Illinois Legislative Leaders Agree On CME, Sears Tax Deal

Date : 12/08/2011 @ 5:18PM
Source : Dow Jones News
Stock : Sears Holdings Corp. (MM) (SHLD)
Quote : 9.1476  0.3876 (4.42%) @ 12:40PM

Illinois Legislative Leaders Agree On CME, Sears Tax Deal

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Illinois legislative leaders agreed Thursday to change their tactics to win passage of a tax-relief plan aimed at keeping Chicago's largest derivatives exchanges and a major retailer in Illinois.

Democrats and Republicans in the Illinois House said they will split in two a proposal to reduce the tax load on CME Group Inc. (CME), CBOE Holdings Inc. (CBOE), and Sears Holdings Corp. (SHLD). Lawmakers will vote separately on a series of tax breaks for Illinois workers, according to information supplied by the office of Republican House Minority Leader Tom Cross.

The larger package was approved by the Illinois Senate, but garnered only eight 'yes' votes a few hours later in the House.

Lawmakers generally agreed on aiding CME, CBOE and Sears, and ease the tax burden for smaller businesses. However, they were divided on providing earned income tax credits for low- and middle-income workers.

Democrats, particularly Governor Pat Quinn, argued that cash in the hands of workers stimulates consumer demand. Republicans complained that such assistance does not create or retain jobs.

The deal provides "some relief to a broad base of businesses in our state," Cross said in a prepared statement.

"It will also less the tax burden on our family farmers and small businesses," Cross also said.

Tax relief for CME and options exchange CBOE remained generally intact compared with previous versions. They would be taxed on 27.54% of all electronic trades, which account for the vast majority of the business performed at the exchanges. Currently, the exchanges pay taxes on 100% of their electronic transactions, even though the bulk of the trades are done outside of Illinois.

Tax breaks won't kick in for CME and CBOE until the start of the next fiscal year, which begins July 1 of next year.

Cost to the already cash-strapped state government would be $43 million in the first year and $85 million in the second year should the bill become law.

A special taxing district would be renewed for Sears, which has its headquarters in the Chicago suburbs of Hoffman Estates. The retailer employs 6,100 people there, a Sears spokesman said.

Attempts to break the legislative bottleneck has taken on increased urgency in recent days. Last Friday, CME executives hosted Indianapolis Mayor Greg Ballard, who said his city has made a "very competitive offer" to land CME headquarters.

CME has run its exchange from Chicago for 163 years. It employs approximately 2,000 employees in Illinois.

CME Chairman Terry Duffy told a state House committee last month that it might relocate its electronic trading operations and clearinghouse. Only the trading floors at CME-owned Chicago Board of Trade would remain. Open-outcry pits represent less than 5% of CME's business, said Duffy.

CME and CBOE protested loudly the legislature's passage in January of an increase in the corporate tax rate to 7%, from 4.8%. The tax increase costs CME an extra $50 million a year, Duffy said.

-By Howard Packowitz, Dow Jones Newswires; 312-750-4132; howard.packowitz@dowjones.com

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