In the closing hours of the 101st General Assembly, Illinois lawmakers almost broke federal law and repealed a tax break designed to help small businesses during the pandemic. This is estimated to cost Illinois businesses up to $ 1 billion in additional state taxes.
Congress approved the change last year as part of the first CARES bill. This would allow some companies to deduct losses from their taxes in the current year instead of having to spread them over several years. Amendment 2 to Senate Act 1199 would decouple Illinois tax legislation from this piece of federal tax legislation, meaning that corporations would not be able to write off these losses against their state taxes. Other states following federal tax law could write this off.
The Illinois S-Corps and limited companies, most often small businesses, would see the tax burden. It is estimated that 440,000 businesses will be affected and cost $ 500 to $ 1 billion if the expected revenue does not flow into the treasury. The state has a budget deficit of $ 4 billion.
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In a vote on the bill in the early hours of Wednesday morning, the House fell ten votes short and several Democrats abstained. Through a procedural maneuver, proponents of the measure could call the bill again before the 101st General Assembly ends at 12 noon.
State MP Mike Zalewski, D-Riverside, turned down those calling the bill a tax hike, saying it would rather hold the state harmless from a federal measure.
“I don’t think that’s a tax hike,” he said. “You shouldn’t have relied on those two prints until the department published their circular in late January.”
Republicans rejected the bill as a kicking company when they were already hanging on to strings due to pandemic-induced business slowdowns and government-ordered closures.
“This is a $ 1 billion tax hike for companies who can’t pay their bills,” said David McSweeney, R-Barrington Hills Rep. “We’re telling people to leave the state of Illinois.”
Deputy Republican Leader Norine Hammond, R-Macomb, sits on the Government Forecasting and Accountability Commission. She said the state’s Treasury Department wrongly failed to tell them or the legislature that the federal pandemic aid in the spring would put such a heavy strain on the state’s finances.
“The Treasury Department dropped the ball and it’s not up to us to pick it up,” she said.
New York decoupled from the same provision in the CARES Act, but in April.
Gov. JB Pritzker proposed breaking out of federal law on the matter, calling the hundreds of millions of dollars “corporate gaps”.
“My administration recognizes the many challenges companies face at this unique time. So we’re going beyond the federal support program by providing hundreds of millions of dollars in assistance to our small businesses, our best job makers who have been hard hit, from COVID-19, ”Pritzker said in December. “Unfortunately, COVID has also put a strain on our national budget and requires difficult decisions about what we can and cannot afford. At this time, we cannot afford to extend tax breaks to companies that are already receiving tax breaks. As we recover from the pandemic, we need to focus on creating jobs and balancing our national budget. I am confident that we can grow our economy and put our state on a firmer fiscal footing. “
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