Illinois considers decoupling state tax liabilities from federal depreciation program
November 09, 2011
To finance a tax cut intended to keep CME Group and CBOE Holdings in Chicago, Illinois Governor Pat Quinn proposed a bill that would decouple state tax liabilities from the federal early depreciation
program, Chicago Business reports.
However, as the news source points out, "decoupling merely advances money the state would have received anyhow, as companies take depreciation now rather than two or three years later." Essentially, the tax cuts are permanent but the savings are nonexistent.
The timing of the proposal is also an issue. The deadline for the year-long federal early depreciation program is the end of next month, so many have already taken advantage of it. A retroactive removal of the tax break is likely to be both difficult and unpopular with those who purchased new fixed assets
and counted on the federal allowance.
Because of this, Quinn and other legislators recently met to discuss other ways to raise revenues, such as closing an overseas corporate profits loophole.
Earlier this month, Forbes noted that the expiration of temporary allowances such as early depreciation and bonus depreciation may cause "a dramatic reversal" in economic recovery.