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August 24, 2012

Governor Signs Legislation on Tax Transparency

In the spring 2012 session, the General Assembly considered legislation to increase the transparency of several state and local tax incentive programs. Although incentive programs utilize taxpayer dollars, their use is not always publicly disclosed. This Policy Update reviews two new transparency laws recently signed by Governor Quinn regarding tax incentives.

On August 17, 2012, Governor Quinn signed PA 097-0976, requiring municipalities and counties to file reports concerning sales tax rebate agreements with the Illinois Department of Revenue (IDOR). The legislation was spurred in part by a lawsuit by the Regional Transportation Authority and several other taxing bodies, alleging that sales tax rebates by the Villages of Channahon and Kankakee have prompted companies to establish so-called "sham offices" outside the RTA service area, brought about a legislative effort to increase the transparency of these sales tax rebate agreements. It requires municipalities and counties to file existing agreements by April 1, 2013, and thereafter within 30 days after a new agreement is executed. The report will include:

  • The name of the business and county or municipality entering into the agreement.
  • The location of the business.
  • Whether the business maintains additional places of business in Illinois.
  • How the amount of sales tax to be rebated is to be determined.
  • The duration of the agreement.
  • The names of any businesses that would directly or indirectly receive a share of the rebate.
  • A copy of the agreement.

The bill does not call for complete transparency, however. Sales figures, the amount of sales tax collected, and the amount of sales tax rebated will be redacted by IDOR, and the county or municipality and would be exempt from the Freedom of Information Act. By July 2013, IDOR will post the first reports (excluding the copy of the agreement) to its website, and will update this website monthly with new reports. This legislation is an important step towards transparency, but CMAP continues to urge the State and local governments to increase access to all available information on how taxpayer dollars are being spent. GO TO 2040 emphasizes the importance of improved access to information, and the CMAP's Regional Tax Policy Task Force recently recommended that CMAP analyze the impact of one particular incentive -- sales tax rebates -- on development decisions.

The governor also signed PA 097-0749, which requires the Illinois Department of Commerce and Economic Opportunity (DCEO) to post the terms of each Economic Development for a Growing Economy (EDGE) tax credit agreement on its website. The information disclosed will include:

  • A description of the project, including the location and amount of the investment and jobs created or retained.
  • The duration and timespan of the credit.
  • The income tax amounts withheld in connection with the new full-time employees.
  • Steps for terminating the agreement.

This law appears to improve transparency by making previously undisclosed data on the costs and impacts of the program available to the public.

Both of these bills take strides in disclosing data on public investments. GO TO 2040 outlines implementation action areas needed to improve access to data on public expenditures and investments so that the State and region can fully analyze the tax system and enact reforms where necessary to improve the vitality of the region.