Quinn proposes taxing offshore oil companies

SPRINGFIELD, Ill. (AP) — Gov. Pat Quinn believes oil rigs off U.S. shores may be key to saving Illinois about $75 million a year.

The Democrat touched on an unusual proposal during his budget address Wednesday: requiring companies that drill in the outer continental shelf and profit from doing business in Illinois to pay a share of a corporate income tax in the state. He said doing so would close a tax code loophole.

“For too long, we’ve had a revenue code that looks like Swiss cheese, with plenty of loopholes for the powerful. Many of these loopholes are based on politics, not economics,” he said before legislators. “Why does Illinois give big oil companies the privilege of declaring their oil derricks in the Gulf of Mexico to be foreign countries?”

Details on the complicated proposal were scant Wednesday. But Quinn’s office said the measure would essentially require companies that drill offshore and do business in Illinois to pay a “fair share” of a corporate income tax. Specifically, the proposal extends the definition of the United States in Illinois tax law to include the outer continental shelf, which is underwater land off U.S. shores that’s owned by the federal government but doesn’t belong to any state. It includes the Gulf of Mexico, for example.

While Quinn has expressed interest in the idea before, experts say seeking such an income tax is uncommon among states.

More than 20 years ago, the Supreme Court ruled that states may tax some income from oil and natural gas extracted from the outer continental shelf. The decision upheld an Iowa tax, challenged by Shell Oil Co., that was imposed on that portion of a company’s income derived from doing business in Iowa.

Still, business groups are skeptical of the proposal for Illinois.

The Illinois Chamber of Commerce predicted it would be difficult to implement with oil companies, while the Taxpayers’ Federation of Illinois doubted the projected savings would be so high.

“It’s such an arcane issue,” said federation president Tom Johnson.

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Sophia Tareen can be reached at http://twitter.com/sophiatareen

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