December 04, 2012
Corporate Tax Disclosure Bill Could Trigger Lawsuit
By: Matthew Blake
Illinois may soon require publicly traded companies to reveal their state income tax payments online.
Supported by community organizations such as the Lakeview Action Coalition that often call for corporate tax reform, Senate Bill 282may be politically feasible after an election that saw Democrats gain super majorities in both the Illinois House and Senate.
However, if opponents cannot shoot down the bill in the General Assembly they might sue, arguing that SB282 violates the privacy rights of corporations. “A court challenge is probably pretty likely” if the bill becomes law, says Todd Maisch, vice president for government affairs at the Illinois Chamber of Commerce, which is lobbying against the legislation.
Senate President John Cullerton introduced SB282 this spring, legislation that calls for a Web site publicizing the income tax filings of all companies that do business in Illinois. Cullerton revived the bill last week when House Majority Leader Barbara Flynn Currie (D-Chicago) signed on as the House sponsor, and SB282 narrowly cleared the Senate by a vote of 30-27.
The legislation is now in the House Rules Committee. Speaker of the House Mike Madigan (D-Chicago) has not taken a position on the bill, and Madigan spokesman Steve Brown says there might not be time to call the bill for a House vote this week.
The legislation’s long-term prospects, though, look good. Madigan tends to back what Currie supports, and if Democratic leadership cannot shepherd enough votes now, they can wait until January 9 when the House Democratic majority swells to a 71-47 advantage. Also, Gov. Pat Quinn has long supported disclosing the tax payments of publicly traded corporations, according to spokeswoman Brooke Anderson.
SB282 supporters make clear that “this bill is just for transparency,” according to Sue Gries, a representative for the Lakeview Action Coalition, and would not necessarily lead to other legislation, such as curbing special corporate tax breaks. “Illinois needs to base its tax decisions on facts, not guess work,” Gries says.
Illinois companies currently do not have to make their income tax payments public to even state lawmakers. The Illinois Department of Revenue instead simply releases aggregate information in annual tax reports. The latest report shows that corporate income tax generates about 8 percent, or $2.9 billion, in total state revenue.
The Land of Lincoln is not unusual in this regard. Most states do not publicize such information and the federal government does not reveal corporation’s federal tax filings. In fact, it is a federal crime for an IRS employee to publicly disclose the filings of an individual or corporation.
With that in mind, Maisch at the Chamber of Commerce argues that SB282 is “a total breach of privacy” and that Cullerton made an “arbitrary political decision to single out publicly traded companies.”
The chamber could be building a legal case that corporations should be afforded similar privacy rights to people. But Charlotte Crane, a tax expert at Northwestern University law school, is skeptical about such arguments. “There is not a state rule that says you have to treat corporations as people,” Crane says. “The legislature can do what it wants.”
If the legislation does pass the General Assembly and legal muster, it is not clear that more transparency means changes in tax policy.
Cullerton’s office did say that the information could shape the debate on whether to make the 7.2 percent corporate income tax rate permanent. “I think it’s a perfect tie-in,” says Cullerton spokesman Ron Holmes. “We’ll have a true idea of how much corporations are paying.”
Absent subsequent legislation, the rate is scheduled to drop to 5.25 percent in 2014.