Center for Tax and Budget Accountability

Generates a total of between $386-$482 million in revenues
Local governments would receive $116 million of total revenue for roads
Transit (CTA, RTA and PACE) would receive between $270 and $366 million
Additional revenue would go to the Downstate and Metro-East Public Transit Funds
Increases the sales tax by .50% in Lake, McHenry, DuPage, Kane and Will counties
Increases the sales tax by .25% in Cook County
Increases the Chicago Real Estate Transfer Tax (by $300 for every $100,000)
Decreases CTA personnel retiree benefits

In the Senate, President Jones cancelled sessions scheduled for Monday and Tuesday that were supposed to deal with transit.

Impact on Riders:

On September 16th, the CTA will begin to implement the "doomsday" plan. The plan will:

Eliminate service on 39 bus routes
Lay off more than 600 workers
Increase fares by $.50 to $1.00 for rides on busses and trains.

View a letter from CTA President Ron Huberman on the cuts

List of eliminated routes

Information on fare increases

WHAT YOU CAN DO!

Click here to make a phone call or send an email or fax to your legislator and state wide leaders telling them to find a long term solution to the state's transit funding problem.

SPOTLIGHT: Corporate Taxes

Illinois Corporate Income Taxes

The Illinois Corporate Income Tax is set at a flat state rate of 4.8%, with an additional 2.5% personal property replacement tax collected for local governments.

Constitutionally, the state can impose an income tax on corporations that is no more than 8/5 greater than the rate assessed against individuals.

Currently, the corporate rate is 4.8%, the maximum allowed under constitutional constraints.

The revenues from the Corporate Income Tax primarily feeds the General Fund, although one-tenth of the revenue from the state's individual (and corporate) income taxes is distributed to local governments, under the Local Government Distributive Fund.

Additional revenue generated from the state's individual and corporate income tax revenue fund the individual and corporate "refund funds," that taxpayers receive when they submit their Illinois tax returns.

Figure 1 below shows state revenues generated from the Illinois Corporate Income tax over the last eight years compared to Inflation. In the beginning of the decade, revenues from the Corporate Income Tax did not keep up with inflation. However, since fiscal year 2004, revenues have outperformed inflation.

Figure 1: Historical Performance of the Illinois Corporate Income Tax: FY 2000 - FY 2007

FY 2000

FY 2001

FY 2002

FY 2003

FY 2004

FY 2005

FY 2006

FY 2007

Actual

$1,237

$1,036

$803

$738

$937

$1,172

$1,428

$1,750

Prior Year Inflation Adjusted (CPI)

$1,279

$1,053

$822

$752

$968

$1,212

$1,477

$ Difference Inflation Adjusted

-$243

-$250

-$84

$185

$204

$216

$273

% Increase Over Prior Year Inflation Adjusted

-19.6%

-24.1%

-10.5%

25.1%

21.8%

18.4%

19.1%

Figure 2 shows that since 2000, state revenues from the Illinois Corporate Income Tax have outperformed inflation by $302 or 30.2 percent.

Figure 2: Historical Comparison

Total Revenue Generated: FY 2000 - FY 2007	$7,864
What Revenues Should Be (in order to keep up with inflation)	$7,562
$ Difference: FY 2000 - FY 2007 Inflation Adjusted	$302
% Difference: FY 2000 - FY 2007 Inflation Adjusted	30.2%

Single Sales Factor

In 1998, Illinois changed its method of determining the taxable income a corporation has in the state from a three part test to a "single sales" factor test. Under the single sales factor, corporate income taxable in Illinois is determined solely on the basis of a company's in-state sales. Under the prior method, in addition to sales, the value of a corporation's property and payroll in Illinois were weighed in determining how much of that company's income was subject to Illinois Corporate Income Tax and Corporate Personal Property Replacement Tax.

Under the single sales factor method, large, multinational companies who already have a strong presence (facilities and employees) in Illinois, and are therefore the largest beneficiaries of state services, receive major corporate income tax cuts. Compare that to small mom and pop shops, who principally make all their sales in the state, and therefore receive no benefit from the tax law change.

According to a report issued by then Illinois Comptroller, Republican Loleta A. Didrickson, 32 companies were projected to gain at least $1 million per year in tax savings under the change to single sales factor.[i]

Limited Liability Companies and S Corporations

An increasing number of businesses are organized as limited liability companies or "S" corporations rather than traditional "C" corporations. Neither limited liability companies nor "S" corporations pay any corporate income tax. Rather, their undistributed profits are taxed to the owners of those entities at individual tax rates.

Other Taxes Paid by Business

Businesses pay a significant amount of local property tax. Almost 38 percent or $7.6 billion of all local property tax paid in Illinois are paid by businesses.

[ii]

Resources:

More information about corporate income taxes is available on CTBA's corporate tax section of our website

For more on Single Sales Factor see:

Michael Mazerov, "The 'Single Sales Factor' Formula for State Corporate Taxes: A Boon to Economic Development of a Costly Giveaway?" Center on Budget and Policy Priorities, September 2001, online at http://www.cbpp.org/3-27-01sfp.htm.

