Madigan tightens corporate tax-credit rules over business outcry
BY DAVE MCKINNEY Springfield Bureau Chief May 14, 2014 12:51PM
Updated: June 17, 2014 1:51PM
SPRINGFIELD — A push by House Speaker Michael Madigan to reel in a key business tax credit advanced in the Illinois House on Wednesday despite an outcry from business leaders, who called the move a “barrier to economic growth.”
The Chicago Democrat pushed his new rules for the state’s EDGE tax-credit program through the House Revenue Committee and to the House floor on an 8-2 vote.
“The purpose of the proposal is twofold: encourage use of the credit by small businesses and ensure the program is being run in a way that benefits both the recipients and state taxpayers,” Madigan told the panel.
Now, more than 700 companies claim the EDGE tax credit, which was conceived originally under former Gov. George Ryan and designed to permit expanding companies to write off state tax withholding for any new jobs created from the company’s corporate income tax liability.
But increasingly, as much as two-thirds of all Illinois companies are not paying any state corporate income taxes, with some, such as Archer Daniels Midland, asking for the state Legislature to grant them the tax break as an offset for withholding taxes on workers rather than a credit from corporate income taxes.
ADM unsuccessfully sought that advantage when the Decatur-based company was contemplating locating a new global headquarters in Chicago. When state lawmakers balked, ADM went ahead and chose Chicago as the home of its new global complex without the state tax break.
The speaker’s legislation, which is backed by Gov. Pat Quinn’s administration, would require the chief executives of all companies seeking the EDGE tax break to sign a document that states they would not expand in Illinois without the tax credit.
In cases where a company is asking for an offset of their withholding taxes on workers, as ADM did, the firms would have to meet “higher standards,” the speaker said.
Firms looking for the EDGE tax credit to relocate or expand in Illinois would have to create new jobs, rather than simply retain the ones they have.
They would have to certify that new jobs would be created in areas with high poverty and high unemployment, and companies would have to publicly disclose their gross income, the amount of income allocated to Illinois and their net income during the period in which they claim the EDGE credit.
Business groups lined up against Madigan’s proposal, with the head of the Illinois Chamber of Commerce calling the plan a “barrier to economic growth” and its income disclosure requirement a “huge disincentive” for businesses.
“It sends the wrong signal to people about doing business in Illinois,” Doug Whitley, president and CEO of the state business organization, told the House committee.
Afterward Wednesday’s committee hearing, Madigan rejected any notion that he is anti-business.
“It relates to my desire to amend the Illinois tax code so at the end of the day, it’s balanced and it’s helpful to Illinois businesses. On the fiscal side, that’s what the budget-making and tax policies are all about,” the speaker told reporters. “And I think you know that I’ve developed a record in the Legislature where on fiscal matters, I’m considered to be a conservative, and that’s how I’d approach the situation.”
Madigan’s move comes at a time when his chamber is on the verge of moving ahead with a $38 billion state budget despite not having the votes to fully fund the plan because of lack of support in the House for extending the state’s expiring temporary income-tax increase.
Madigan, who dismissed a question about the constitutionality of that approach, wouldn’t say how close he is to the necessary 60 votes needed to pass permanent income-tax increase legislation between now and the House and Senate’s scheduled May 31 adjournment.
“We’re working our roll call, and our purpose in advancing the budget first is to set the bar against which we’ll work to convince people to vote for the revenue,” the speaker said.
Asked if he had tried to squeeze his members into backing a permanent tax increase, Madigan balked: “As I said earlier, we don’t engage in tactics like that. We try to work with people, persuade people, cajole people.”
Pressed to describe how he’s trying to “persuade” his 70 fellow House Democrats to back the tax legislation, Madigan said, “We talk in terms of their view of where the state should be, what the state should be doing. They’re all policy-oriented conversations.
Then, in ending his post-hearing briefing with reporters as he prepared to walk away, Madigan laughed and said, “You’d really enjoy them.”