November 14, 2014
Preview of Fall Veto Session
Now that the election is over its back to governing the state of Illinois. The legislature is scheduled to meet next week for veto session starting on Wednesday, November 19 to Thursday, November 20 (Friday’s session was cancelled) and then returning for a second week December 2 to December 4. A number of familiar topics may re-emerge such as minimum wage, auto IRA, state based healthcare exchange, lawsuit lending, and extension of the MPC tax credit.
Manufacturer’s Purchase Credit
As you are aware, in August of this year the Illinois Manufacturers’ Purchase Credit (MPC) was subject to the automatic sunset provisions of the Illinois sales tax. The Illinois Chamber has made extension or expansion of the MPC a top priority for the fall veto session and spring session of the legislature. We have been actively reaching out to legislators over the summer to explain how important the MPC credit is to our manufacturing members throughout the state and working to make sure that extension of the MPC is on a list of items to be considered during fall veto session. While there are no guarantees given, extension of the MPC is certainly an opportunity for members of the General Assembly to send a signal that legislators are willing to be responsive to the needs of the Illinois business community.
Despite nearly three years of legislative debate and an advisory referendum placed on the ballot last week that received over 67% approval from the voters, we have received indication that it is unlikely that a vote on increasing the minimum wage will take place during veto session and will most likely take place in January. We have also heard that the City of Chicago may act on their own to raise their minimum wage in the city sometime in December. We will continue to actively oppose any increase in the minimum wage both in the City of Chicago and on the state level. Illinois already has one of the highest minimum wages in the nation and small businesses simply cannot afford an increase of nearly 21% in their labor costs as our state’s economy continues to recovery from the Great Recession and our economic growth lags behind neighboring states.
Self-insured Premium Tax
We also believe that active consideration is being given to repeal of the recently-enacted insurance premium tax (see SB 3324 / Public Act 98-0978) during fall veto session. The new tax imposes a 3.5% tax on insurance premiums paid directly by Industrial Insureds to unauthorized insurers (without the use of a Surplus Lines Broker)-in short, almost all self-insurers, including some large not-for-profits. Prior to SB 3324, these self-insurance transactions were exempt from premium tax. Most legislators, including the bill’s sponsor, have indicated that they were not made aware of the new tax and its significant negative effect on Illinois-based businesses as the bill moved through the General Assembly-and, in fact, the new tax was not mentioned during House and Senate floor debates on the bill. Legislators that did not understand the full impact of SB 3324 will hopefully now have an opportunity to reconsider their vote prior to the January 1st effective date of the new tax. Fact sheet is here.
The advocates and coalition members for a state based healthcare exchange are expected to meet during veto session to discuss the possibility of introducing legislation in the House to create a state based healthcare exchange. The Senate has already passed a bill approving a state based exchange while the House could not form a consensus on the issue and it stalled. Gov. Pat Quinn is urging the creation of a state based exchange so that Illinois does not potentially lose the Federal subsidies if the US Supreme Court strikes them down next year in their ruling. Illinois currently partners with the Federal government to run our healthcare exchange and the Federal law as written says tax credits to be given to individuals in exchanges establishes by the states, which the Supreme Court will rule if those tax credits are applicable to individual in exchanges that are run by the Federal government such as ours. If legislation is introduced the sponsor would be State Representative Robyn Gabel.
Legislation may also be introduced to regulate lawsuit lending in Illinois. This has been an initiative of the Illinois Chamber in the past and continues to be a priority to regulate an industry that seeks out plaintiffs with promising pending lawsuits and offer them “up front” cash to cover immediate living or medical expenses while they are engaged in a lawsuit and await settlement. These third-party loans are provided at exorbitant interest rates, and are then paid back to the lender from any settlement or judgment award the plaintiff may later receive.
In a real sense, the consumer lawsuit lender is a gambler who bets on the plaintiff’s case being successful. If the plaintiff recovers substantially through settlement or a damages award, the lawsuit lender wins big. But, if the plaintiff loses, the lawsuit lender recovers nothing. This fact leads lawsuit lenders to seek control over strategic decisions in litigation in order to prosecute lawsuits in their own interests, even if those interests diverge from those of the plaintiffs.
Legal reform advocates, such as the U.S. Chamber Institute for Legal Reform (ILR), and consumer advocacy groups are promoting legislation that would actually protect consumers and curb lending abuses by bringing lawsuit lending into alignment with existing state law. These efforts would make consumer lawsuit lending subject to the same fair-lending laws already in force in that particular state.
Legislation introduced earlier this year would mandate that employers set up an automatic Individual Retirement Account for their employees, a system to be administered by the Illinois Dept. of Revenue and a newly created Board led by the Illinois Treasurer.
The legislation targets small businesses with 25 or more employees and forces them to not only set up the accounts but also automatically deduct at least 3% from their employees’ paychecks. An employee would have to actively pursue “opting out” if they did not want to participate.
The Illinois Chamber is part of a coalition that opposes this proposal as it is a mandate on employers, not an option. Small businesses currently have a variety of private sector options they may choose to participate in for retirement purposes. And the money from participants would not be held in or managed by a depository institution or a trained financial professional, it instead would be deposited into a new government holding account to be invested potentially by state officials. The consumer losses suffered under other state administered investment programs are reason enough to oppose implementing yet another government-run investment program.
Senator Daniel Biss is the sponsor and it will most likely not come up for a vote the first week of veto session, however, may emerge during the second week.