Illinois Legislature Schedules Vote On Tax Breaks For CME, CBOE
November 10 2011 - 1:36PM
Dow Jones News
Illinois legislators aim to complete a deal granting tax relief
to the state's derivatives exchanges before Thanksgiving even
though that might not be soon enough to prevent the exchanges from
moving their headquarters to a more tax-friendly state.
Lawmakers have yet to agree on a plan to reduce taxes for CME
Group Inc. (CME) and CBOE Holdings Inc. (CBOE) as they debate
broader legislation that adds incentives to keep Sears Holdings
Corp. (SHLD) in Illinois, too.
Other provisions include a multiyear extension of
research-and-development tax credits for all Illinois businesses
and tax relief for workers, even as Illinois struggles to overcome
massive budget deficits.
Hearings on the bill are scheduled for next Wednesday and
Friday, with votes by the full Illinois Senate and House of
Representatives on Nov. 21, according to John Bradley, chairman of
the House Revenue and Finance Committee.
"It's a Herculean effort," said Bradley, referring to the
legislative schedule.
"We want to get something done as soon as we can, but we want to
make sure we get it right," said Bradley, during a phone interview
on Thursday.
Testifying before Bradley's committee Tuesday evening, CME
Chairman Terry Duffy urged lawmakers to vote on the plan this week,
stating that he did not want to limit the options of CME's board of
directors.
CME's board is considering what Duffy described as "very, very
lucrative" offers from other states.
It is unclear whether CME and CBOE have agreed to the delay.
Representatives for both exchanges declined to comment on the
latest developments.
The exchanges have waged a public battle on what they view as an
unfair tax burden after the Illinois legislature in January raised
the corporate income tax to 7%, from 4.8%. The tax increase costs
CME an extra $50 million a year, according to Duffy.
CME pays 6% of all corporate taxes paid in Illinois, which Duffy
said is "not acceptable."
A measure introduced by Illinois Senate President John Cullerton
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.
Duffy warned that if CME moves its headquarters elsewhere, it
would also relocate its Globex electronic control center, now based
in Aurora, Ill. Only the trading floors at the Chicago Board of
Trade would remain, which account for less than 5% of CME's
business, said Duffy.
CME, owner of the Chicago Mercantile Exchange and CBOT, has been
based in Illinois for 163 years.
CME is the world's largest futures exchange as measured by
trading volume, and CBOE is the largest options exchange in the
U.S.
-By Howard Packowitz, Dow Jones Newswires; 312-750-4132;
howard.packowitz@dowjones.com
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