for struggling small businesses. The Governor endorsed an Illinois Chamber idea to direct future federal funds to his Business Interruption Grant (BIG) program. This Chamber-backed legislation was introduced by Representative Margaret Croke as HB 2424. Senator Fowler will soon introduced similar legislation. We look forward to supporting the Governor and General Assembly on this critical issue. The Governor's complete speech can be read here.
Madigan Resigns House Seat
Longtime Illinois House Speaker Michael J. Madigan resigned his House seat on Thursday after 50 years of service.
Speaker Madigan, first elected to his leadership post in 1983, was the longest serving Speaker in US history. He concluded his tenure as Speaker in January, 2021. Speaker Madigan left a unique mark on Illinois throughout his extended career which spanned nine governorships (seven while Speaker.) Neither the State, or the Legislature, will be the same going forward.
This week, over 2000 bills were introduced in the General Assembly. The Chamber is actively tracking each piece of legislation in accordance with Member needs. See our "new legislation to watch" section below or our complete key bills list for more information.
On Wednesday, the Senate Labor Committee held a subject matter hearing on unemployment insurance and the agreed bill process. Representatives from both the labor and business community delivered testimony and received questions. Rob Karr of the Illinois Retail Merchants Association represented the business community and discussed the importance of the agreed bill process, which prevents the advancement of Unemployment Insurance legislation without the agreement of both labor and business representatives. The process has been in place since 1984.
Governor's Proposed Elimination of "Corporate Loopholes."
The following information regarding the Governor's proposals is provided Courtesy of Chamber Tax Institute Executive Director, Keith Staats. This information was originally published in the Tax Institute's weekly newsletter available to Tax Institute Members. If you are not a member of the Tax Institute, now is a great time to join.
Restrict the manufacturing machinery and equipment exemption from the sales tax by removing “production-related tangible personal property” from the exemption. To reach an agreement on the FY 2020 budget, in 2019 the Governor agreed to modify the manufacturing machinery and equipment exemption to include “production-related tangible person property” that was formerly exempted under the Manufacturers’ Purchase Credit. With this proposal, he goes back on that agreement.
Eliminate the Blue Collar Jobs Act that was scheduled to be effective on January 1, 2021. To reach an agreement on the FY 2020 budget, in 2019 the Governor agreed to a new Blue Collar Jobs Act program that is designed to spur investment and creation of good paying blue collar jobs. With this proposal, he goes back on that agreement.
Reverse the repeal of the Corporate Franchise Tax. To reach an agreement on the FY 2020 budget, in 2019 the Governor agreed to a gradual phase out of the Corporate Franchise Tax. With this proposal, he goes back on that agreement.
“Roll Back Federal Tax Cuts and Jobs Act 100% Foreign-Source Dividend Deduction.” I'm advised by the Department that they intend to add back the 100% deduction for dividends from 10%-owned foreign corporations and the 50% deduction for GILTI. They explain that they plan to do this while still permitting corporate taxpayers to take advantage of the standard deductions authorized under IRC Section 243 for domestic dividends and IITA Section 203(b)(2)(O) for foreign dividends. They state that the impact of this proposal will fall primarily on large, multi-national corporations with foreign subsidiaries or substantial ownership interests in foreign corporations.
“Limit the corporate net operating loss to $100,000 per year for the next three years.” Under Section 207 of the Illinois Income Tax Act, corporations are allowed to carry Illinois net losses forward to offset income in later years. Illinois decoupled from federal law on corporate net operating losses going back to the 1980s. This proposal would limit the amount of losses that can be used in a tax year to $100,000. The Department advises that this proposal will allow the restricted losses to be carried forward for use in later years. In essence, the Governor is seeking an interest free loan from Illinois business for the next 3 years.
Decouple from federal accelerated depreciation. Under the 2017 federal Tax Cuts and Jobs Act, purchasers of capitol assets were authorized to take the cost of such a purchase in the year of acquisition as an expense, rather than depreciating the cost of the asset over the life of the asset. Illinois conforms to this federal change. The idea behind the federal change was to spur investment by businesses. The Governor proposes to decouple from the federal treatment and "apply the standard depreciation schedules in IRC Section 168. Once again, in the long run this doesn't provide any additional money to the states. This is also an interest free loan to the State of Illinois by Illinois businesses.
