November 29, 2011 / 8:28 PM / 6 years ago

Illinois senate panel passes CME, Sears tax breaks

* Proposal would give CME $85 mln in tax relief yearly

* Sears would get $15 mln of relief annually

* Companies have threatened to move to other states

By Andrew Stern

CHICAGO, Nov 29 (Reuters) - A second committee of Illinois legislators approved a proposal that gives $100 million in tax relief to CME Group and Sears Holdings , which have threatened to move to other states.

The 12-3 vote by the Illinois Senate Executive Committee sets the stage for passage of the proposal by the full Senate Tuesday afternoon, an aide to Senate President John Cullerton said.

On Monday, a similar proposal passed the Illinois House’s Revenue and Finance Committee. It was expected to be taken up by the full House.

The House and Senate will then take up each other’s bills, which differ in minor respects, and the one that passes both houses would be sent to Democratic Governor Pat Quinn to be signed into law.

CME, Sears and some other employers in Illinois have threatened to move to other states if they fail to get tax relief after a recent steep state tax increase.

Critics say giving tax breaks to the companies disadvantages smaller firms with less leverage and sets a precedent for other big companies to demand tax breaks.

CME executives say they have talked to officials in Texas, Florida and Tennessee about potential moves. A Sears spokesman said the company has received proposals from about a third of the 50 U.S. states, and the Chicago Tribune has reported that Sears executives have visited Columbus, Ohio, and Austin, Texas.

Cash-strapped Illinois can ill afford a reduction in tax revenue. The state faces billions of dollars in unpaid bills and billions more in unfunded pensions, and it is one of several states grappling with a strained budget.

Illinois in January raised corporate tax rates to 7 percent from 4.8 percent, and individual rates to 5 percent from 3 percent, to close a chronic budget deficit and begin paying overdue bills.

CME and Sears each employ thousands of people.

CME, which operates the Chicago Mercantile Exchange and the Chicago Board of Trade, would receive $85 million in annual tax savings. The bill limits state taxes to income on 27.54 percent of electronic transactions on local exchanges.

Sears, which owns Sears and Kmart stores, would get a tax break of $15 million yearly over the next decade as long as it keeps its headquarters in the Chicago suburb of Hoffman Estates. The company, which has 6,100 employees in Hoffman Estates, said it backed the measure.

Under the proposal, all Illinois businesses could claim up to $100,000 in tax credits from past net operating losses, helping small firms, and a research and development tax credit was extended for five years. Individuals would see a bump in the personal tax exemption, the estate tax exemption would be raised, and the earned income tax credit for poor taxpayers would rise.

One key difference in the Senate version is the earned income tax credit would rise to 10 percent in 2013, while it would stay at 7.5 percent in the House version.

The $250 million tax relief package was to be funded by letting expire an allowance for companies to accelerate depreciation of capital investments.

Quinn also announced a bipartisan agreement to keep open seven state healthcare facilities through the fiscal year. The facilities had been slated for closure.

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