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Illinois Senate President John Cullerton introduced a bill on May 9 that would require publicly traded corporations doing business in Illinois, and those that are at least 50% owned by a publicly traded company, to disclose certain income tax liabilit
August 23, 2012
Illinois Senate President John Cullerton introduced a bill on May 9 that would require publicly traded corporations doing business in Illinois, and those that are at least 50% owned by a publicly traded company, to disclose certain income tax liability information for eventual publication on an Internet database. SB 282 would require the information, usually considered confidential, to be disclosed by corporations that are not obligated to file a corporate income tax return. The data would be publicly searchable, although the data would not be disclosed until two years after the relevant tax year. Although the General Assembly adjourned on May 31 without voting on the bill, Senator Cullerton plans to work on the bill over the summer with the intent of holding hearings before the November veto session.
The information that Illinois would require to be disclosed in an annual statement filed with the Secretary of State includes, among other items: (1) name and address of the corporation; (2) name and address of any corporation that owns 50% or more of the voting stock; (3) modified taxable income; (4) business and nonbusiness income; (5) apportioned income; (6) Illinois apportionment factor; (7) Illinois credits claimed; and (8) Illinois tax liability before and after credits.
Beyond requiring unprecedented levels of taxpayer disclosures, a corporation’s obligation to file the annual statement is not based on the company having an income tax filing requirement, but whether it is “doing business” in the state. The doing business standard in the bill includes corporations making sales of tangible personal property to Illinois customers, earning income from intangible personal property with a situs in Illinois, or performing services for customers located in the state. Thus, some corporations that are not subject to the corporate income tax, such as companies protected by Public Law 86-272, will nonetheless have to file an annual disclosure statement. However, the bill does give these companies the option of electing to not provide a detailed statement but instead provide an explanation of why no tax return is required and a designation of the gross receipts in the state. The current version of the bill prescribes noncompliance penalties up to $100 per day for a corporation that is delinquent in filing the annual statement.
Senator Cullerton justifies this approach as a tool to evaluate the need for corporate tax breaks and to understand the impact tax incentives have on job creation and economic development. While understanding whether incentive programs achieve their intended purpose is admittedly important, SB 282 arguably goes beyond what is necessary to achieve that goal and places another administrative burden on already burdened companies. The relationship between the stated goal and providing such data to the public is unclear, including why only data from public companies is relevant to evaluating tax policy. And particularly worrisome is the bill’s extension of the reporting requirement to corporations not subject to tax, and arguably corporations not even required to be registered with the Secretary of State. Further, the Illinois taxpayer confidentiality provision already allows taxpayer information to be shared with the Secretary of State, and a simple addition to that provision could serve the stated purpose of SB 282 without additional burdens on taxpayers.