IVCA Provides Updates for State Legislative Issues – 06/05/2024
Illinois Venture Capital Association Illinois Legislative Report
David Stricklin / Stricklin & Associates
Wednesday, June 5, 2024
IVCA CONTINUES WORK WITH IDOR ON PARTNERSHIP ISSUES
Our work is ongoing with the Illinois Department of Revenue regarding implementation of the Qualified Investment Partnership legislation passed in 2023. Longtime readers of this column will remember the issue surfaced around 2019 when the Department of Revenue decided PE funds were a “trade or business” if they invested in certain partnership structures. Legislation to address that decision took several years to pass, and as you might imagine in the technical and complicated world of tax policy, some unintended consequence came to light this spring.
Negotiations with IDOR centered on the following two provisions:
(C) Partnerships meeting the expanded definition in subsection (A-5) may elect not to be treated as an investment partnership for tax years ending on or after December 31, 2023, and ending before December 31, 2025. The election shall be made in the form and manner required by the Department. Once made, the election shall be irrevocable.
(D) Partnerships that do not meet the definition of investment partnership under subsections (A) or (A-5) and each partnership making the election under subsection (C) shall be deemed to be engaged in a trade or business and shall be subject to the provisions of Section 305(c) of this Act.
IDOR did agree to make the election annual, however IVCA decided not to proceed based on the insistence that the term “trade or business” was being memorialized in legislation, therefore neither provision you see above was included in the omnibus revenue bill for 2024. IDOR has engaged in several conversations and has always been willing to listen and discuss the concerns of IVCA members, and that will continue in the coming months. If you have an interest in participating in that process please contact IVCA Executive Director Christie Pruyn at cpruyn@illinoisVC.org.
REVENUE PACKAGE ALMOST SINKS BUDGET
Speaking of the revenue bill, it took three tries and some parliamentary maneuvering by the House Democratic Majority to get the bill over the finish line around 3:30 a.m. on May 29.
IVCA ally, retiring Revenue Chair Rep. Kelly Burke:
“Well, it is 3:36 in the morning in the last week of May,” sponsoring Rep. Kelly Burke, D-Evergreen Park, who is retiring at the end of her term, said during her closing remarks after a grueling hour of debate. “And I gotta tell ya, I’m not gonna miss this.”
The following story is a blow by blow authored by Capitol Fax reporter Rich Miller, who is widely considered one of the top analysts/reporters covering Illinois policy and politics:
TAX PACKAGE NEEDS CPR TO SURVIVE
WHAT’S IN THE BILL
Sports gaming is first on the list of new revenue sources the state is tapping to keep pace with spending in the FY 25 budget. This is an excellent overview by reporter Hannah Meisel of the industry and the revenue it produces and how it applies to the state budget:
Governor Pritzker signed the budget into law today, and it takes effect July 1, 2024.
WARNING SIGNS FLASHING YELLOW
The Illinois Policy Institute represents the conservative view of Illinois politics and issued a sharp warning about the road ahead:
Illinois’ long-standing tradition of failing to pay enough into its five statewide pension systems continues in 2025. Pension expenses are the single-largest item in the state budget, taking up nearly $10.5 billion, or 20%, of the state’s general funds budget, and nearly $11.6 billion across all state funds. But that is still $4.5 billion below what the plans’ own actuaries have determined is required to actually begin paying off the state’s pension debt.
WHAT ELSE WAS OR WAS NOT ACCOMPLISHED
Fiscal issues and other big picture items are logically the focal points of a legislative session. In addition to the must-do legislation, each session there are a host of measures which are introduced and ultimately approved which impact our daily lives, or at least give us a moment of levity, from protections from AI in social media, to naming an official state mushroom. Left on the table, regulating the nascent Hemp industry, and there was no movement on the Bears/White Sox et al stadium packages. Governor Pritzker and the two legislative leaders have continued to pour cold water on the efforts by professional sports teams to get taxpayer support for their future homes.