The 2024 Spring Session in Springfield came to an end in the early morning hours of May 29th. More than 11,000 bills were introduced, and more than 400 bills passed both houses.
The largest budget in Illinois history passed with the minimum votes needed for the passage of the revenue plan with a final vote of 60-45 on the third attempt. The $53 billion dollar budget includes over $1 billion dollars in additional revenue from last year’s budget. According to the Illinois Chamber of Commerce, there are “significant concerns about the revenue bill (HB4951) that passed in that it will ultimately be balanced on the backs of the taxpayers and businesses of Illinois. With an increase of more than $1B in revenue without commensurate cuts, it poses substantial problems moving forward…”
Revenue builders that affect business include the extension of Illinois’ cap on net operating losses; the cap had been scheduled to expire at the close of the current budget year. On the other hand, the cap was increased from $100,000 in losses to $500,000.
A cap was also put in place for retailers by limiting how much businesses are allowed to keep for collecting sales and use taxes for state and local governments. The measure would effectively raise taxes by $186 million on retailers. Instead of retaining 1.75% of the sales tax per transaction, they will be limited to $1,000 per month. It should be noted that lawmakers give retailers something back by creating the Interchange Fee Prohibition Act which refrains credit card companies and banks from collecting fees from sales taxes and gratuities on an electronic transaction. There may be some changes to this Act to balance concerns from the banking and financial industry.
Recently, the possible elimination of the “grocery tax” has sprung up in the news as municipalities faced the loss of the 1% tax in the upcoming 2025 Illinois state budget. In a paper submitted by the University of Illinois Institute of Government and Public Affairs, it is acknowledged that the 1% tax placed on grocery items is regressive however, a family would have to spend $30,000 annually on grocery items to see a relatively small savings of $300. On the other hand, Illinois municipalities will lose significant revenue that many use to fund programs and services such as police, fire and public works. Illinois municipalities lobbied to maintain the tax as the State of Illinois was not planning to reimburse the loss as it did during the suspension of the tax during the pandemic. Ultimately, the budget does call for the elimination of the “grocery tax” however it will not be repealed until January 1, 2026, which will provide time for local municipalities to weigh the consequences of the lost revenue. Additionally, municipalities, both home-rule and non-home rule would be able to reinstitute the tax via local ordinance.
What are some wins that area businesses can claim coming out of the FY2025 budget?
The Illinois Chamber of Commerce has worked for several years to reverse the upfront taxation upon the purchase of leased property by the lessor. The lessor is now no longer responsible for paying an upfront tax based on an acquisition cost; instead, the lessee pays the tax as part of their rental charges.
There were also workforce development changes that will allow private business and vocational schools to partake in workforce training programs, increasing the number of organizations in the state that may participate in worker training. The exemption applies to programs where participants are not charged tuition.
The budget also sets aside $500 million for the creation and development of quantum computing campuses. Such campuses have the ability to cause a positive ripple effect that will attract new waves of talent to the state and possibly our local area which is known nationally as a technological and research hub. Furthermore, such technologies can drive economic growth by creating new industries, jobs, and business opportunities.
There is much to digest coming out the 2024 Illinois Spring Session and the NACC will be working to summarize the session and make sense of the pros and cons that were debated and passed in Springfield. Be on the lookout for more information in the coming days.
If you would like to a front row seat to what went down in Springfield relating to business, please join us for the NACC End of Session Recap on June 20th from 3 – 4:30 p.m. Local state legislators will join attendees to summarize individual highlights, discuss and answer questions regarding how bills passed will affect area businesses, and finally network, take questions one on one, pose for photos, and connect with those in attendance. A link for further details and to register is here. We hope to see you there!