Dear Governor Blagojevich:
I am writing to you in opposition of your reported gross receipts tax proposal. As you know, Venture Capital & Private Equity firms in Illinois manage more than $100 billion and the Gross Receipts Tax has the potential to negatively impact the private equity/venture capital investment very severely.
Given your past support of our industry, I know that you understand that any weakening of the private equity/venture capital industry in Illinois will prevent private funding for new and growing companies here in the state and will severely harm Illinois’ economy in terms of lost job opportunities, growth and revenues.
The proposed Gross Receipts Tax (GRT) will harm both entrepreneurial companies and private equity and venture capital firms:
- Emerging companies generally have little or no profit. A VC portfolio generally is comprised of a substantial portion of companies that generate revenue but that operate at a loss for years before making a profit. If a gross receipts tax were in place, most young companies in Illinois would immediately become uncompetitive in the funding selection process due to new increased operating costs relative to those companies in states without gross receipts taxes. Add to this the increased input costs for these companies from the pyramiding effects of a gross receipts tax and not only would private equity and venture capital investments likely dry up but many of these new struggling companies would not survive. A $1 million exemption would not address our concerns given that many small companies with private investment support have sales well in excess of $1 million in Illinois annually yet continue to operate at a loss.
- Illinois Funds would have inherently disadvantaged IRRs. The same concerns that prompted your Administration to eliminate the uncompetitive PPRT on investment income would hold true for a new gross receipts tax. Such a tax on Illinois private equity firms – and any company they fund in Illinois -- will place this industry at a severe competitive disadvantage relative to other competing money center states for domestic and foreign investment.
I appreciate the opportunity to present my views on the gross receipts tax proposal.
Sincerely,
