IVCA Provides Updates for State and Federal Legislative Issues - 09.13.17

IVCA Provides Updates for State and Federal Legislative Issues

UPDATE provided by Stricklin & Associates on September 13, 2017:

General Assembly to meet this fall for Veto Session
The Illinois General Assembly will return to the Capitol for Veto Session on October 24, 25 and 26 and November 7,8 and 9. 
  • IVCA will be tracking closely the two bills proposing a 20% “privilege tax” on the capital gains earned by investment managers which are currently sidelined in the House Rules Committee. 
    • SB 1719 passed the Illinois Senate May 23 on a 32-24 vote but went no further in the House.
    • HB 3393 moved out of the House Revenue and Finance Committee but was not called on the House floor during the waning days of the regular session. 
  • The threshold for passage during Veto Session is a supermajority 3/5ths or 71 votes.  While it may seem unlikely either bill will be considered by the House during the Veto Session, since the threshold for passage is a 3/5ths majority, or 71 votes in the House and 36 in the Senate, we can’t take it for granted.  This week the U.S. Treasury Secretary indicated “carried interest” issue is on the tax reform table at the federal level, and federal action, or lack thereof, could inform how the issue is dealt with in Illinois.
  •  IVCA members should remain connected to their legislators and continue to explain to them the devastating impact a “privilege tax” would have on the economy of Illinois.  If you are interested in meeting with your state representative and senator to discuss the issue, please let Maura know and we will work with you to make those arrangements. 
K-12 education funding / scholarship tax credit
Illinois has a new approach to education funding after literally decades of debate and discussion as the legislative leaders and Governor Rauner came to agreement at the end of August on landmark changes to the Illinois K-12 funding formula, including a key provision of a tax credit for scholarships at private schools.
Funding Districts*
  • Illinois schools have historically relied on property taxes, which created wide disparities between wealthy and poor districts.
  • Under the new plan, Illinois will consider how much money districts need to adequately educate their students and how much money they can generate from property taxes.  State aid will be prioritized to districts that need the most help bridging the gap between those two numbers.
  • No school will lose money this year compared with last year.
*By Sara Burnett and Sophia Tareen, Associated Press
TAX CREDIT FOR SCHOLARSHIP DONATIONS A tax credit would be created to incentivize donations for private school scholarships.
  • Individuals or businesses could receive a 75% tax credit for each dollar donated, for which they cannot receive a federal tax deduction.
  • A maximum of $75 million in credits may be awarded annually, and this amount will not increase. If the full $75 million in credits is realized, this would cover less than 6,000 scholarships.
  • This program would operate as a 5-year pilot program.
  • All K-12 Illinois students would be eligible to receive the scholarship, provided their household income is less than 300% of the federal poverty level (FPL) ($72,900 for a household of 4), or 400% FPL ($97,200 for a household of 4) if the student is a prior scholarship recipient. However, priority for scholarships will be given to 4 groups of students: (i) those with a household income below 185% FPL (the threshold for reduced lunch assistance, or nearly $45,000 for a household of 4); (ii) those who reside within an academically failing district, or “focus district;” (iii) prior scholarship recipients; and (iv) siblings of scholarship recipients. Focus districts are school districts that have at least one school that scores in the bottom 10% of student assessments or has a graduation rate of less than 60%. The most recent information from ISBE identified 89 focus districts, including CPS.
  • The maximum amount of individual scholarships will be the lesser of the tuition and fees of the private school, or the statewide average operational per-pupil spending among public schools. Students with disabilities, English learners, and gifted students will have higher thresholds, but still based on a statewide average.
  • Scholarships would be distributed through scholarship granting organizations which are not-for-profit organizations approved by the Department of Revenue. ISBE will be responsible for identifying participating schools, which must be non-public schools located in Illinois and recognized by ISBE. All participating schools will be required to assess student performance using the state assessment test. ISBE will select an independent evaluator to annually assess the academic performance of scholarship students.
Angel Tax Credit renewed
SB 2012 was approved unanimously and signed by the governor to extend the Angel Tax Credit in Illinois.  Several important changes were made in Senate Amendment #1 to SB 2012:
(1) provides that the credit applies for taxable years ending on or before December 31, 2021 (currently, December 31, 2016);
(2) defines "investment" as money (or its equivalent) given to a qualified new business venture, at a risk of loss, in consideration for an equity interest of the qualified new business venture;
(3) provides that the Department of Commerce and Economic Opportunity may adopt rules to permit certain forms of contingent equity investments to be considered eligible for a tax credit under the program;
(4) provides that the minimum amount an applicant must invest in any single qualified new business venture is $10,000;
(5) provides that qualified business ventures must maintain a minimum employment threshold in the State through the date which is 3 years from the issue date of the last tax credit certificate issued with respect to that business;
(6) provides that, of the aggregate amount of credits that may be awarded under the program, a certain amount shall be reserved for investments made in minority owned businesses, female owned businesses, or businesses owned by a person with a disability;
(7)  The aggregate amount of tax credits available in a calendar year remains $10M,
  • of that amount $500,000 is reserved for investments with minority-owned businesses, female-owned businesses, or business owned by a person with a disability.
  •  $500,000 in credits are also being reserved for low-population areas of the state.

