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Legislative move shines light on antiquated law

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Illinois

* The new state budget authorized $297 million in transfers out of the Corporate Personal Property Replacement Tax Fund, and that is having an impact on some school district which thought they would be held harmless like every other district when the new school funding reform bill was enacted…

“We certainly now have huge red numbers, because of the diversion of CPPRT and the estimate of this year compared to last year.” [said Vic Zimmerman, superintendent of Monticello schools] […]

CPPRT was created when local units of government gave up their power to tax businesses in 1979. It basically promises local government units, including schools, the same money they got in corporate and personal taxes from corporations back in the 1970s — even for companies that no longer exist. CPPRT isn’t much of a factor in funding school districts that never had big corporations in their areas. But in areas that had major manufacturing plants in the 1970s, CPPRT is crucial, as Zimmerman can attest.

“I was superintendent at St. Joseph-Ogden before I came here, and we got $30,000 in CPPRT,” he says. “Then I come over here and I see we’re getting, you know, $6.5 million, and I’m like: What’s this?”

In the 1970s, Monticello was home to Americana Healthcare, Illinois Power, and General Cable. During the height of the cable television boom, General Cable company supplied most of the fiber for the nation, Zimmerman says. Like Illinois Power, General Cable is long gone, but the amount of their tax contributions — frozen in CPPRT — added up to 40 percent of Monticello Schools’ budget.

Monticello will lose $900,000.

But, man, we sure have some weird laws in this state.

posted by Rich Miller
Friday, Sep 22, 17 @ 11:39 am

Comments

The CPPRT makes the effective corporate tax rate 9.5 percent while it adds another 1.5 percent to small businesses.

People never account for this when they say our income tax rates are 5 and 7 percent.

Comment by 4 percent Friday, Sep 22, 17 @ 11:44 am
I can see how that law would make sense for a transitional period, but there should be a weaning off of dollars for companies that no longer exist. As in maybe a re determination happens every 5 years or something that recalculates how much property tax businesses would have generated.

Comment by Perrid Friday, Sep 22, 17 @ 11:45 am
Huh. Always wondered what the heck PPRT was and now I know.

Comment by 47th Ward Friday, Sep 22, 17 @ 11:55 am
I struggle to feel to badly for Vic. He and his team were very cavalier about funding issues because they get most of their funding through CPPRT and were able to keep their property tax rate lower as well. They were not real interested in engaging in the effort to reform school funding. Now the shoe is on the other foot.

It is a bad deal, the no red numbers is a canard again, the politicians seem to always find a way to take what they say they give.

Comment by JS Mill Friday, Sep 22, 17 @ 11:59 am
I hate these specialty, carved/out deals. Same with the EDGE tax credits. We’re picking winners and losers in the state. Not very democratic.

Comment by Blight Wing Friday, Sep 22, 17 @ 12:12 pm
Crazy Illinois…..nothing that happens ever surprises me.

Comment by Anonymous Friday, Sep 22, 17 @ 12:25 pm
4P, what percentage of Illinois corporations are paying your so-called effective tax rate of 9.5%.?

It’s not an “effective” tax rate if no one is paying it.

Comment by wordslinger Friday, Sep 22, 17 @ 12:28 pm
This is one more piece of an overly complicated formula. This should have been cleaned up with the rest of school funding (or at least included in the attempt to clean up school funding). My family worked hard to help support and pass a local property tax referendum just to get the local school district up to a reasonable funding level. We are transparent that our district is 75-80% funded by local property taxes. Then you have old deals cut years ago that don’t make any sense. These payments should have been reassessed and phased out long ago for any business that closed or moved.

Comment by Fairness and Fairness Only Friday, Sep 22, 17 @ 12:29 pm
==As in maybe a re determination happens every 5 years or something that recalculates how much property tax businesses would have generated.==

That would be so easy and inexpensive to do.

Comment by Whatever Friday, Sep 22, 17 @ 1:32 pm
@wordslinger.

My point is simply that policymakers ignore the CPPRT and claim that the rates are lower than they actually are in reality. It’s a fact that they don’t like to admit when they try and compare IL with other states.

Comment by 4 percent Friday, Sep 22, 17 @ 1:58 pm
4P, you need to look up the definitions of “effective tax rate” vs. “statutory tax rate.”

When two-thirds of Illinois corporations pay zero state income tax, the effective tax rate is nowhere near even 7%, much less 9.5%.

Comment by wordslinger Friday, Sep 22, 17 @ 2:12 pm