Quick Hit Ellyn Fortino Wednesday November 20th, 2013, 1:53pm

Ald. Burns Introduces Chicago Corporate Tax Disclosure Ordinance

Ald. Will Burns (4th) wants all publicly-traded corporations seeking subsidies or contracts from the city of Chicago to publicly disclose the amount they pay in Illinois income taxes as well as any tax breaks they receive. 

Burns introduced the Chicago Corporate Responsibility and Tax Disclosure Act at Wednesday's city council meeting. Under the proposed measure, big corporations asking for city actions, subsidies and contracts would also have to report net and taxable income.

Alds. Pat Dowell (3rd), Leslie Hairston (5th), Roderick Sawyer (6th), Natashia Holmes (7th), Toni Foulkes (15th), Ricardo Munoz (22nd), Deb Mell (33rd), Michele Smith (43rd), James Cappleman (46th), Ameya Pawar (47th), Harry Osterman (48th) and Joe Moore (49th) have signed on as co-sponsors to the measure thus far. Leaders with the Fair Economy Illinois coalition are also in support of the proposed ordinance, which has been sent to the Finance Committee.

"We are increasingly turning into a society, which in the words of Martin Luther King, Jr. takes necessities away from the many and gives luxuries to the few," Fair Economy Illinois leader Rev. Marlan Branch of St. James AME Church said before Wednesday's council meeting. "The city of Chicago spends millions of dollars each year subsidizing and contracting with big corporations. Those corporations have a particular responsibility to support the common good, which should include publicly disclosing the corporate income tax they pay to the state of Illinois."

The public, including lawmakers, are largely left out of the loop when it comes to the details surrounding big companies' corporate income tax liabilities in Illinois. But what is known is that two-thirds of Illinois corporations reportedly pay no corporate income tax to the state, according to the Illinois Department of Revenue's 2010 Annual Report.

When the state is starved of income tax revenue, it "puts more pressure on property tax owners here in Chicago," Burns said at a Wednesday morning news conference. 

"For too many years, the middle class' wages have been stagnant while corporate profits grow, and at the same time corporate profits have increased, cities and other regions have been asked to subsidize economic development that probably would have occurred anyway," the alderman continued.

Fair Economy Illinois leaders stressed that the state's "revenue crisis" impacts all Chicagoans, as the city relies on state funding for things like education and public transportation, among other services.

"So when the state cuts $800 million from schools over a five-year period and cuts 20 percent from human services over the course of a decade, communities are devastated throughout the city," noted Kristina Tendilla, a leader with the coalition. "Meanwhile, two-thirds of corporations pay nothing in corporate income taxes to the state of Illinois, and we don't even have a clear idea which corporations are actually paying their fair share and which are taking unfair advantage of tax loopholes."

The proposed corporate tax transparency ordinance would impact only publicly-traded corporations, not small businesses or privately-held firms.

Burns said he has not talked directly to Chicago Mayor Rahm Emanuel about where he stands on issue, but he did brief the mayor's staff on the proposal.

"This is right in the mayor's wheelhouse when you talk about transparency and accountability and making sure that public dollars are spent wisely and invested wisely," Burns explained. "So I don't expect to have an issue with the administration to move this ordinance forward."

As part of the measure, publicly-traded corporations would have to file corporate tax disclosure statements with the city at the time they apply for contracts or subsidies, and then report such information each year that they are under a city agreement.

Burns said many of these large corporations already disclose this tax-related information to the U.S. Securities and Exchange Commission (SEC). The ordinance simply ensures that the information is both transparent and easily understandable for the public, he added. Under the proposal, the city's Department of Procurement Services would make the corporate tax disclosure statements public via a searchable online database.

"This ordinance doesn't require anyone to change their behavior. It doesn't require any burden on any business. It just requires transparency," Ald. Smith said in remarks before the meeting. "Members of this caucus fight for transparency every single day in our government, and I think the taxpayers have a right to know, and the aldermen have a right to know when deciding whether or not to approve benefits for a corporation, what (corporations) pay in taxes. It's a pretty simply ordinance."

Additionally, the ordinance would give the city enforcement authority to verify corporations' corporate tax disclosure statements. The procurement services department would also be tasked with setting up a penalty system if corporations fail to comply with the measure. According to the draft ordinance, large firms could face up to a $100 penalty for each day they are late in filing a financial statement.

Moreover, failing to comply with the measure would make "any ordinance, ordinance amendment, city council approval or other city action on behalf of the applicant failing to comply, voidable at the option of the Chicago City Council or other city agency involved, upon the recommendation of the mayor," the draft ordinance reads.

Burns took to task the argument that his proposal would dissuade corporations from doing business with the city, noting that Chicago is a "world-class city" with an excellent workforce and infrastructure system, among other advantages over other states and cities that may also be offering subsidies.

He added that he's "tired of this race to the bottom" and "corporations putting guns to our head saying that, 'We're going to leave unless you give us $25 million,' when you're raking in $400 million in profits."

Burns was referring to the recent request for state tax breaks from Archer Daniels Midland Co. In September, ADM officials said they were moving the company's headquarters from Decatur to a more internationally-accessible location, and wanted a tax break to stay in Illinois. The state legislature did not take action on the ADM proposal during the fall veto session.

Pawar chimed in that the proposed Chicago ordinance is a big step forward in an effort to level "the playing field for all taxpayers."

"(Big corporations) clearly think that they can write the rules to exempt themselves from paying those taxes," Pawar said. "At some point, we have to arrive at a point where we say, 'No more of this pay me or I'm leaving,' but more importantly, also require these big corporations to pay their fair share just like the rest of Americans."

If approved, Burns' measure may not compel corporations to start paying state income taxes, but the alderman noted that it could have an impact on the debate in Springfield over the temporary income tax hike that's set to expire in 2015, as well as the larger conversation about Illinois' corporate tax system.

For example, the proposed Chicago ordinance mirrors pending statewide legislation, the Illinois Corporate Responsibility and Tax disclosure Act, HB 3627. The Illinois Senate passed the measure in fall 2012, but the House hasn't called it for a vote. Illinois' House Revenue and Finance Committee, however, held a subject-matter hearing on the bill in September that saw a large public turnout.

Burns' recent proposal also comes about a month after he and Ald. Ed Burke (4th) introduced the Executive Compensation Disclosure Ordinance, which would force publicly-traded companies seeking financial incentives from the city to disclose the pay difference between their chief executives and rank-and-file employees. The proposal is pending in the city's Finance Committee.

"I think the thing that connects these two ordinances is that people in Chicago want to know that the system is fair, and it's up to us in the city council and advocates to try and make sure that happens," Burns stressed.

If approved, both the Chicago Corporate Responsibility and Tax Disclosure Act and the Executive Compensation Disclosure Ordinance would take effect upon passage and publication.

Stay tuned.

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