Government Affairs Roundup
“Your Timely Roundup of Local, State, and Federal Updates”
A few interesting items on the state side of things today in the report. News has started to leak out about what could be on tap for a potential special session and veto session in November, but no news on specific date yet for the special session. Cannabis has taken the lead in headlines with an announcement of estimate breaking revenue on top of another announcement of additional licenses finally being approved.
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Special Session and/or Veto Session Topic Possibilities
In an announcement on Monday, as the legislature readies for a possible special session after Labor Day, Speaker Welch said working groups will be “focusing on the need to develop consensus and create necessary solutions for some of the most critical issues facing Illinoisans today.”
“Illinois has done a lot of important work to ensure we remain an outlier in the Midwest in protecting reproductive health and shielding our citizens from the nationwide scourge of gun violence,” Welch said. “But after the extremist Supreme Court overturned the landmark Roe v. Wade decision and the tragedy that took place in Highland Park, it is apparent that we have more work to do. I have created these working groups to take a balanced and research-driven approach to meaningfully reform our laws in Illinois.”
House Speaker Emanuel “Chris” Welch has formed working groups around four hot-button issues leading up to the next legislative session — a veto session in November. Here’s the lineup:
Reproductive Health and the Dobbs Decision Working Group, led by Rep. Kelly Cassidy. Members: Reps. Dagmara Avelar, Lakesia Collins, Terra Costa Howard, Margaret Croke, LaToya Greenwood, Greg Harris, Anna Moeller and Ann Williams.
Firearm Safety and Reform Working Group, led by Rep. Bob Morgan, who was at the Highland Park parade when a gunman opened fire July 4. Members: Reps. La Shawn Ford, Jennifer Gong-Gershowitz, Sonya Harper, Barbara Hernandez, Maura Hirschauer, Jay Hoffman, Nick Smith, Denyse Stoneback, Kathleen Willis and Lance Yednock.
Mental Health Working Group, led by Rep. Deb Conroy. Members: Reps. Fred Crespo, Mary Flowers, Angelica Guerrero-Cuellar, Will Guzzardi, Fran Hurley, Lindsey LaPointe, Camille Lilly, Rita Mayfield, Michelle Mussman, Bob Rita and Maurice West.
Social Media and Online Extremism Working Group, led by Rep. Jaime Andrade. Members: Reps. Carol Ammons, Jonathan Carroll, Daniel Didech, Edgar Gonzalez, Stephanie Kifowit, Lamont Robinson, Curtis Tarver and Michael Zalewski.
Marijuana Tax Revenue Explodes
Illinois took in nearly a half-billion in marijuana taxes in its second full fiscal year of legal recreational sales. Tax revenue rose 50% in the year ended June 30, exceeding forecasts, the governor’s office announced. Marijuana, which is taxed at rates between 25% and 40% on retail sales and 7% on wholesale, now produces more state revenue than hotels or alcohol.
Local governments, which charge their own taxes of up to 3%, took in $146 million during the past 12 months.
Overall, recreational-use sales increased sharply to $1.5 billion during the 12 months ended June 30, as more retail stores opened after legalization. But growth lately has plateaued at about $130 million a month. Sales are expected to increase as more new stores open. Last week, the state issued 149 of 185 new retail licenses. Illinois currently has 110 dispensaries. Some of the new stores will be open later this year, but most won’t open until 2023.
Brightfield Group, a Chicago-based research firm, predicts Illinois will have the third-highest recreational marijuana sales in the nation this year at $1.77 billion, up from fourth place in 2021 at $1.38 billion. Sales could reach $2.77 billion by 2027.
Pritzker Administration Issues First Wave of Conditional Adult Use Cannabis Dispensary Licenses
Governor JB Pritzker and the Illinois Department of Financial and Professional Regulation (IDFPR) issued 149 Conditional Adult Use Dispensing Organization Licenses to applicants selected in three lotteries held in the summer of 2021. All businesses qualify as Social Equity Applicants under the Cannabis Regulation and Tax Act. The list of awardees and the next steps for the conditional license period are available on the IDFPR’s Adult Use Cannabis webpage.
