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Springfield Highlights

Springfield Highlights – 02/23/18

Tax Reform Initiated by the IMA

The Illinois Manufacturers’ Association has initiated two tax reform proposals that will help drive manufacturing growth and expansion if enacted into law. Illinois tax law today imposes significant cost barriers for manufacturers and discourages middle class job creation or capital investment.

The IMA’s Manufacturing Job Destination Tax Credit includes a preamble noting that manufacturing employs 570,000 workers in good, high-paying jobs that average more than $84,000 per year. The sector’s economic output totals more than $103 billion and contributes the single largest share of the Gross State Product. However, it correctly notes that Illinois has gained only 8,300 manufacturing jobs since the recession ended in 2009 compared to average manufacturing job growth of 68,800 jobs in neighboring states.

This proposal (HB 5469, SB 3303) would incent the manufacturing sector by providing a 25 percent tax credit on labor, apprentice, and job training costs. In order to qualify, the manufacturing company must also provide health insurance, paid time off, and a pension or 401k plan to its employees. There is no minimum salary requirement for employees but the credit is limited to the first $25,000 of an employee’s wages.

The IMA’s second proposal (HB 5295, SB 3453) is a comprehensive tax reform package that will modernize and update current or recently expired tax incentives. Most important, it reinstates the Manufacturers Purchase Credit and melds it permanently into the Machinery & Equipment sales tax exemption. While the IMA attained a five-year extension of the Research & Development tax credit last year, this proposal includes our goal of making it permanent and also modernizing the base calculation so that all companies conducting research receive a benefit. Additionally, the bill reinstates the training expense credit, extends the coal and aggregate exploration credit, and creates a new apprenticeship credit.

It’s important to continue to educate lawmakers on the importance of the manufacturing sector and impact of tax policy. The IMA appreciates the leadership of Rep. Tony McCombie, Rep. Keith Wheeler, Sen. Karen McConnaughay, and Sen. Dan McConchie for their leadership and support of the manufacturing sector.

 

IMA Leads Coalition Opposing Digital Fair Repair Act

This week, the IMA formed a coalition of nearly two dozen companies and trade associations aimed at defeating the recently proposed Digital Fair Repair Act that would jeopardize confidential and proprietary software code by mandating its release to independent third party repair shops. The legislation targets a wide swath of products ranging from inexpensive consumer electronics to larger capital investments such as heavy equipment.

Sponsored by Rep. David Harris (R-Arlington Heights), HB 4747 creates potentially dangerous safety issues and risks compliance with environmental regulations if a couple lines of code are changed, intended or not. Changes in source coding could also void warranties and change a machine’s capabilities and performance.

The legislation is based on a similar proposal in New York but it fails to make a distinction between access to coded software in machinery or electronic devices and access to diagnostic tools and repair information. Current diagnostic and repair manuals are provided to the general public and repair shops. U.S. copyright law currently protects embedded software code and that protection should remain in place.

HB 4747 is currently in the House Rules Committee.

 

EPA Set to Release VW Settlement Plan

The Illinois Environmental Protection Agency is set to release its proposed mitigation plan funded by proceeds from the $2.9 billion settlement reached by Volkswagen and the federal government following severe violations of emissions laws. Illinois is poised to receive more than $108 million to help reduce NOx emissions and applications will be accepted for funding under the established parameters.

Stakeholders will be allowed to comment on the IEPA plan when it is released in the next few days. The original plan will focus on reducing NOx emissions in areas where the affected Volkswagen vehicles are registered along with maximizing emission reductions and leveraging funding through cost-effective projects. It is anticipated that much of the funding will be allocated to the Chicago and Metro East areas due to their ozone non-attainment designations and larger number of registered VW vehicles.

Despite this transparent and public process, environmental activists are already opposing the unreleased mitigation plan and plan an end-run around the EPA process. Senator Heather Steans (D-Chicago) and Sen. Christina Castro (D-Elgin) introduced legislation (SB 3055 and SB 3101) seeking to determine how the settlement money should be spent. The first bill specifically dedicated 15 percent for the purchase of light duty electric vehicle supply equipment with the remainder allocated for the replacement of fossil fuel powered vehicles. The second bill creates a task force controlled by environmental advocates that will make recommendations on how to spend the funds. They include no representatives from the business community.

The IMA supports the process initiated by the Illinois EPA and plans to weigh in during the stakeholder process so that these funds are used effectively. At the same time, the IMA will oppose legislation sought by environmental activists who believe they should be able to unilaterally control how and where it is spent.

 

Project Next Grid Stakeholder Meetings

The Illinois Manufacturers’ Association is one of only three business groups invited to participate next week in the inaugural stakeholders meeting for Illinois’ Project Next Grid. In addition to serving on the Stakeholder Advisory Council, the IMA is also being named to a seat on one of the seven working groups that will each focus on a specific area of study including (1) New Technology Deployment and Grid Integration, (2) Metering, Communications and Data, (3) Reliability, Resiliency and Security, (4) Customer and Community Participation, (5) Electric Markets, (6) Regulatory and Environmental Policy Issues, and (7) Ratemaking.

The University of Illinois in consultation with the Illinois Commerce Commission is managing the eighteen month Project Next Grid study designed to “identity, research, and develop options to address issues facing Illinois’ electric grid, its users, and the utilities who operate it.” At the end of the process, the study will culminate in a Next Grid Final Report issued by the Illinois Commerce Commission that is supposed to identify options for modernizing grid infrastructure and policies.

Manufacturers are major energy users and could be significantly impacted by potential changes. The Illinois Manufacturers’ Association will be a leading voice representing job creators during this process because recommendations could have a profound impact on energy costs, efficiency, and availability.

 

Net Neutrality

The Federal Communications Commission (FCC) published new rules this week as part of the process for eliminating the current net neutrality rules established by the Obama Administration. It is one step in a process in Washington D.C. that will require the Office of Management and Budget to review the suggested change.

In Illinois, legislation initiated by Attorney General Lisa Madigan and the ACLU would essentially create a state net neutrality law. While this is an issue that has received much debate over the past year, these telecommunications policies are the responsibility of the FCC rather than a patchwork of state laws.

The four bills dealing with the net neutrality issue are HB 4819 (Williams, D-Chicago), HB 5094 (Andrade, D-Chicago), SB 2975 (Biss, D-Evanston), and SB 2816 (Cullerton, T, D-Villa Park).

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