* As we area all painfully aware, CME Group’s chairman/CEO has announced that he hates Illinois’ tax hike and may move pieces of his company to another state. But a couple of plans are surfacing…
Recent studies have shown, however, that most large Illinois-based corporations do not pay income taxes at anywhere near the official rate. Large manufacturers such as Boeing and Caterpillar, for instance, tend to book sales elsewhere, and because Illinois imposes its income tax taxes only on profits from sales within the state, these companies pay substantially less than if all their profits were taxed.
The CME Group, in contrast, executes the vast majority of its millions of daily trades in Chicago.
CME Chairman Terrence Duffy recently told reporters that the way Illinois apportions income tax liability puts his exchange at a distinct disadvantage. If Caterpillar sells earth-moving equipment to an individual living outside Illinois, the transaction does not incur state taxes in Illinois.
So the CME Group is looking for relief. Under one scenario, its trades could be recorded in the home state of the buyer or seller of the futures contracts. Under another, the state and the city could provide a package of economic incentives-job training grants, TIF financing, property tax abatements – to partially offset the income tax hit. [emphasis added]
I checked with the governor’s budget office on this and they, in turn, checked with the Department of Revenue. The budget office’s response…
As a general matter, their sales should be sited to the location of their customers. It is perhaps an open question who their customers are - perhaps they are the clearinghouses.
So, it’s possible that the law could be tweaked to allow CME Group to avoid state taxes by using a different formula for how the point of sale is calculated. But a decision really needs to be made soon.
* Earlier in the year, Gov. Pat Quinn set a September 13th deadline for a resolution to the labor issues at McCormick Place. Quinn said he’d call a special session of the General Assembly if no deal was reached. But before the deadline expired, Quinn announced that there was no need for a special session because talks were progressing smoothly. Not everyone agrees…
Talks aimed at reviving labor reforms at McCormick Place are dragging on too long, and may end up doing too little to make Chicago competitive with other cities, the head of the city’s convention bureau is warning.
In a remarkably candid interview, Bruce Rauner, the chairman of the Chicago Convention & Tourism Bureau, says current and potential trade-show customers “are losing their patience” at lengthy talks among Springfield politicians.
With talks already weeks behind schedule, the Legislature’s fall veto session is running out of time to work on McCormick Place matters, he said. “It’s not clear how these negotiations will turn out, or how comprehensive the changes will be,” Mr. Rauner said.
“This decision has dragged on too long and, if it continues they (customers) could go elsewhere,” he added.
* Gov. Quinn has had since the end of May to craft an alternative to the gaming expansion bill. Legislators and others have complained that he won’t say what specific changes he’d like to make to the bill. Doug Finke is rightly unimpressed with the governor’s latest pronouncement…
Quinn said last week that he will detail his concerns about the gambling expansion by the end of the month. Whoopee.
Quinn has been bad-mouthing the bill for months, complaining variously that it’s too big, it weakens oversight of gambling, it will ruin the family atmosphere of the state fairgrounds, etc. etc. etc. But he’s never really detailed all of his objections so that lawmakers can attempt to work on a compromise
But now Quinn is ready to lay out all of his concerns - by the end of the month. The end of the month, of course, is when lawmakers will be back in Springfield for the veto session. They could end up drafting a final compromise on the fly.
You know how well things turn out when they are rushed through the Legislature.
However, Quinn apparently did say that a south suburban casino is out of the question…
Not that all trustees were as concerned about proposals of a south suburban casino. [Lansing] Village President Norm Abbott said Gov. Pat Quinn told south suburban mayors during a recent meeting that it was unlikely any casino would ever be located in the South Side or its surrounding suburbs.
“He (Quinn) told us there just won’t be a new casino on the South Side,” Abbott said.
* Related…
* Durflinger reflects on doing business with China
* Legislative update: Illinois Fall Veto Session looms week of Oct. 25
* Hispanic leaders want seat on health review board
* Editorial: Defense costs an issue for lawmakers
- wordslinger - Tuesday, Oct 11, 11 @ 10:51 am:
–So the CME Group is looking for relief. Under one scenario, its trades could be recorded in the home state of the buyer or seller of the futures contracts. Under another, the state and the city could provide a package of economic incentives-job training grants, TIF financing, property tax abatements – to partially offset the income tax hit. [emphasis added]–
I prefer the latter option. The more you allow big corporations to opt out of the income tax system, the more it sticks it the corporations whose business serves primarily Illinois residents, not to mention the poor schmuck W-2 taxpayer.
