UPDATE:Illinois Legislative Leaders Agree On CME, Sears Tax Deal
December 08 2011 - 7:29PM
Dow Jones News
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 next week 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.
Chicago Mayor Rahm Emanuel said in a prepared statement that the
legislation will provide "much deserved tax relief to working
families and keep the headquarters of two of Illinois' most
important companies here in Chicago."
"I hope that the General Assembly will act swiftly and in a
bipartisan fashion to pass this important legislation," Emanuel
said.
The state House will meet in special Monday, with the state
Senate scheduled to meet the following day.
Lawmakers generally agreed last week on aiding CME, CBOE and
Sears, and easing 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 statement.
Gov. Quinn stated he intends to continue working "closely" with
leaders and the bill's sponsors to "provide relief to working
families, while helping employers put more people to work."
Tax breaks 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 relief 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, according to documents supplied by Minority
Leader Cross.
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 have taken on
increased urgency in recent days. Last Friday, CME executives
hosted Indianapolis Mayor Greg Ballard, who said his city 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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