(8) makes changes concerning applications for qualified business ventures.
Governor proceeds with bonding
The budget package the Illinois General Assembly approved over the governor’s veto authorized $6B in bonding authority for Illinois to address its $15B backlog of unpaid bills
"Illinois has been deficit spending for many years, resulting in a huge unpaid bill backlog. The state has been, in effect, borrowing from local service providers, including nonprofits and small businesses, because it takes months for them to get paid," Gov. Rauner said. "My preferred solution has always been for state government to reform its spending, and for a strong, competitive economy to grow family incomes faster than the cost of government.
"Unfortunately, the General Assembly passed a tax hike and an out-of-balance budget over my veto. Even with a permanent income tax increase costing the average Illinois household more than $1,000 a year, the budget is more than $1 billion out of balance and is still growing the unpaid backlog. We're choosing to exercise borrowing authority because it's better to have Wall Street carry our debt than Main Street Illinois."

Take this job and ….
Members of the Illinois General Assembly continue to announce they wlll not run for re-election or are outright stepping down from office.  Of particular note for IVCA members is the announcement Tuesday September 12 that Rep. Carol Sente would not seek re-election.  Rep. Sente expressed opposition to the “privilege tax” as proposed by SB 1719/HB 3393.
Also, as the legislature wrapped up its budget and education funding discussions at the end of August, the appointment of Bloomington-area State Senator Bill Brady to be the Senate Minority Leader was approved, replacing former Leader Christine Radogno.
The full roster of retirements and resignations is as follows:
HOUSE DEMOCRATS                                                  HOUSE REPUBLICANS
McAsey (resigned)                                                      Pritchard (not seeking re-election)
Phelps (resigned)                                                        Hays (not seeking re-election)
Drury (running for governor                                        B. Wheeler (not seeking re-election)
Soto (running for MWRD)                                          Bellock (not seeking re-election)
Stratton (Pritzker Lt. Gov. running mate)                  Mitchell (not seeking re-election)
Wallace (Biss Lt. Gov. running mate)                        Fortner (not seeking re-election)
Nekritz (not seeking re-election)                               Andersson (not seeking re-election)
Beiser (not seeking re-election)                                 Jimenez (not seeking re-election)
Sente (not seeking re-election)                                  Stewart (running for Bivins seat)
Fine (running for Biss senate seat)
SENATE DEMOCRATS                                                 SENATE REPUBLICANS
Biss (running for Governor)                                        Radogno (resigned)
Haine (not seeking re-election)                                  Bivins (not seeking re-election)
                                                                                    McCarter (not seeking re-election)
Governor on overseas trade mission
Governor Rauner is in Japan participating in the 49th Midwest U.S. – Japan Association Conference, joined by other governors from Midwest states.