Illinois Senate Approves Tax Relief For Chicago Exchanges, Sears
December 13 2011 - 5:24PM
Dow Jones News
Illinois government's attempt to keep Chicago's largest
derivatives exchanges and a major retailer in the state cleared its
final legislative hurdle on Tuesday.
The Illinois Senate sent to the Governor a proposal providing
tax relief to CME Group Inc. (CME), CBOE Holdings Inc. (CBOE) and
Sears Holdings Corp. (SHLD). All three are considering relocating
their headquarters to other states, putting at risk thousands of
Illinois jobs.
The Senate vote was 44-9. The bill passed the Illinois House on
Monday, and Democratic Gov. Pat Quinn has indicated he will sign
the legislation.
Quinn pushed for the deal to also include tax relief for
low-income workers in the form of earned income tax credits. It
also provides aid for small businesses and family farms.
CME and options exchange CBOE loudly protested the
Democratic-controlled legislature's vote in January to boost the
cash-strapped state's corporate tax rate to 7%, from 4.8%.
For CME, the tax hike costs an extra $50 million per year,
according to Chairman Terry Duffy.
However, Democratic Senate President John Cullerton said he and
Duffy agreed that the tax increase was not the problem, but rather
the "unfairness of how it's applied to his company."
The tax rate for CME and CBOE would stay at 7%, however the
state would tax the exchanges on only 27.54% of all electronic
trades, which is the dominant method of buying and selling
derivatives contracts.
Currently, the exchanges pay taxes on all electronic
transactions, even though most of the trades are not based in
Illinois.
Tax breaks would start for the next fiscal year, which begins
July 1. Initially, CME lobbied for the deal to take effect this
fiscal year.
Sears would pay lower taxes through renewal of a special taxing
district in the Chicago suburb of Hoffman Estates, where
approximately 6,100 people are employed.
CME employs about 2,000 people in Illinois, but 130,000 jobs are
tied to the exchange industry, said CME chief financial officer
Jamie Parisi, during testimony before a state House committee on
Monday.
Some lawmakers questioned the fairness of picking winners and
losers in the deal.
Republican Sen. Chris Lauzen deemed the bill "corporate welfare"
and a "give-away to a favored few."
However, Sen. Kirk Dillard, also a Republican, said he's
comforted that CME and Sears are "long-standing Illinois
entities."
"These two companies that we're picking as winners have been
here for a long-time," said Dillard.
CME has called Chicago its home for all of its 163 years in
business. If it moves elsewhere, all that would remain are the two
trading floors at CME-owned Chicago Board of Trade, CME Chairman
Duffy said in early November.
Open outcry trading in the CBOT pits represent less than 5% of
CME's business, according to Duffy.
-By Howard Packowitz, Dow Jones Newswires; 312-750-4132;
howard.packowitz@dowjones.com
CME (NASDAQ:CME)
Historical Stock Chart
From May 2024 to Jun 2024
CME (NASDAQ:CME)
Historical Stock Chart
From Jun 2023 to Jun 2024