Limit the retailers discount for the costs of sales tax collection to $1,000 per month. Illinois law recognizes that there are costs to retailers for collecting and remitting state and local sales taxes to the state of Illinois. Illinois law allows retailers to retain 1.75% of the taxes collected as reimbursement for the costs of collection. The Governor proposes to cap this discount at $1,000 per month contending that costs of collection do not increase based on the sales volume of the retailer. This is simply untrue.
Eliminate the sales tax exemption on the sales of biodiesel. Currently, biodiesel blends containing more than 10 percent biodiesel but no more than 99 percent biodiesel, 100-percent biodiesel, and majority blended ethanol currently receive a full sales tax exemption.
Reduce the Illinois tuition tax credit program to a 40% credit for donations from 75%. The Governor campaigned on eliminating the tuition tax credit. This proposal, by reducing the tax credit to 40% of the amount of a donation from the current 75%, will likely have the same effect as an outright repeal by eliminating the attractiveness of making a donation.
Decoupling from the individual net operating loss provisions under the CARES Act was not mentioned in the Governor's budget address. However, i am advised that there will be continued efforts by the Governor to pass decoupling legislation. I suspect the decoupling proposal wasn't highlighted in his address on Wednesday because the decoupling would be retroactive at this point and would not be a FY 2022 budget issue, but rather would affect the FY 2021 budget.
New Legislation to Watch:
HB 1830 (Durkin) COVID-19 Limited Liability
- Provides that a person shall not bring or maintain a civil action alleging exposure or potential exposure to COVID-19 unless: the civil action relates to a minimum medical condition; the civil action involves an act that was intended to cause harm; or the civil action involves an act that constitutes actual malice. Provides, with exceptions, that a person who possesses or is in control of a premises shall not be liable for civil damages for any injuries sustained from the individual's exposure to COVID-19. any person who designs, manufactures, labels, sells, distributes, or donates household disinfecting or cleaning supplies, personal protective equipment, or a qualified product in response to COVID-19 shall not be liable in a civil action alleging personal injury, death, or property damage caused by or resulting from the qualified product.
HB 1839 (Croke) DCEO Regulated Good Corporate Citizen Designation
- This bill provides that the Department of Commerce and Economic Opportunity may require a business organization to agree to certain terms that ensure the business is a good corporate citizen as a condition for receiving development assistance. Provides that a business that cannot truthfully agree to any required terms shall be ineligible for the development assistance. Specifies terms that may be required. Provides that compliance with good corporate citizen eligibility is required throughout a development assistance agreement. Provides that the Department may seek revocation of any credits or exemptions that were earned or used during a time when the business or its corporate parent or affiliate was not in compliance with any applicable requirements.
HB 1855 (Hoffman) DCEO Innovation Voucher Program
- This bill provides that the Department of Commerce and Economic Opportunity is authorized to establish the Illinois Innovation Voucher Program for the purpose of fostering research and development in key industry clusters leading to the creation of new products and services that can be marketed by Illinois businesses. Provides that the Department may award innovation vouchers to eligible businesses to offset a portion of expenses incurred through a collaborative research engagement with an Illinois institution of higher education.
HB 2424 (Croke) BIG Program, Federal Funds - Chamber Initiative
- This Provides that of the federal funds received by the State for purposes related to the COVID-19 public health emergency, 25% of any such funds received on or after March 1, 2021 shall be allocated for use by the Coronavirus Business Interruption Grant Program (BIG Program). This bill is a Chamber initiative. The Chamber supports the continuation of the BIG program due to the continued financial need of Illinois small businesses.
HB 3003 (Batinick) COVID-19 Liability - Chamber Initiative
This bill provides that no individual or entity engaged in businesses, services, activities, or accommodations shall be liable in any coronavirus exposure action unless the plaintiff proves specified elements by clear and convincing evidence. Provides that no health care provider shall be liable in a coronavirus-related medical liability action unless the plaintiff proves certain requirements by clear and convincing evidence. Provides that an employer conducting testing for coronavirus at the workplace shall not be liable for any action or personal injury directly resulting from such testing.
Illinois Chamber Releases 2021 Key Legislation List
Last week, the Illinois Chamber released its first key legislation list for the 102nd General Assembly. This list, which will be updated and edited regularly, features the most crucial legislation for Chamber Members.
Check our website regularly for updates on these bills. These new features make the Chamber's key legislation page a "one-stop-shop" for all business-related legislation. Access the new key legislation list here or at the link below.