CME-CBOE Tax Break Bill Clears First Legislative Hurdle In Illinois

An Illinois Senate committee endorsed legislation Thursday that would cut by about half the state taxes paid by Chicago's derivatives exchanges.

The city's two largest exchanges, CME Group Inc. (CME) and CBOE Holdings Inc. (CBOE), threatened to leave Illinois because of what they call an unfair tax burden.

The legislature in January raised the state's corporate income tax to 7% from 4.8% to help fill gaping budget deficits.

However, the bill introduced Monday by Democratic Senate President John Cullerton would reduce CME and CBOE's tax bill by about 50%.

The measure's key provision would tax only about 27.5% of all electronic trades performed at the exchanges, rather than the 100% now. Cullerton came up with the 27.5% figure based on U.S. census data approximating the proportion of electronic trades that are performed in Illinois.

Electronic platforms expand their reach worldwide, far beyond traditional trading floors.

Action on the bill was delayed for a day because it lacked bipartisan support, according to a Cullerton spokesman.

The committee's endorsement followed a meeting this morning between legislative leaders and Gov. Pat Quinn, a Democrat.

The bill now moves to the full Senate for consideration. It must also win favor in the Democratic-controlled Illinois House of Representatives and Gov. Quinn.

-By Howard Packowitz, Dow Jones Newswires; 312 750 4132; [e-mail]