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Illinois legislation seeks to amend property tax code for tool and manufacturing business property

Illinois legislation seeks to amend property tax code for tool and manufacturing business property


Recently, Chicago Business announced that a manufacturing company has decided to relocate to Illinois from Indiana. The company is the latest business to move to Illinois and revealed that one of the deciding factors was the offer of a tax abatement in Munster.

The tax abatement will eliminate property taxes for the manufacturer over the next 10 years, providing the company with a yearly relief of around $200,000.

Property tax incentives are commonly used by states to attract more business. In 2012, the Lincoln Institute of Land Policy reported that local and state governments often resort to this tactic and give up between $5 and $10 billion each year in order to bring in large employers. For businesses, this type of program can provide them with some extra cash as they work on expanding their brand and establishing themselves in their new location.

Property tax abatements for manufacturers

Last year, Illinois lawmakers proposed an amendment to the state’s property tax code that would enable counties, cities and other municipalities to pass an abatement ordinance for tool and manufacturing businesses. Under the new terms, local leaders could present, vote upon and pass new rules that eliminate or reduce the amount of property tax a manufacturing company would pay in their area.

In order for companies to receive the tax deal, they would need to qualify as a tool or manufacturing company under the North American Industrial Classification System. Classifications include the following:

  • Furniture manufacturing
  • Products made from plastic or rubber
  • Producing machinery
  • Making fabricated metal products
  • Building electronic or computer equipment
  • Primary metal manufacturing

Additionally, companies would also have to show that they have no more than 75 full-time employees and that the building is within the boundaries of the taxing district.

Expanded power

The new legislation empowers municipalities, giving them the ability to issue a tax break without the need for state approval and applies to all tax-issuing governments in the state. In addition, the bill also gives tax districts the right to follow the ordinance. For instance, if a township approves an ordinance that offers these types of businesses a property tax cut of 75 percent, then the taxing districts may also automatically cut the tax rate.

The bill was approved unanimously by the state Senate and was referred to a rules committee by the House. It is unknown whether the House will approve such a measure but it could provide advantages for tool and manufacturing companies in the state. Companies with questions about the bill may find it helpful to meet with an attorney.

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