CME, CBOE Tax Break Bill On Hold In Illinois Senate

The president of the Illinois Senate on Tuesday delayed action on a measure that he said would reduce by about half the state taxes paid by Chicago's two main derivatives exchanges.

Senate President John Cullerton, a Democrat, took the bill off the Senate's executive committee agenda after Republicans sought more information about the cost and impact of the legislation aimed at preventing CME Group Inc. (CME) and CBOE Holdings Inc. (CBOE) from moving key operations away from the state. Florida and Texas are believed to be among the states attempting to lure CME and CBOE away from Illinois.

"At the moment, it does not appear to have necessary bipartisan support," said Cullerton spokesman John Patterson.

Cullerton introduced the bill Monday, calling on the state to greatly reduce taxes on derivatives trades made on electronic platforms, which represents the vast majority of transactions performed at both exchanges.

The state would tax only about 27.5% of electronic trades, down from 100% under current law. Cullerton said he came up with the 27.5% figure based on U.S. census information to approximate how much of the exchanges' electronic trading business is done in Illinois.

Senate Republicans demanded more details about the financial impact to the state, even though Cullerton said during an interview Monday that the bill would reduce state and local tax revenues from CME and CBOE by about $79 million annually.

"We want to keep CME in Illinois, but we also want to keep small and medium-size business that are also suffering," said Patty Schuh, spokeswoman for Senate Republican Leader Christine Radogno.

Radogno is scheduled to meet with legislative leaders and Illinois's Democratic Governor Pat Quinn later this week, "so that we can collectively fix the problems," said Schuh.

It's unclear what Cullerton will do next to push the bill through the General Assembly. The exchanges threatened to move key operations and perhaps thousands of jobs to a more tax-friendly state after the Illinois legislature in January raised the corporate income tax to 7%, from 4.8%.

Cullerton had expected executive committee approval on Tuesday and consideration by the full Senate on Wednesday.

Any bill must also win favor in the Illinois House of Representatives and from Gov. Quinn. Democrats control the Illinois House.

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

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