The Financial Services Institute said Tuesday that it had successfully lobbied to defeat legislation in Illinois that would have imposed a 20% privilege tax rate on partnerships and corporations engaged in investment management services.
S.B. 1719, and its companion, H.B. 3393, introduced in February, would have impacted FSI broker-dealer and advisor members who organize their businesses as limited liability corporations, limited partnerships or limited liability partnerships. The bill was to take effect on July 1.
These types of businesses are subject to paying franchise taxes, excise taxes and would have been subject to a professional privilege tax which would have equated to being double taxed, FSI states.
One reason cited for the tax was politicians’ interest in dealing with the “carried interest loophole,” which lowers the taxes that investment managers pay on certain income. But critics argued the tax would have impact far beyond the managers who benefit from that loophole.
A similar bill in Connecticut also failed to pass during the state’s latest legislative session, according to FSI.
“It’s critical we do everything possible to ensure clients have access to quality, affordable financial advice. And we will oppose anything that puts more of a burden on financial advisors that ultimately hurts their hard-working clients,” said Dale Brown, FSI president and CEO, in a statement.
“A tax of this nature certainly would not help our members grow or help their clients thrive. Thanks to the advocacy efforts of our members and our team, we have continued to ensure that this growth is possible in Illinois, and that our members’ clients in that state continue to have access to the advice they deserve.”
FSI notes that it collaborated with other stakeholders in Illinois and “immediately engaged” with the bill sponsors, members of the Illinois State House of Representatives and State Senate, and Governor Bruce Rauner.
FSI said that its Illinois members also contacted their state legislators urging them to oppose the bill.
The bill, which passed the Illinois Senate, was never called for a vote in the Illinois House during the legislative session nor during the special session called by Gov. Rauner to address budget issues.
The bill has been re-referred back to the Illinois House Rules Committee.