Of the businesses selected through the lottery, 41% are majority Black-owned, 7% are majority White-owned, and 4% are majority Latino-owned, while 38% of awardees did not disclose the race of their owners. To date, Illinois has made and executed the greatest commitment of adult use cannabis tax revenue to community reinvestment, expunged the most criminal history records involving cannabis, and has the highest rate of minority ownership of any state reporting/collecting ownership demographic data in the country.
The release of these licenses marks the first issuance of Conditional Adult Use Dispensing Organization Licenses since Illinois legalized cannabis for adult use under the Cannabis Regulation and Tax Act in 2019.
The businesses awarded Conditional Licenses will have 180 days to select a physical storefront location and obtain the full Adult Use Dispensing Organization License. A full overview with next steps for the process is available here. If a Conditional Licensee is unable to find a suitable physical location within the 180-day period, they may request an extension of 180 days. Once issued an Adult Use Dispensing Organization License, a business may begin purchasing and dispensing adult use cannabis.
Through a separate program administered by the Illinois Department of Commerce and Economic Opportunity (DCEO), the State of Illinois offers low-interest loans to qualified licensed companies through its Social Equity Cannabis Loan Program. The first round of social equity license applicants are expected to finalize loan agreements directly with DCEO’s partner lending institutions in the coming weeks. The next phase of the loan program will be launched in the near future. Additional information about the Social Equity Cannabis Loan Program can be found here.
DCEO also funds free licensing and post-licensing technical assistance through their partners at Oakton Community College, The Trep School, the Women’s Business Development Center, and the University of Illinois Chicago Law School. Additional information on these resources and how to access them can be found here.
Illinois’ unemployment rate is expected to increase
A new report suggests that Illinois’ unemployment rate will rise to over 5% by 2027. One expert discusses why Illinois struggles in the job market. The research carried out by Lensa calculated the average change in unemployment rates in Illinois and applied this to the 2021 figures to estimate the state’s unemployment rate if the trends continued on their current trajectory.
For Illinois, the unemployment rate in June was 4.5%, lagging the national average of 3.6%. Illinois’ average unemployment rate in 2021 was 6.1% and the report projects that number to grow over the next few years. According to the report, Illinois is projected to have the worst unemployment rate in the Midwest over the next five years.
Bryce Hill, director of fiscal and economic policy with the Illinois Policy Institute, reviewed Lensa’s report and explained what was accounted for in the report. “They compared Illinois’ overall job market to others across the country, and looked at job prospects, ability to find a job and likelihood to build a career in Illinois,” Hill said. “They found that the prospects in Illinois are not as good as in other states.”
Hill gave some insight into what Illinois is struggling with within the job market. “If you look at Illinois today, they are battling the fourth-highest unemployment rate in the nation at 4.5%,” Hill said. “We are also missing 117,000 jobs. So we lost one in seven jobs during the pandemic, and those jobs have still not returned.”
CNBC says Illinois is in the middle of the pack when it comes to business
How good, or bad, is Illinois’ relative business climate? Every group that takes a look at that question seems to come up with a different answer. But one organization that’s been doing so for a while, CNBC, finds Illinois in the mediocre middle in its latest review, better than the state’s critics believe.
The analysis ranks Illinois 19th of the 50 states, behind Sun Belt stars Florida and Texas as well as Midwest neighbors Minnesota, Iowa and Michigan. But at least we’re ahead of Wisconsin (23rd) and Missouri (25th) as well as big states California and New York at 29th and 36th, respectively.
Not surprisingly, Illinois’ best ranking is in infrastructure (3rd) and the state also snagged 8th in technology and innovation. On the other hand, the Land of Lincoln was just 26th on labor force, a category in which the state usually does well and which the folks at Intersect Illinois, the state’s corporate recruitment arm, say they can’t quite believe.
This particular study has one odd feature to it, though: it gives extra weight to what it claims each state pushes most in its promotional materials. So Illinois might get extra credit of sorts for infrastructure while Texas might do especially well because it talks a lot about its cost of business. That being said, CNBC claims it relies on 88 different metrics within its 10 categories to rate actual state performance.
