IMA Leads Coalition Against Water’s Edge Tax Proposal
As the IMA reported previously, legislation (SB 1115 / HB 2085) has been introduced in both the House of Representatives and Senate that would move Illinois into a “worldwide combination” state while at the same time reducing the water’s edge dividend deduction from 100 to 75 percent. The legislation also creates a tax haven “blacklist” of nearly 50 countries including Ireland, the Netherlands, and Switzerland.
If enacted into law, Illinois would join outliers such as Idaho, Montana, and North Dakota with worldwide reporting schemes. Illinois taxpayers would be required to make the water’s edge election every 10 years that could require them to include 25 percent of GILTI. The water’s edge reporting would create extraterritorial double taxation of income in certain circumstances including (1) taxpayers with U.S. source income without regard to federal treaties, (2) taxpayers earning more than 20 percent of their income, directly or indirectly, from intangible property or service-related activities, and (3) taxpayers doing businesses in one of the tax haven designated countries.
Federal law allows for the exclusion of certain foreign corporations from the federal income tax return. If Illinois moves to worldwide reporting, corporations may be required to include more corporations and affiliates, regardless of their place of incorporation or level of U.S. business activity.
The genesis for this legislation is a progressive advocacy organization that used a recent flawed report from ITEP purporting to show that Illinois is losing more than $1.3 billion because of the state’s tax system. However, Illinois has twice passed legislation (2004, 2008) that “add back” income to address concerns of tax shifting.
The IMA is concerned about the potential impact of this legislation and convened a meeting of the leading business organizations to begin organizing opposition. While this specific legislation may not move, the IMA has spoken with sponsor Majority Leader Greg Harris (D-Chicago) who has indicated that the concept remains on the radar for potential action given the state’s need for revenue.
If your company is concerned about HB 2085 / SB 1105, please contact Mark Denzler and ask to be added to the coalition for future calls and meetings.
Right to Repair Legislation
The House Consumer Protection Committee was cancelled this week postponing a potential vote on Right to Repair legislation (HB 2026) sponsored by Rep. Michelle Mussman. The IMA is leading a coalition of two dozen associations and businesses opposed to this legislation that would require manufacturers to provide confidential source coding and proprietary technology to independent repair shops. This would risk intellectual property rights while jeopardizing safety and emission requirements along with warranties.
Manufacturers often provide repair guides but a “right to repair” should not create a “right to modify” manufactured products. The IMA encourages members who are opposed to HB 2026 to contact members of the House Consumer Protection Committee.
New Energy Bill Released that will Harm Manufacturers
The Illinois Clean Jobs Coalition announced the introduction of a Clean Energy Jobs Act this week. Sponsored by Senator Cristina Castro (D-Elgin) and Rep. Ann Williams (D-Chicago) respectively, the legislation (SB 2132 / HB 3624) would result in higher electric rates for manufacturers and eliminates an important energy efficiency exemption available to large industrial customers that was enacted in 2017. Manufacturers have led the way to increase efficiency and reduce energy consumption but this massive government mandate will harm the state’s manufacturing sector and add billions of dollars in new costs.
Despite repeated promises to customers of “rate caps” on energy costs in previous years, the Clean Jobs Coalition broke their word. This legislation eviscerates the supposed rate cap by hiking the price cap by 28 percent over the next five years with annual increases built into the formula every five years.
Proponents describe the 365-page bill as an effort “to move Illinois to 100 percent renewable energy by 2050, achieve a carbon-free power sector by 2030, and electrify the transportation sector.”
Within 180 days of taking effect, the Illinois EPA is directed to establish “annual greenhouse gas pollution caps” and further “co-pollutant reductions” beginning in 2020 from electric generating units including but not limited to coal, oil, combustion turbine, integrated gasification, and co-generation facilities. The IEPA is directed to eliminate all emissions of greenhouse gases, particulate matter, mercury, nitrogen oxides, and sulfur dioxide from Illinois’ electric sector by 2030.
The legislation eliminates an entire section of the Environmental Protection Act (415 ILCS 5/9.15) that provides an air pollution construction permit shall not be required if the equipment, site, or source is not subject to regulation. If enacted, this will significantly increase the number of permits needed, adding time and cost to job creators.
Drug Pricing Caps
The House Prescription Drug Affordability and Accessibility Committee met on Wednesday morning for a subject matter hearing on prescription drug pricing. The Committee heard testimony only from one national organization in favor of price controls while avoiding testimony from manufacturers who make life-saving products.
Illinois and the United States are leaders in the biopharmaceutical industry. There are more than 50,000 women and men employed in the sector in Illinois alone in good, high-paying jobs. American manufacturers are innovators supporting a diverse and large-scale supply chain for the development, production, and distribution of therapeutics to patients.
Democratic lawmakers pushing drug pricing legislation believe that government should regulate prices and include new taxes on drug price increases while also allowing Illinois to become a licensed wholesaler of imported drugs from Canada.
At a press conference after the committee hearing, Democrats led by Rep. Will Guzzardi (D-Chicago) announced a package of bills:
- HB 156 – Mandating certain pricing disclosures
- HB 1441– Makes Illinois a licensed wholesaler to import medications from Canada
- HB 2880 – Imposes a tax on drug prices that increase faster than CPI
- HB 3493 – Creates a state board to regulate prescription drug prices
FY 2020 Economic Forecast
Last week’s Budget Address by Governor Pritzker began the FY2020 budget process in the General Assembly, with dozens of appropriation bills containing the Governor’s proposals filed in the House of Representatives and Senate.
This week, House Revenue Committee held a subject matter hearing on state revenue with the Department of Revenue and Governor’s Office of Management and Budget presenting the FY 2020 Economic Forecast and Revenue Estimate.
The presentation projects slowing growth nationally and in Illinois where employment will grow at an annual rate of 0.5 percent, below the national average of 0.8 percent. Labor shortages will continue to hamper the economy. GOMB and Revenue is predicting a 3.3 percent increase in individual income tax revenues with a smaller 0.8 percent increase in corporate income taxes. Sales tax receipts are expected to grow 3.7 percent.
2019 Business Day
Mark your calendars and plan to attend Business Day on May 1 in Springfield. Every year is important but manufacturers are facing a barrage of legislation that could have a significant impact on your business. We’ve already seen a minimum wage hike and now we’re looking at a graduated income tax, higher energy bills, recreational marijuana, and more labor regulations. Please click here to register.
Come to Springfield and make your voice heard! Thank you to our current sponsors.