Illinois Governor Signs Deal To Keep CME-CBOE, Sears In State
December 16 2011 - 5:41PM
Dow Jones News
A bill providing tax incentives to prevent Chicago's largest
derivatives trading companies and a major retailer from leaving
their Illinois headquarters, and the accompanying loss of thousands
of jobs, was signed into law late Friday by the state's
governor.
Gov. Pat Quinn signed the controversial measure that was adopted
earlier this week by both chambers of the Illinois General
Assembly.
The bill provides tax relief to CME Group Inc. (CME), CBOE
Holdings Inc. (CBOE), and Sears Holdings Corp. (SHLD).
CME, Illinois' largest corporate taxpayer, protested that a tax
increase imposed by the legislature in January would cost the
exchange operator an extra $50 million a year.
Democrats, who control both legislative chambers and the
governor's office, raised the corporate tax in January to 7%, from
4.8%.
Republicans contended that higher taxes will force other
businesses to leave Illinois.
Several states, including Florida and Indiana, were quick to
court CME, offering their locations as a new home base.
Indianapolis Mayor Greg Ballard visited with top CME executives
in Chicago on Dec. 2.
However, Chicago is considered a major international hub for
derivatives and risk-management trading, with 130,000 jobs
connected to the exchange industry, said Jamie Parisi, CME's chief
financial officer, during testimony before an Illinois House
committee earlier this month.
The tax rate for CME and CBOE will stay at 7%; however, Illinois
government will 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 exchange officials claim most of the
trades don't originate in Illinois.
Tax breaks will start for the next fiscal year, which begins
July 1.
During Tuesday's debate, Senate President John Cullerton argued
that January's tax increase wasn't the problem, but rather the
"unfairness" of how it is applied to the exchanges.
Sears, which also owns Kmart and Lands End, employs
approximately 20,000 people in the state, according to the
company.
It will pay lower taxes through creation of a special taxing
district at its headquarters in Hoffman Estates, a Chicago
suburb.
-By Howard Packowitz, Dow Jones Newswires; 312-750-4132;
howard.packowitz@dowjones.com
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