Mary E. Forsberg, "Single Factor: Double Trouble," New Jersey Policy Perspective, 2001, online at http://www.njpp.org/rpt_singlefactor.html.

The Illinois Constitution Article IX, Section 3 outlines the Illinois Corporate Income Tax Inflation based on Bureau of Labor Statistics Consumer Price Index

[i]Illinois Office of the Comptroller, http://www.comptroller.state.il.us/index1.cfm.

[ii]Illinois Department of Revenue, "Tax Year 2000 Illinois Property Tax Statistics."

Corporate Accountability

What is a Tax Expenditure

A tax expenditure is a special tax break given by the state that reduces the amount of taxes a business otherwise would have to pay to state or local government. It is called a "tax expenditure" because it amounts to indirect spending by the government of taxpayers' money. Rather than collecting tax revenue from a taxpayer, and then directly spending that revenue on a public service, the state lets that taxpayer keep what it otherwise would have to pay in taxes, in exchange for the taxpayer itself delivering the desired public good.

Collectively, corporate tax expenditures in Illinois total over $1.5 billion annually.[1]

Tax expenditures have been used since the 1930's to strengthen the Illinois business environment and promote economic development in the state. It was during the 1980's that these tax breaks began to rapidly grow. During that decade, 73 of the existing tax expenditures were enacted, of which 31 were directly related to economic development. There are a total of 218 tax expenditures, 170 associated with taxes and 48 with licenses or fees[2]

Some examples of these incentives are the reduction of the cost for business purchases (including equipment, training and research,) the exemption from the sales tax of the purchase of machinery and equipment used in manufacturing and assembling, tax exemptions and credits from the electricity excise tax and sales taxes available to business in enterprise zones and sales of motor fuel for use other than in motor vehicles.[3]

The Illinois Corporate Accountability for Tax Expenditures Act

The Corporate Accountability for Tax Expenditures Act (Public Act 93-0552/HB 235) was signed into law in 2003. The act requires that all corporations receiving tax breaks for economic development disclose all job creation, wage and retention results annually. It established a procedure for the State to make known, monitor and enforce these tax break agreements to ensure a return on taxpayer money.

A company that fails to meet its part of the bargain will have its tax benefits clawed back by the state, unless that company can demonstrate extenuating circumstances.

To find out about specific corporations in your community and throughout Illinois, please visit the Illinois Corporate Accountability Portal.

Fact sheet on the Illinois Corporate Accountability Act

Resources:

List of all corporate tax expenditures from Fiscal Years 2001 - 2004

Fact Sheet on Tax Expenditures

Text of Public Act 93-0552

Overview of the Limitation of the Net Operating Expense Carry Forward Law

Analysis of the first year of economic development deals disclosed under Public Act 93-0552 by Good Jobs First - This analysis covers 25,278 jobs at 90 companies that received state tax breaks in 2004.

For more information on corporate tax accountability in Illinois please visit: http://www.ctbaonline.org/Corp%20Accountability.htm

[1] Illinois State Comptroller Tax Expenditure Report FY 2006 .

[2] Illinois Comptroller, Tax Expenditure Report, FY 2006.
[3] Enterprise zones are specific job depressed areas

Corporate Tax Accountability

Combined Reporting

Seeking to address flaws in the corporate income tax, many states, including Illinois, have implemented combined reporting for corporate tax income.

Combined reporting requires multi-state corporations to report the income earned for a parent company and all of its subsidiaries on a single tax return The income gets allocated among the states based on the locations of property, payroll and sales.

Combined reporting prevents corporations from structuring transactions between affiliates in various states to avoid paying taxes. As a result, combined reporting is the most effective tool in preventing corporations from using accounting methods to avoid paying their fair share of taxes.

Resources:

Table of states that have made combined reporting part of their tax structure from the Institute on Taxation and Economic Policy

Read the Institute on Taxation and Economic Policy's primer on combined reporting in the states

Illinois Retirement Security Initiative

Pension Funding and the State Budget

Illinois lawmakers finally approved a new state budget last month which appeared to fully fund pensions. However, don't be fooled, the pension problem has in no way been solved. While our legislators should be applauded for paying into the system this year, funding the system for 2008 by no way means Illinois has paid off its $40.7 billion unfunded pension liability. It only means that the current budget includes all of the money required under an instalment plan that is supposed to result in the pension systems being 90 percent funded by 2045. Read more on pension funding and the FY 2008 budget.

In case you missed it, check out the IRSI September newsletter:

IRSI Newsletter, September 2007

Overview of Spring 2007 Pension Legislation

For more information contact Jourlande Gabriel, Director of the Illinois Retirement Security Initiative at jgabriel@ctbaonline.org

Visit the IRSI website for more information about state worker's pensions at http://www.ctbaonline.org/pensions.htm

"The Illinois Retirement Security Initiative is a project of the Center for Tax and Budget Accountability. The goal of the Illinois Retirement Security Initiative is to ensure public retirement benefits in the state are adequately financed and designed to attract high quality employees to the public sector. The Initiative will research, formulate and advocate for public policies towards that end."

