(Crain's) — A plan to cut state income taxes on Chicago’s big trading exchanges hit a bump late Monday when Illinois Senate President John Cullerton abruptly cancelled a vote on a bill he’d submitted earlier in the day to slash their tax liability 50% and perhaps more.
The bill, introduced Monday morning by Mr. Cullerton, had been scheduled for a vote in the normally compliant Senate Executive Committee. The measure specifically would help CME Group Inc., and CBOE Holdings Inc., both of which have threatened to move some operations out of state because of allegedly unfair Illinois taxes.
But Mr. Cullerton Monday evening postponed any vote. His spokeswoman said there was a need to “tweak the bill” and “tighten some language” — both in regard to the exchanges and to a separate clause in the bill that would revive the state’s recently expired corporate research-and-development tax credit for five years.
The R&D clause had been added as an apparent sweetener to get non-Chicago lawmakers to vote for the bill.
It was not known whether a vote also was held up because initial reaction to the proposal was poor, but Senate Republicans withheld support, at least for the moment. Their spokeswoman said the caucus appreciates the CME's and CBOE's problems but was shown the bill only an hour before it was introduced.
But, shortly after the bill was submitted, House Majority Leader Barbara Flynn Currie suggested that the bill may not be needed at all, and certainly needs full vetting.
“I’d like to see the details,” said Ms. Currie, like Mr. Cullerton a Chicago Democrat. “If there is an essential unfairness (in current state corporate income-tax law), I’d like to end it. But I don’t know if there is an essential unfairness.”
House Speaker Michael Madigan has recused himself on any CME legislation, making Ms. Currie the senior House Democrat on this measure.
Mr. Cullerton's office said both CME and CBOE would get a 50% cut "as currently drafted," but added, "Things are changing." Other Springfield sources said they weren’t sure exactly what the savings would be.
As introduced, both exchanges generally would pay state corporate income tax only on 27.54% of receipts from transactions “matched or executed by means of an electronic transaction system.” Such trades represent the vast bulk of CME and CBOE's transactions.
A minority of trades — those attributable to the traditional “open outcry” system on exchange floors — would be 100% taxable in Illinois, if they occurred in Illinois. But such trades make up a relatively small share of the exchanges' overall business, and much of the CME's open outcry trades occur at its New York Mercantile Exchange unit in New York.
Both Gov. Pat Quinn and House Democrats have been supportive of the idea of helping the exchanges, but it was not immediately clear if they are endorsing Mr. Cullerton's bill.
"We’re reviewing the proposal,” a spokeswoman for the governor's office said Monday evening.
The exchanges have loudly complained in recent months that they paid a disproportionate share of the state’s corporate income taxes, because almost all of their income was attributed to Illinois sales despite their world-wide customer base. Other states reportedly have made significant financial offers to the exchanges to get them to move their headquarters out of Illinois.
Chicago options exchange company Cboe Global Markets has put its South Loop headquarters building up for sale after announcing earlier this year that it was considering a move.
