Economic Outlook And Revenue Forecast
State of Illinois
2012 receipts, a review of the IIT forecast will be
conducted at the end of April.
Corporate Income Taxes
Fiscal year 2012 baseline Corporate Income Tax
(CIT) receipts are forecast at $2,000 million, a 5.2
percent increase. The baseline is then reduced by
$29 million, to $2 billion, due to the fiscal year
2011 amnesty program. Gross CIT receipts
associated with the 2.2 percentage point tax
increase are forecast at $917 million. Bonus
depreciation reduces receipts by $310 million,
while the full suspension of Net Operating Losses
(NOLs) increases receipts by an estimated $275
million. Total gross receipts are estimated at
$2,853 million. The refund rate for fiscal year 2012
is 17.5 percent, yielding a net CIT forecast of
$2.354 billion.
For fiscal year 2013, baseline CIT receipts are
forecast at $2.05 billion, a 2.5 percent increase.
The baseline is then reduced by $20 million, to
$2.03 billion, due to the continued negative impact
of the fiscal year 2011 amnesty program. Gross CIT
receipts associated with the 2.2 percentage point
tax increase is forecast at $940 million. Downward
adjustments were made for: (1) bonus depreciation,
(2) a change in how exchanges and clearing houses
apportion income to Illinois and (3) the
introduction of the live theater credit. An
adjustment is also made for the cap placed on NOL
use. Refunds for fiscal year 2013 are estimated at
$416 million, yielding a refund rate of 14 percent.
The net CIT forecast for fiscal year 2013 is $2.55
billion.
Tax policy changes, rather than economic
conditions, have resulted in increased uncertainty
in Corporate Income Tax forecasting. First, the CIT
rate was increased for tax year 2011. The fiscal
year 2011 forecast correctly assumed that firms
would make estimated payments in the second half
of fiscal year 2011, at the hold-harmless rate of
150 percent of the previous year. In order to avoid
penalties, firms will have to pay 100 percent of
their tax year 2011 tax liability by March 2012.
However, two major policy factors complicate this
picture: 100 percent federal expensing1 of capital
expenditures, and the suspension and capping of
Net Operating Losses (NOLs). While overall
estimates for these policy changes are based on
sound methodologies2, the year in which they
impact state revenue is associated with a high
degree of uncertainty.
1 Section 401 of the Federal Tax Relief, Unemployment
Insurance Reauthorization and Job Creation Act of 2010 (Public
Law 111-312)
2 For federal expensing, the Department of Revenue developed
estimates for Illinois based on federal estimates made by the
Joint Committee on Taxation (see JCT report JCX-54-10). The
magnitude of the Department’s estimate comports with
estimates released by the Center for Budget Policy and Priorities
(http://www.cbpp.org/files/3-1-11sfp.pdf) published in April
2011. The estimate for revenue generated as a result of NOL
suspension and capping is based on the average NOL tax
expenditure from 2000-2009, adjusting for the tax rate increase
and growing by the underlying growth rate in CIT receipts.
Corporate Income Taxes
($ millions)
Overview: Corporations are taxed at 7 percent for net income
earned after December 31, 2010.
The starting point for the Illinois Corporate Income Tax (CIT) is
federal taxable income. The federal taxable income is modified
by adding back certain items and subtracting out others. The
state collects an additional 2.5 percent Personal Property
Replacement Tax on behalf of local governments.
FY09 FY10 FY11*
FY12
Estimate
FY13
Forecast
Gross Revenue
at 4.8 percent
Rate
$2,073 $1,649 $2,106 $1,971 $2,030
Gross Revenue
from 2.2
percent Rate
Increase
(estimate)
n/a n/a $180 $917 $940
100%
expensing of
capital
expenditures
n/a n/a n/a $(310) $(190)
Change in
Apportionment
of Exchanges
n/a n/a n/a n/a ($43)
Live Theater
Credit
n/a n/a n/a n/a ($2)
Net Operating
Loss
Suspension
n/a n/a n/a $275 n/a
Net Operating
Loss Cap
n/a n/a n/a n/a $232
Total Gross
Receipts
$2,073 $1,649 $2,286 $2,853 $2,966
Refund Fund
Deposit
$363
17.5%
$289
17.5%
$426
17.5%
$499
17.5%
$416
14.0%
General Funds
Revenue
$1,710 $1,360 $1851 $2,354 $2,550
*FY11 receipts were distorted in two ways by the amnesty
program. First, baseline receipts include $302 million in amnesty
payments. Second, amnesty revenues were deposited into three
“general funds”, rather than the usual two.
Key Assumptions: The State’s estimate for FY12 assumes an
underlying growth rate of 5.2 percent. The forecasted growth
rate falls to 2.5 percent in FY13. FY12 and FY13 baseline revenue
is reduced by $29 million and $20 million respectively, to
account for the continued negative impact of the FY11 amnesty
program.
Executive Budget for Fiscal Year 2013 Chapter 3 - 11