Calendar of Events

WHAT? Single-Family Development: Community Housing Developers Institute

WHEN? September 11-12, 2007

WHERE? ICAA Training Facility, 3435 Liberty Drive, Springfield, IL
Contact: nate@housingactionil.org or 312-939-6074 x 201 More info: www.housingactionil.org.

WHAT? 2008 Illinois State Budget Briefing: What Nonprofits Need to Know.

WHEN? Date is currently being rescheduled

WHERE? Spertus Institute - 618 S. Michigan, Chicago

Hear what experts have to say about the areas of the state budget that will have the greatest impact on the nonprofit sector and get answers to your questions.

Legislative speakers will include Senator Don Harmon, Senator James T. Meeks, and Representative Paul D. Froehlich (invited). Additional distinguished guests will also join us as speakers, including Ralph Martire of the Center for Tax and Budget Accountability and Lawrence J. Suffredin, Jr., Cook County Commissioner.

Co-Hosted by The Center for Tax and Budget Accountability and the Donor's Forum

Contact Chrissy Mancini at

cmancini@ctbaonline.org for more information

WHAT? State of Work Illinois Community Forum - Vermilion County

WHEN? Tuesday, September 18, 3:00 to 5:00

WHERE? University of IL Extension - Vermilion County 12190 U.S. Route 150 Oakwood, Il

View a flyer

Contact Dia Cirillo at dcirillo@ctbaonline.org for more information

The forum, funded by the Grand Victoria Foundation, will bring together key leaders in the area to discuss the regions economic trends and opportunities.

WHAT?Making the Connection Basic Training

WHEN?Tuesday, September 18

WHERE?Lincoln Library, Springfield, IL

Presented by the DuPage Federation on Human Services the session contains practical information in an easy to understand format regarding many programs available to assist low income persons.

Register Here

WHAT? Your Pension and You

WHEN? Thursday, September 20, 3:00 to 5:00

WHERE? UIC Medical Center

Contact Carol Humble at JHumble368@aol.com for more information

WHAT? PIE Network Chicago: Summit on Transforming Low-Performing Schools

WHEN?September 20-21, 2007

WHERE?Hyatt Regency, Chicago

More Information

WHAT? National Association of Social Workers (NASW) IL Chapter's Statewide Conference, "Bridging Health Disparities: Help Starts Here"

WHEN? September 24-26, 2007

WHERE? Holiday Inn Chicago Mart Plaza, Chicago, IL

Click here for more information.

WHAT? State of Working Illinois Community Forum - Peoria

WHEN? Tuesday, September 25, 7:30 am to 9:00 am

WHERE? The Central Illinois Workforce Development Board

One Technology Plaza

211 Fulton Street, Suite 300

Contact Dia Cirillo at dcirillo@ctbaonline.org for more information

The forum, funded by the Grand Victoria Foundation, will bring together key leaders in the area to discuss the regions economic trends and opportunities.

WHAT? State of Working Illinois Community Forum - Macomb

WHEN? Friday, September 28, 10:00 am to 12:00 pm

WHERE? TBA

Contact Dia Cirillo at dcirillo@ctbaonline.org for more information

The forum, funded by the Grand Victoria Foundation, will bring together key leaders in the area to discuss the regions economic trends and opportunities.

WHAT? Making the Connection: Public Benefits and Single Adults & Public Benefits for Youths up to 21

WHEN?October 2, 2007

WHERE?Naperville, IL

Presented by the DuPage Federation on Human Services

Register Here

WHAT? Illinois Alcoholism and Drug Dependence Association Annual Conference

WHEN?October 1-3, 2007

WHERE?The Wyndham Drake, Oak Brook, Illinois

More Information and Registration Here

WHAT? Making the Connection: Mental Health and Public Benefits & Understanding Spenddown

WHEN?October 12, 2007

WHERE?Naperville, IL

Presented by the DuPage Federation on Human Services

Register Here

WHAT? Property and Asset Management: Community Housing Developers Institute

WHEN? October 16-17, 2007

WHERE? ICAA Training Facility, 3435 Liberty Drive, Springfield, IL
Contact: nate@housingactionil.org or 312-939-6074 x 201 More info: www.housingactionil.org.

WHAT? Understanding Appeals & Domestic Violence and Public Benefits

WHEN?October 24, 2007

WHERE?Naperville, IL

Presented by the DuPage Federation on Human Services

Register Here

WHAT? Immigrants and Public Benefits & Putting the Pieces Together

WHEN?October 25, 2007

WHERE?Naperville, IL

Presented by the DuPage Federation on Human Services

Register Here

WHAT? Affordable Housing Month

WHEN? November 1-30, 2007

WHERE?