(The Center Square) – After a decoupling measure died last week in the previous General Assembly, the battle over hundreds of millions of dollars in tax liabilities for Illinois small businesses continues, and time is running out.
Part of the COVID-19 relief package the U.S. Congress passed last April was a provision that allowed small businesses certain tax allowances for losses due to the pandemic and government orders impacting the economy.
State Rep. Fred Crespo, D-Hoffman Estates, gave the Republican minority credit after the so-called decoupling bill failed in the final hours of the lame-duck session earlier this month.
“They framed it as a tax increase, it really isn’t,” Crespo said. “It really is a liability avoidance for the state. Failure to act would mean that we’re going to have an additional $500 million to $1.2 billion hole in our budget.”
Gov. J.B. Pritzker Friday said decoupling was a standard thing many impacted states have already done following a federal change in April last year.
“It’s really actually a fairly standard movement by states to make sure that they’re decoupling and we’re going to do the same,” Pritzker said.
Lawmakers return Feb. 2.
State Rep. Steven Reick, R-Woodstock, said time is running out for businesses to file their taxes by mid-March with the confidence that they’re meeting both federal and state requirements. In opposing the move, he noted New York decoupled back in May, so the issue should have been known to Illinois officials back then. Reick suggested the lack of action is either gross incompetence or worse.
“I hate to think that the governor was sitting on this, putting it in his back pocket, waiting for us to vote up or down on the Fair Tax amendment and then unload this thing,” Reick said.
The issue didn’t surface when the legislature met in May of last year. Voters in November overwhelmingly opposed the proposed constitutional amendment to change the state’s flat income tax to one with higher rates on higher earners. In advance of the post-election session and before the fall session was canceled, the governor didn't raise the issue.
Reick called it “rank cynicism” to attempt to pass the decoupling measure in the early morning hours of the session earlier this month, where it failed to get enough votes and was pulled from consideration.
Pritzker’s office didn’t respond when asked for a reaction on why action wasn’t taken sooner.
Republicans said the change would impact 400,000 small businesses by increasing their collective tax liability anywhere from $500 million to more than $1 billion.