Illinois General Assembly Passes Bill to Level Playing Field
SPRINGFIELD — Illinois Treasurer Michael Frerichs today called on Gov. Bruce Rauner to sign legislation that would prohibit companies that establish ownership outside the United States specifically to avoid state and federal taxes from doing business with state agencies.
The new ownership arrangements often are referred to as expatriated companies.
“We must stand up against companies that engage in elaborate restructuring schemes to avoid paying their fair share of state and federal taxes,” said Frerichs. “These tax avoidance schemes are shifting billions of dollars onto law-abiding citizens and businesses. Companies that twist the tax code should not be rewarded with lucrative contracts paid for by Illinois taxpayers.” House Bill 3419, sponsored by Rep. Andrade (D-Chicago) and Sen. Martinez (D-Chicago), passed in both the House and Senate with bi-partisan support.
The legislation prohibits the State of Illinois from doing business with or investing in expatriated entities that use complicated corporate inversions to avoid paying state and federal income taxes.
The bills also require the Illinois Investment Policy Board to identify expatriated entities to ensure retirement systems can engage in shareholder activism and divest from expatriated entities if shareholder activism is unsuccessful.
Under the legislation, a change to the Illinois Procurement Code would prohibit an expatriated entity from submitting a bid or entering into a contract with a state agency. The legislation uses a definition of expatriated entity from the federal Homeland Security Act of 2002, which was passed with bi-partisan Congressional support and signed into law by President George W. Bush, and federal regulations issued by the Treasury Department under President Barack Obama.
The Illinois Pension Code would add expatriated entities to the list of restricted companies that are provided to each of the retirement systems. It would also require the Illinois Investment Policy Board to identify all expatriated entities by April 1, 2018 and include these companies in the list of restricted companies distributed to each retirement system.
The legislation is supported by organized labor, the Illinois Manufacturers Association, and the Illinois Retail Merchants Association. The federal government has prohibited federal agencies from entering into contracts with expatriated entities since 2003.
About the Illinois Treasurer The Illinois Treasurer is the state’s chief investment officer and Frerichs is a Certified Public Finance Officer. He protects consumers by encouraging savings plans for college or trade school, increasing financial education among all ages, and removing barriers to a secure retirement. The Treasurer oversees a portfolio worth more than $25 billion. It includes approximately $13 billion in state funds, $7 billion in college savings plans and $5 billion on behalf of local and state governments. The investment approach is cautious to ensure the preservation of capital and returns $28 to the state for every $1 spent in operations. The Treasurer’s Office predates Illinois incorporation in 1818. Voters in 1848 chose to make it an elected office.
-END