September 19, 2011

House Republicans Introduce Jobs Plan

Peoria, IL….House Republican Leader Tom Cross, Deputy Republican Leader David Leitch, and State Representative Michael Unes on Monday held a press conference at Advanced Technology Services of Peoria to unveil a blueprint to attract and keep good jobs in Illinois.

“The national economy is struggling, but Illinois’ economy is faring even worse,” said Cross (R-Oswego).   “All but one of our neighboring states has lower unemployment than Illinois.  Today, we are introducing a plan to make Illinois more attractive to all businesses from large manufacturers, to small business entrepreneurs to family farmers.” “We need to take a proactive approach to not only attract new jobs, but also to keep the good jobs we already have.  Indiana and Wisconsin have launched aggressive campaigns designed to specifically lure Illinois jobs across the state lines.  They have made job creation their top priority.  They aren’t just talking about creating jobs, they have instituted business friendly policies that are successfully attracting employers to their states,” said Leitch (R-Peoria).  “We need to fight fire with fire.”

The House Republican Job Package includes measures to:

1.  Re-instate the Net Operating Loss deduction.

Many businesses are losing money in this tough economy, this proposal allows them to use their net operating loss as a tax deduction extending the corporate carry forwards from 12 years to 20 years, and allowing a two year carry back.

2.  Re-enact the Illinois Research & Development tax credit.

Illinois businesses utilized this tax credit until it expired in December 2010. Its’ reinstatement would allow businesses that are doing legitimate research and development projects as defined in the law to qualify for a tax credit each year.  Our proposal would also add ethanol and biodiesel research as qualified R & D activities.

3.  Extend the life of existing Enterprise Zones by up to 20 years.

Most designated Enterprise Zones in Illinois are set to expire in the next ten years.  Our proposal would allow current municipalities around the state to extend the enterprise zones in their communities to ensure tax incentives to businesses that have located or choose to locate in these underdeveloped areas.

4.  Reduce the administrative costs and burdens involved with setting up and incorporating a Limited Liability Corporation in Illinois.

In Illinois even the cost to set up a business is much higher.  We are proposing to reduce that fee from $750 to $100. The highest fee that any of our surrounding states currently charges is in Wisconsin at $130.

5.  Increase the estate tax exemption to $5 million.

Under the current law, when family farms are passed from generation to generation the heirs are hit with a huge estate tax if their assets are worth more than $2 million.  Family farm assets are invested in land and equipment leaving limited available cash flow.  Our proposal would raise the estate tax exemption to $5 million—which mirrors the federal tax code.

“When the owner of a family farm dies, surviving children are often forced to sell the farm just to pay the estate taxes.  Raising the estate tax exemption will help keep Illinois’ family farm tradition alive,” said Randy Farr, President of the Fulton County Farm Bureau.  The Illinois Farm Bureau also supports raising the estate tax exemption to $5 million.

Advanced Technology Services, helps make factories run better by improving productivity and profitability.  “As a manufacturing services company, ATS’ growth relies on being able to attract and retain highly skilled workers. To this end, the State of Illinois must provide a business friendly environment that does not penalize its residents with unrealistic taxes that impair recruiting efforts compared to other states,” said Jim Hefti, Vice President of Human Services.

“This isn’t complicated.  Companies go where their costs will be the lowest.  Many of our proposals were actually law here in Illinois, but were abandoned in favor of raising taxes on business.  And we have all seen the results, businesses are leaving.  We need to turn this around and re-instate business friendly policies,” said Michael Unes (R-East Peoria).

“When more people are working and re-investing in our communities, our economy is stronger.  For every point we reduce our unemployment rate, the state generates around $600 million in new revenue to fund state programs and services.  We can’t afford not to enact these proposals,” said Cross.

The package is supported by the National Federation of Independent Business and the Illinois Chamber of Commerce.

“As Illinois faces rising unemployment rates and a recession that shows no signs of life, allowing small business owners to keep more of their own money makes sense,” said Kim Clarke Maisch, NFIB/Illinois State Director. “NFIB has long supported either eliminating or allowing for a high exemption on the death tax, which gives small businesses a piece of mind that their hard work will be passed on to family members.  As well, reinstating the net operating loss will be very helpful to the many businesses that experienced significant losses during this ongoing recession.”

