Thursday, February 16, 2012

Sears tax break allows for layoffs

By Jamey Dunn 

One company that will benefit from a tax break brokered to keep jobs in the state announced layoffs today.

Sears told Crain’s Chicago Business that the company plans to lay off 100 people today from various departments at the company’s headquarters in Hoffman Estates. This comes just months after the General Assembly approved a tax break geared toward keeping the company in the state. The tax credit given to Sears is worth $150 million over 10 years. The company is required to maintain jobs and make a $300,000 million capital investment. Under the legislation, the company must have at least 4,250 employees at the corporate headquarters when the tax benefits go into effect next fiscal year and must keep employment numbers at that level. However, Sears currently employs about 6,100 people at the headquarters, which leaves the door open to more potential layoffs.

“Regarding the legislation passed last fall, this has no impact whatsoever on that measure. We are well above the minimum headcount requirements for … the new legislation — 4,250 — which takes effect in 2013. We have about 6,100 people currently working in our HQ. It’s important to know that under the legislation, if we don’t meet our obligations, we receive no benefits. We’re focused on improving our business and continuing to be a strong, contributing member of the Illinois business community,” Kimberly Freely, a spokeswoman for Sears Holdings Corp., said in a prepared statement. Freely confirmed today’s layoffs but did not comment on whether the company plans additional job cuts in the future.

“Obviously we’re not happy with this news. We’re not happy when any corporation cuts jobs,” said Brooke Anderson, a spokeswoman for Gov. Pat Quinn. But, Anderson said, without the tax cut, Sears might have left the state taking all of its more than 6,000 jobs with it. “The only thing surprising about [the layoff] announcement is that anyone is surprised,” said Rep. Jack Franks, a Marengo Democrat. Franks warned that the legislation allowed for layoffs when it was up for debate late last year.

Today, he pointed to the companies recent troubles, including disappointing holiday sales that the company said would lead to the closure of up to 120 stores. Sears announced 79 store closures at the end of last year, but none of the stores were located in Illinois. “We’re going to give [Sears] money to fire tax-paying Illinoisans,” Franks said. “If you’re going to help job creators, you ought to actually help job creators. Sears is not a job creator. Sears is the great terminator.”

While Franks said he opposed the Sears provision, he did vote in favor of Senate Bill 400, which contained the break for Sears as well as one for the CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade. During floor debate, Franks requested that the Sears provisions be put into a separate bill, but he said he voted in favor of the measure because he supported a cut to the estate tax that was also included in the package. “I thought that the other things in the bill were by and large pretty good,” he said. The bill included several tax breaks for businesses, including an extension of a research and development tax credit and a credit for smaller businesses that had net operating losses.

Franks is sponsoring HB 3934, which would create a panel comprising business experts within the Department of Revenue that would approve future tax incentives like the one given to Sears. Franks said the group would look at the overall business performance of those seeking tax help to make sure that they are good investments for the state. He also said he plans to support a bill that would require businesses receiving tax breaks to maintain employee levels based on the headcount when lawmakers approve the tax breaks.

Rikeesha Phelon, spokeswoman for Senate President John Cullerton, echoed Anderson’s claim that the tax deal may have prevented a much larger job loss that would have occurred if Sears had left the state. However, Phelon said: “Sears hasn't violated the agreement, but their recent decision doesn't encourage good faith. If they do not fulfill their obligations in the future, the tax benefit will become void.”

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