Serious questions about skirting federal law fails to derail Excellence Fund legislation in House
A Democrat-backed tax deduction bill was cause for serious debate on the House floor April 18.
HB4237, sponsored by Rep. Jonathan Carroll (D-Northbrook) to alter the Illinois Excellence Fund, would seemingly undermine the $10,000 cap on state and local tax (SALT) deductions placed on charitable contributions by the federal government and hamper private scholarship funding donations, according to some GOP lawmakers.
Rep. Peter Breen (R-Lombard) got right to the point, asking Carroll if a SALT workaround that meets federal law could really bring up to $6 billion back into taxpayers’ pockets. After being told yes, Breen then asked Carroll to explain the process.
“As I read your bill, the Illinois government would create a fund within the government and instead of writing checks to the Department of Revenue, you would write the check to the Illinois Excellence Fund; and then from a state level, we would treat that not as a tax payment but as a charitable contribution,” Breen said.
That is exactly what it would do, Carroll said, who added the new federal plan is “really hurting” Illinois taxpayers, traditionally blue states.
“But I just read you a regulation that appears to make your plan not work, even under today’s law,” Breen said.
Rep. Steven Reick (R-Woodstock) asked Carroll if he was present when the Democrats voted for the tax increase in 2017. After he was told no, Reick said he “would not visit those sins” upon Carroll before detailing how his bill could affect local school districts.
“I can see school board presidents' hair catching fire when they find out property tax money that would otherwise go to their schools is now going to a charitable purpose to which they have no control,” Reick said.
After Carroll said it would be up to the local school boards to figure it out, Reick said the bill is an attempt to get around federal law, which could subject citizens to audits.
“The people on the other side of the aisle voted to raise taxes," Reick said. "Now they want to give a tax break, Which is it? Give them a tax break with real honest to goodness tax reform or spending restraint, not something like this.”
Rep. David Harris (R-Arlington Heights) said he was attempting to understand Carroll’s bill, but he still is unsure if the legislation would work.
“I am not going to disagree with my colleagues on this side of the aisle except for one, and that is that the IRS might audit every return in Illinois,” Harris said, noting he would not vote no to a bill that could help give taxpayers a break.
Carroll’s bill is all about publicity, according to Rep. C.D. Davidsmeyer (R-Jacksonville).
“A lot of these bills that come through, they end up being a headline in a newspaper to say ‘Hey, look I helped you with your property taxes,’” Davidsmeyer said.
A better discussion between both sides of the aisle could have made the bill a lot better, according to Davidsmeyer, who said Breen has a similar piece of legislation with a lot more muster.
“I have co-sponsors on your side of the aisle, so I don’t think that is a fair accusation,” Carroll said.
Rep. Allen Skillicorn (R-East Dundee) asked Carroll if, in his opinion, charitable contributions are "voluntary or coercive," but did not get a definite response, prompting him to ask if taxation was voluntary or coercive to prove his point.
Rep. Tom Demmer (R-Dixon) pointed out Democrats raise taxes to lower taxes.
“Let’s not have a conversation about what Washington did to Illinois, but about what Illinois is doing to taxpayers,” Demmer said.
Rep. Jeanne Ives (R-Wheaton) said if the IRS decides that Carroll’s bill is an illegal construct then citizens will be in jeopardy of being penalized. Ives suggested Carroll send a private letter to the IRS to ensure his bill is even legal.
“This is a serious matter and we should not just decide on the fly we are going to approve,” Ives said.
Carroll did not take Ives suggestion, however, and HB4237 passed 93-15 before being moved to the Senate.