State law would require Illinois corporations to disclose taxes
The Illinois Senate narrowly passed a bill last night that would require publicly-traded companies in Illinois to disclose their corporate tax liability.
It’s an unusual move as the federal government, and most states, have a longstanding tradition of keeping tax information confidential.
The proposal would require publicly traded companies that do business within the state to disclose tax liability, two years after the fact. (So if the bill passed in 2013; the first information would not be available until 2015).
The information would be available in an online database.
Sen. John Cullerton, a Democrat, said the legislation was not intended to make the state seem less business-friendly.
“This is a pretty straightforward bill, it’s not something that requires a lot of effort to disclose,” he said on the floor of the Senate Wednesday.
It is designed to provide more information on the two-third of public companies doing business here who do not pay taxes. Cullerton’s spokeswoman, Rikeesha Phelon, said that information comes directly from the Illinois Department of Revenue.
There are two types of state taxes that corporations here pay: an income tax and a personal property replacement tax, which is a percentage of income. In fiscal year 2009, which filed in 2010, 29.4 of companies that filed state returns had a positive corporate "tax liability", meaning the compaies owed the state some money.
In fiscal year 2010, 30.4 percent of companies had a positive liability, which takes into account both the income tax and personal property replacement tax, the Illinois Department of Revenue said. That's where the two-thirds figure comes from.
Officials have also said they do not know how much companies like Sears and the CME Group – recipients of a large tax credit bill last year – pay in state taxes.
The CME Group declined to comment Thursday when asked how much the financial exchange paid in state taxes.
Sears said it paid $207 million to the state last year, spokesman Howard Riefs said in an e-mail, pointing out that data is available on Sears’ corporate website.
Officials at one point compared the Illinois proposal to a measure that Wisconsin has. However, that state’s corporate tax disclosure law differs significantly. It functions more like a freedom of information request, where individuals can request information from the Wisconsin Department of Revenue. There are limitations on how that information can published.
The notion of tax information privacy is deeply-established in the American tax code, said David Weisbach, who specializes in corporate tax law at the University of Chicago law school.
Weisbach noted that when he worked for the U.S. Department of Treasury, workers were always very careful around tax returns: it’s a felony for federal government workers to even look at a tax return without proper authorization.
Ironically, tax information wasn’t always this sacred.
“We did have public disclosure of tax information about a 100 years ago, back in the early days of the income tax,” he said.
Basically, anyone could just go to the IRS and ask to look at other people’s return. That didn’t last long.
“We wanted the government to get the true and correct information and not have individuals or corporations not have an incentive to tell the truth on their tax returns,” he said. “So there was a tradeoff between the government getting the best possible information for tax purposes and public revelation, and we decided early on that we wanted the government to have the best possible information”.
Next up, the Illinois House takes up the issue and decides whether public relevation is now more important.
(Correction: A previous version of this story misstated that Sears paid $217 million to the state last year. Sears paid $207 million.)