Analysis of HB 3760 Local Government Tax Incentive Disclosure Act

Posted April 27, 2016 in Legislative briefs

Analysis of HB 3760
Local Government Tax Incentive Disclosure Act

HB 3760 (Representative Franks, D-Marengo) would create a new Act in the Illinois statutes known as the “Local Government Tax Incentive Disclosure Act.” While the bill’s title suggests a strictly local obligation, the legislation also imposes a reporting obligation on the state for state-provided tax credits.

The objective of the legislation is to foster transparency so that state and local residents, as well as policymakers, can easily identify what their governments spend on tax incentives intended to generate economic development.

HB 3760 was approved by the House on a vote of 110-3 on April 13. The bill is being sponsored in the Senate by Senator Biss (D-Elgin). Transparency legislation is politically popular, so the sizeable vote margin in the House is unsurprising.

Disclosure Obligation of Local Governments

Under the bill as amended and approved by the House, a “tax incentive” is defined as “any property tax abatement or tax increment financing affecting a unit of local government.” Local governments are defined as “counties, municipalities, townships, special districts, and units, designated as units of local government by law, which exercise limited governmental powers or powers in respect to limited governmental subjects, but does not include school districts.”

The bill would require affected local governments to include the annual value of any awarded tax incentives within their annual financial reports under the designation “community investment revenue.”

As introduced, the bill would have required that local governments report tax incentives as “lost revenue” in their annual financial reports. HB 3760 was subsequently amended to replace the designation “lost revenue” with “community investment revenue” after concern was voiced by the Illinois Tax Increment Association (ITIA).

Disclosure Obligation of the State

HB 3760 also includes a disclosure requirement for the State of Illinois. The Illinois Department of Commerce and Economic Opportunity (DCEO) would be required to annually report the total value of all tax credits awarded by the Department. This would include, but not be limited to, credits awarded under the Economic Development for a Growing Economy Tax Credit Act (EDGE). The Department would be obligated to provide a report to the Governor and General Assembly no later than August 1 of each year. Unlike the provision affecting local governments, the state would not be required to include the value of tax credits within any official financial statements.

The House sponsor, Representative Franks, is a long-time critic of the EDGE tax credit. Representative Franks previously sponsored a 2003 corporate accountability law and co-chaired a House study of state tax policy.

HB 3760 would become law immediately upon receiving the Governor’s signature.

By: Joe McCoy
Legislative Director
Illinois Municipal League

April 26, 2016

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