- OneMan - Tuesday, Oct 11, 11 @ 10:56 am:
So we are not going to put a casino someplace that would easily attract the business that the Indiana boasts are getting from Illinois outside of the city of Chicago.
Brilliant!
- zatoichi - Tuesday, Oct 11, 11 @ 11:03 am:
So why hasn’t CME rearranged it’s business model so Chicago handles the all the database processing but the actual sales is booked where it occurs? It would seem fairly easy to set up or contract with a group in each state to handle these transactions. In a stretch, this is like a twist on the Amazon sales tax issue. Technology makes the physical location almost irrelevant, but the tax regs are still based on paper based assumptions.
- John Galt - Tuesday, Oct 11, 11 @ 11:15 am:
@wordslinger: do you have a comparative list of what different illinois companies are paying in state taxes? Without this information your opinion is only emotional and suspect. Maybe we should see what your paying…mmm. We’ve seen stats on this site that point to an inequality in CME’s state tax bill compared to larger state companies. If we had this info we could make a logical analysis instead of always looking at your shadow.
- Michelle Flaherty - Tuesday, Oct 11, 11 @ 11:28 am:
So as protesters across the country demand government stop coddling corporations, here in IL the corporations demand more coddling?
- mokenavince - Tuesday, Oct 11, 11 @ 11:31 am:
With Quinn in charge the gambling bill is dead.
Last one to leave shut off the lights at McCormick
Place, the Union wins and the customers goes to Vegas.
- CircularFiringSquad - Tuesday, Oct 11, 11 @ 11:34 am:
Zatoichi makes a great point
Why does CME cook its books to appear to pay more tax?
Does that ultimately lower their fed bill, shelter other expenses, jack up charges to clients, etc…..come on boys and girls,wake up and use the noodle. These are the guys who “trade a lot of imaginary products and make zillions.
Perhaps the Capt Fax can delve into this notion in betweeb glancing at all the comments of guys who failed to go to the G until the G knocked on their doors.
- wordslinger - Tuesday, Oct 11, 11 @ 11:35 am:
–So as protesters across the country demand government stop coddling corporations, here in IL the corporations demand more coddling?–
Not to worry. They’ve been out in front of CME offices at the Board of Trade for weeks, but the CPD (funded by those nasty ol’ taxes) keep them at arms length.
- Alexander cut the knot. - Tuesday, Oct 11, 11 @ 11:41 am:
The CME sales are sourced to where its service is received, BUT, if the CME does not pay tax in that state, then, under the law that took effect for the 2008 and later tax years, those sales are not considered part of total sales in the fraction that compares Illinois sales to total sales, so the CME’s Illinois tax would remain high. That is a problem that the law imposes on all taxpayers earning service income, not just CME.
- dupage dan - Tuesday, Oct 11, 11 @ 12:00 pm:
I wonder what revenues Illinois would see if their business tax rate was lower and more business was conducted here.
- The KQ - Tuesday, Oct 11, 11 @ 12:23 pm:
Mokenavince, I would shut off the lights as I leave McCormick place, but I am not a union electrican. I will see if I can find one and how much he will charge me for flipping the switch.
- wordslinger - Tuesday, Oct 11, 11 @ 12:32 pm:
–I wonder what revenues Illinois would see if their business tax rate was lower and more business was conducted here.–
Huh?
What possible effect does the state income tax have on futures trading? I’ve worked in that business for 25 years, and I’ve never heard anyone say “gee, I sure would like to long on heating oil futures, but that state income tax…”
For the record, though, CME is the largest derivatives market in the world, and the reason they pay a lot of state tax is because they make a lot of money.
- wordslinger - Tuesday, Oct 11, 11 @ 3:37 pm:
John Galt, the air must be thin their in Colorado. Did you read the post? It started like this:
–Recent studies have shown, however, that most large Illinois-based corporations do not pay income taxes at anywhere near the official rate. Large manufacturers such as Boeing and Caterpillar, for instance, tend to book sales elsewhere, and because Illinois imposes its income tax taxes only on profits from sales within the state, these companies pay substantially less than if all their profits were taxed.–
- Crabby645 - Tuesday, Oct 11, 11 @ 5:53 pm:
the ga will be in session soon plenty of contact sports there