CME/CBOE Tax Deal Not Likely To Happen This Week -Source
November 09 2011 - 6:02PM
Dow Jones News
Illinois lawmakers will probably not agree before the end of
this week to grant tax relief to the state's derivatives exchanges,
even though they have threatened to move their headquarters
elsewhere.
"It appears this is going to take some time, and we want to make
sure we get this right," said John Patterson, a spokesman for
Illinois Senate President John Cullerton.
That echoes comments made Tuesday evening by the chairman of a
state House committee that did not take action on the deal. It
would reduce by about half the state taxes paid by CME Group Inc.
(CME) and CBOE Holdings Inc. (CBOE).
Cullerton introduced a measure earlier this month that would tax
the exchanges on only about 25.7% of the trades performed on their
electronic platforms. Currently, they pay taxes on all electronic
transactions, which make up the vast majority of the derivatives
business.
CME and CBOE lobbied the legislature for relief after lawmakers
in January raised the corporate income tax to 7%, from 4.8%. The
tax hike costs CME an extra $50 million, said CME chairman Terry
Duffy.
CME Group, owner of the Chicago Mercantile Exchange and Chicago
Board of Trade, has been based in Illinois for all of its 163
years. It is considering "very, very lucrative offers" from other
states, said Duffy during testimony before a House committee.
Duffy was reluctant to grant state lawmakers extra time to agree
on a deal, stating that he could not limit the options of CME's
board of directors, which would make the final decision on a move.
The chairman of the House Revenue and Finance Committee, John
Bradley, suggested Tuesday that the legislature might be called
back into session by the end of this month.
Duffy said that if CME departs, it would move its Globex
electronic control center from its Aurora, Ill., facility. All that
would remain would be the trading floors at the Chicago Board of
Trade, which accounts for less than 5% of CME's business, Duffy
said.
To win bipartisan support, the legislation has broadened in
scope to include tax breaks for Sears Holdings Corp. (SHLD) and a
multi-year extension of a research-and-development tax credit for
all state businesses.
Democratic Governor Pat Quinn has also pushed for the bill to
also include tax relief for Illinois workers.
CME leaders were not immediately available for comment on the
latest developments. A CBOE spokesman declined comment.
-By Howard Packowitz, Dow Jones Newswires; 312-750-4132;
howard.packowitz@dowjones.com
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