(The Center Square) – An effort could be underway in Springfield over the next few days that would hinder small businesses’ ability to recover from “incredible economic damage,” a small business group said.
On Friday, the Illinois House returned to Springfield for the first time since May at an alternative location because of COVID-19 concerns. They’ll be in session through Wednesday to finish up the 101st General Assembly. The Senate set to come into order to finish out this term starting this weekend.
One issue Gov. J.B. Pritzker said he was looking for during the lame-duck session is a provision to decouple the state’s tax code from the federal tax code.
On Friday afternoon, the governor’s office said the administration is “freezing the implementation of a new set of state business tax credits and calling for a decoupling of Illinois tax law from recently enacted federal business tax changes that would cost Illinois in excess of $500 million.”
The administration said state tax credits authorized in 2019 that took effect this month cost the state $20 million annually.
“Unfortunately, COVID also hit our state budget, requiring tough choices about what we can and cannot afford. Right now, we cannot afford to expand tax breaks to businesses that already receive tax breaks,” Pritzker said in a statement. “As we recover from the pandemic, we must focus on job creation and balancing our state budget. I am confident in our ability to grow our economy and put our state on firmer fiscal footing.”
A source familiar with the proposed change said as of Friday afternoon, no measure has been filed for consideration, but that there is a desire to decouple provisions of the state’s tax code from the federal code dealing with losses from previous years as part of tax loss deductions. The estimated revenue hit to Illinois’ coffers ranges from $500 million to $1 billion.
National Federation of Independent Business Illinois State Director Mark Grant said from what he’s hearing the change the governor characterized as “technical” would have consequences for some small businesses hit the hardest by the pandemic and the government’s restrictions to slow the spread of the disease.
“It just takes away an avenue for our small businesses, sole proprietors, to be able to recover from this incredible economic damage that’s been done to them over the last year,” Grant said. “It takes away avenue the federal government thought was a good idea, and would help our small businesses recover, and this would take away that ability to help with that.”
The Tax Foundation said in a July analysis of the CARES Act that the bill signed in March 2020 would give relief to businesses.
“In particular, provisions related to net operating losses, business interest deductibility, the Paycheck Protection Program, and the cost recovery treatment of qualified improvement property offer critical cash flow assistance to struggling businesses and provide immediate economic relief in a structurally sound manner,” Katherine Loughead said. “Conforming with the provisions … will facilitate a smoother economic recovery, ensuring as many employers as possible can remain in business and rehire the millions of Americans who have lost their jobs in recent months.”
It’s unclear when such a measure could surface, or if it would advance both chambers of the state Legislature before the current term ends Wednesday when a new term of the state Legislature begins.
