Dupage Policy Journal

In a Jun. 26 news release, Rep. Jennifer Sanalitro spoke out on the Illinois Franchise Tax.

"The tax burden on our small businesses is substantial," Sanalitro said. "It prevents us from both creating an environment that attracts new investment while also preventing us from lowering costs for our state’s existing businesses."

Sanalitro serves the people of the 48th District. She and her husband live in Hanover Park, and she is in executive sales at a packaging company, and volunteers with Brittany’s Trees. She is a mother to two grown children and also has a dog named Lucy. According to her website, Sanalitro values serving her community.

In 2019, the Illinois General Assembly adopted what would become Illinois Public Act 101-00089 which would have phased out the franchise tax by January 2024.

A document from DeLoitte, available here, explained how franchise taxpayers would be exempted on a portion of what they owed in successive tax years. The bill also created a franchise tax amnesty period for unpaid tax or license fees from March 15, 2008, to June 30, 2019.

In March 2021, the Taxpayers Federation of Illinois published a blog post that called the franchise tax “still a bad idea.”

In the post, writer Carol Portman explained how the tax worked, and what has happened in other states before diving into opinion on the franchise tax itself. The blog post notes that Illinois is an outlier because six states have something similar to Illinois’ franchise tax, but they base the tax on total assets, not paid-in capital.

The news release on Sanalitro’s website gives some history of the franchise tax.

It notes that the tax was created in 1872 and that back then the tax was seen as a way to protect corporations legally. There were few possible bases for the tax and that’s when the paid-in-capital option was chosen. Now, 151 years later, there are many other taxes that the state can levy, and the franchise tax itself is seen as archaic.

There have been attempts to eliminate the franchise tax, but they haven’t been successful.

In April 2021, The Institute for Illinois’ Fiscal Sustainability at the Civic Federation noted that the 2022-2023 state budget included $932 million in taxes that would be charged to corporations in the state, and that Pritzker proposed eliminating those “loopholes” as he called them. Then, after the 2019 attempt to repeal the franchise tax, the budget included a reversal of that repeal, among other things.