A spokesperson for Gov. J.B. Pritzker offered a generic state touting successes but not directly addressing the ranking: “Under Governor Pritzker’s watch, Illinois has transformed into a place where the demands of the 21st-century economy can be met. Responsible spending decisions, a world-class infrastructure system, and a dynamic, innovative workforce offer an opportunity for businesses of any size to succeed. The administration will continue to drive job growth throughout the state, making clear to the world why Illinois is the best state in the nation to live, work, raise a family and do business.”
For what it’s worth, Illinois’ 19th position is down slightly from its 15th place in 2021. But it’s still above the state’s 2019 pre-pandemic ranking of 30th. That’s about where the state has ranked overall since the first rating in 2007, when it ranked a lowly 39th.
Senate May Soon Consider New Small Business Tax Wrongly Characterized as Tax Loophole
Thanks to the action of small businesses and other organizations, many harmful small business policies were successfully removed from earlier versions of Congress’ Build Back Better Act. But now, the U.S. Senate is reportedly ready to consider a revived Build Back Better Act in the coming days. To finance this spending plan, those at the bargaining table had agreed to include a new 3.8% tax on pass–through businesses, also known as the Small Business Surtax, wrongly characterized as closing a ‘loophole’ to help fund Medicare. Currently, the Senate has paused negotiations that include tax policies until further inflation data is released, however, the tax increase proposal is likely to return in future legislation.
“This plan to implement this new tax is a direct attack on Main Street when they can least afford it,” said NFIB Vice President of Federal Government Relations Kevin Kuhlman. “With excessive inflation, high gas prices, worker shortages, and supply chain disruptions, a tax increase incorrectly masked as closing a ‘loophole’ or ‘funding Medicare’ is not only problematic, but it will further destabilize the small business economy. Congress should immediately reject this anti-small business provision and NFIB will actively work against its passage.”
Some claim that small business owners do not pay Medicare taxes, but all employers pay Medicare taxes in the form of payroll taxes on their employees’ wages and self-employment taxes on their own compensation.
Lawmakers’ argument that this is just a tax on high-income individuals is also false. For businesses organized as pass-through entities like sole proprietorships, LLCs, and others, business income is included on a business owner’s individual IRS Form 1040. However, filing a 1040 as a business owner is different than filing a 1040 with your personal income from a W-2, 1099, or other typical income. Pass-through business income and profits reported on a Form 1040 is more often the money small businesses use to operate, invest in employee benefits, hire in a tight labor market, expand a business, or save for future challenges like a recession.
For example, a small business owner with $600,000 in business income does not take home that money, but instead is re-investing it into their business. Further, the new small business tax applies to all business income above $400,000 (individual filers) and $500,000 (joint filers). The threshold is even lower for family businesses held as trusts, with the tax applying to income above $13,000. The thresholds in the new Build Back Better Act small business tax are not indexed for inflation, so the tax will hit an increasing number of small business owners and an increasing percentage of pass-through business income every year.
Equality of Opportunity in Action: Global Strategies for Minority-Owned Businesses
Join the U.S. Chamber of Commerce on Wednesday, August 3 at 9:00 a.m. for Equality of Opportunity in Action: Global Strategies for Minority-Owned Businesses.
According to the Minority Business Development Agency, 95 percent of the world’s customers lie outside the United States. The global market presents a myriad of opportunities for minority-owned businesses.
This program will explore opportunities in the global marketplace and the benefits of exporting for minority-owned businesses. Hear from government officials, business owners, and other stakeholders who are promoting economic opportunity through international trade and exporting.
- Latricia Boone, Vice President, Equality of Opportunity Initiative, U.S. Chamber of Commerce
- Arturo Guerrero, President & CEO, Freedom Sourcing
- Irvine Headley, President, Bilmor with Advertising Specialties, Inc.
- The Honorable Marisa Lago, Under Secretary of Commerce for International Trade, U.S. Department of Commerce
- The Honorable Reta Jo Lewis, President and Chair, Export-Import Bank of the United States
- Rick Wade, Senior Vice President, Strategic Alliances and Outreach, U.S. Chamber of Commerce
Executive Vice President
Joliet Region Chamber of Commerce & Industry