New tax break plan for Sears, CME — and theater district
By Dave McKinney and David Roeder Sun-Times staff reporters November 27, 2011 8:56PM
A trader signals an order in the S&P 500 pit shortly after the opening bell at CME Group Inc.'s Chicago Board of Trade (CBOT) in Chicago, Illinois, U.S., on Monday, April 20, 2009. U.S. stocks declined following six straight weeks of gains as concern grew that credit losses are worsening and lower commodity prices dragged down energy and material producers. Photographer: Tim Boyle/Bloomberg News
Updated: December 29, 2011 8:15AM
SPRINGFIELD — House Democrats on Sunday offered a scaled-back, $250 million-a-year, tax-break package designed to keep Chicago’s two financial exchanges and Sears Holdings Corp. from moving out of Illinois.
The package would provide approximately $100 million in combined tax relief annually for CME Group Inc., which owns the Board of Trade and the Chicago Mercantile Exchange; and Sears Holdings Corp. It also proposes new tax credits for Chicago’s theater scene.
The 220-page amendment filed Sunday by Rep. John Bradley (D-Marion) has been tweaked so there will be a continuing source of revenue unlike earlier versions where taxpayers eventually would have been on the hook.
“The biggest change is we can now actually pay for this,” Bradley told the Chicago Sun-Times.
Additional breaks would go toward thousands of other businesses through extending tax credits on research and development, reinstating tax credits on net operating losses and cutting estate taxes.
There’s language in Bradley’s bill that could liven up Chicago’s theater district. Producers of Broadway or long-run theater productions that set up in Illinois and have labor and marketing expenses exceeding $100,000 could tap into $1 million set aside for live-theater tax credits. That provision is being sought by the theater-production group, Broadway in Chicago. A spokeswoman said Mayor Rahm Emanuel supports the tax break for the theater business.
Also under his legislation, the working poor would see an increase in the earned income tax credit from 5 percent to 7.5 percent next year, while all taxpayers would benefit — albeit by only a few dollars — through an increase in the standard exemption from $2,000 to $2,050. Earlier versions had contemplated indexing the standard exemption to inflation, but that was deemed too costly and stripped out of Bradley’s amendment.
“We want to keep these longstanding Illinois companies and the jobs that go along with them in Illinois. We want to be able to provide them some relief, and we want a balanced package to provide some relief to small businesses. We also want to provide some relief to working folks, as well,” said Bradley, chairman of the House Revenue and Finance Committee.
The measure, which will be heard before Bradley’s committee Monday, likely will be voted on by the full House when lawmakers return to Springfield on Tuesday. Senate action also is expected, though it was not clear whether that chamber might seek additional changes to the package.
Asked about Bradley’s measure, Gov. Pat Quinn’s office late Sunday expressed optimism.
“We are encouraged by the progress toward a final package that will help both working families and employers,” Quinn spokeswoman Brooke Anderson said.
A spokeswoman for House Minority Leader Tom Cross (R-Oswego) stopped short of endorsing the package, saying that House Republicans “are analyzing the final language now.”
“I hope the rest of our colleagues will come along on this and recognize this is the best we can do under the current economic situation, and it’s better than most people thought it would be,” Bradley said, when pressed whether he thinks his package has the votes to pass the House.
A complaint from both parties about earlier tax-break legislation involved how it would be paid for by retroactively decoupling Illinois from a federal law due to expire that enables businesses to write off expensive equipment purchases.
Disallowing that tax credit at the state level would have meant an immediate infusion of more than $900 million for Illinois to fund a larger array of tax breaks, but that cash well would have run dry.
Under Bradley’s amendment, simply allowing the federal tax break to expire on its own without decoupling would mean about $250 million coming into state coffers annually for the foreseeable future, he said.
“We were advised about $250 million comes back on the books next year if we don’t mess with it, just leave it alone. That would be over a much longer period of time. Two hundred and fifty million dollars was a sustainable level we could pay for a tax-relief program. This is a level we can actually afford. This is a level that won’t blow a hole in the budget,” he said.
CME has tried to make its case in Springfield by noting that it is unfair for the state to tax trades as if they all occur within Illinois’ borders, when many electronic trades happen outside of the state.
The company also has said that its tax burden has shot up since Illinois raised its income-tax rates last January and that the firm now accounts for 6 percent of all corporate income taxes in the state.
While CME had pressed for immediate tax relief, Bradley said under his plan the exchanges would not see the full extent of their tax breaks until 2013. The same is true for Sears, he said.
Chris Braithwaite, vice president of corporate communications for Sears Holdings Corp., which owns Sears and Kmart, said, “We are pleased to hear that it seems the Sears provisions are being made part of the package that will be considered by legislators next week.”
Braithwaite praised the efforts of key legislators involved in negotiating the subsidy. “This package will have an impact on not just our 6,100 employees in Hoffman Estates, but also the 9,000 vendors with whom we work across the state of Illinois.”
A spokesman for CME Group Inc., had no comment on the proposal. CME owns the Chicago Mercantile Exchange and the Chicago Board of Trade, the city’s two big futures exchanges.