More details of the plan: 

Job Creation Package

Total Cost: $492.0 million 

1. Reinstates the Net Operating Loss deduction, extends the corporate carry forwards from 12 years to 20 years, and allows a two year carryback. 
2. Re-enacts and makes permanent the Illinois Research & Development tax credit beginning in 2011 and adds ethanol and biodiesel research as qualified R & D activities. 
3. Extends the life of existing Enterprise Zones by up to 20 years. 
4. Reduces the cost of setting up an LLC in Illinois. 
5. Increases the estate tax exemption to $5 million. 

Included in the January 2011 legislation that increased the income tax rate, SB 2505, was a provision to remove the ability for companies to use net operating losses as a tax deduction for four years (2011, 2012, 2013, and 2014).   

• The Net Operating Loss deduction and corporate carry forwards have proven to be important and essential tools during recessionary times for struggling businesses and start-businesses that traditionally lose money in the early years.    
• In addition to this restoration, we call for extending the corporate carryforwards from 12 years to 20 years, and allowing a 2-year carryback. 
• The total cost of this proposal is estimated to be $379.0 million by the Commission on Government Forecasting and Accountability. 

• Without a doubt, research and development is a critical component to a robust economy and our future economic productivity. 
• The House Republican Caucus has always supported targeted research and development income tax credits to create a positive incentive for this type of investment activity.    
• In Illinois, the phased-out income tax credit was 6.5% of all qualifying expenditures for new research activities carried out within Illinois.  We call for reinstating this 6.5% credit, making it permanent, and adding agriculture-related energy research and development to the list of activities that qualify for the credit. 
• The total cost of this proposal is estimated to be $25.0 million by the Commission on Government Forecasting and Accountability.

• The Illinois Enterprise Zone Program is a proven economic development partnership between the State of Illinois and local units of government and has a documented history of making the difference for projects seeking to locate in Illinois.  
• The incentives allowed under the Enterprise Zone Program have enabled both existing companies and new ventures alike to make decisions regarding job creation, job retention, and capital investment resulting in a stronger Illinois economy. 
• The Illinois Enterprise Zone Program is of particular importance in today’s highly competitive world of economic development. Recent negative impacts to Illinois resulting from a national and global economic crisis make it even more important to preserve and extend this program. 
• Enterprise Zones throughout Illinois, especially Downstate Illinois, will be expiring in the next few years.  This legislation will allow communities, by consensus of their local governments and their Enterprise Zone employers, to extend the life of their Enterprise Zones.  This will create a business climate within these zones that will allow for continued employer growth and reinvestment.   
• Since Enterprise Zones currently exist in Illinois, there is no additional fiscal impact associated with this proposal. 

• Illinois should decrease the administrative fees associated with filing for and incorporating as a limited liability corporation (LLC) from $750 (currently) to $100. 
• Every State imposes an administrative cost for setting up the “Articles of Organization” to create an LLC.  The cost of setting up an LLC varies between $50 (in Michigan, Missouri, and Iowa) to $750 (in Illinois).
  • Other Midwest state costs are as follows: Ohio- $125; Wisconsin- $130; Indiana $85. 
• Onerous startup costs can be the difference between small businesses not having enough capital to start up in Illinois or thriving within the State.   
• Reducing the setup costs of a LLC will have a minimal fiscal impact.   

• Illinois should increase the personal exemption enjoyed by executors who pay the Illinois estate tax to the federal level of $5 million (currently the state exemption is set at $2 million).   
• The estate tax falls heavily upon family farms and their owners and heirs.  The current price of Illinois farmland means that Illinois farmers who try to bequeath their land to their children, following the traditional pathway through which a farm is moved from parent to child, must pay a heavy “death tax” that is so heavy that the next generation must either mortgage the land or leave the farm.   
• Non-farm small businesses are also affected.  Family businesses can be destroyed when the estate tax forces surviving family members to sell land, buildings, or equipment to generate enough money to pay the tax.   
• A higher exemption would give family farms and small businesses a better chance to remain in operation when transferring from one generation to the next.   
• Senator Mark Kirk (R-Ill.) is pushing similar legislation in his “2011 Small Business Bill of Rights Proposals.”  The proposal suggests either lowering the estate tax or abolishing the tax altogether.  
• The total cost of this proposal is estimated to be $88 million by the Commission on Government Forecasting and Accountability.