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The online education sector is set to rebound this year after a $2 billion tax relief package approved by the state legislature, a group of industry experts and some analysts said Tuesday.
In a report to clients, the Institute for Learning Technology, an industry trade group, projected that the state will spend $10.6 billion on online education this year, with the revenue expected to top $1 billion, a 6.3 percent increase over the current year.
Online education, which includes online learning and tutoring, will be the fastest-growing industry in the state, according to the group, which predicts the revenue to rise nearly 12 percent this year.
State lawmakers approved the package last month in a rare bipartisan vote.
The bill included a $1.3 billion tax credit for online education and a $6 billion tax rebate for students who complete courses through online platforms.
The package is expected to generate $4 billion for Illinois’ budget over the next 10 years, according the group.
The tax credit is projected to be phased out over a decade, and the rebate will expire at the end of 2019, said Mike Padden, an associate professor of management and business at the University of Illinois at Urbana-Champaign.
Padden said Illinois’ tax relief will have a direct impact on the industry’s growth and profitability.
“If you can’t provide online education in a timely manner, you’ll see a decline in your revenues,” he said.
“The tax credit and the subsidy, if they’re not in place, will reduce those revenues.”
Padden also said the bill would encourage online education providers to partner with other educational institutions to offer online courses and courses that could be offered through their own platforms.
The state’s online education companies, like Coursera, Udacity and Courserator, would receive a small subsidy in the form of a one-time tax credit.
The companies would be able to offer courses through existing partnerships, which could cost more money.
Paddy said the legislation would also help the online education businesses by ensuring they have a robust tax base.
The online industry generates more than $2.3 trillion in annual revenue for the state and federal governments, according a report by the Chicago-based Institute for Knowledge and Technology.
“The state of Illinois is doing this in a very aggressive manner,” Paddy said.PADDEN, a professor at the College of Business and Management at the Chicago School of Management, said he believed the tax credit would be more than offset by the fact that Illinois was among a handful of states with no online education tax incentives.
“It is a very big deal,” PADDEN said.
“This is the first time that there’s been a state of the art tax credit in Illinois,” Padden said.
In addition to the tax break, the Illinois legislature approved the tax deduction for tuition for students attending online colleges, which would raise $1 million for the budget.
The tax relief comes as state lawmakers have faced criticism for their response to the coronavirus pandemic.
On Sept. 30, lawmakers approved a $500 million health care funding package that included $250 million in aid for schools, a $200 million tax relief bill that included a refundable tax credit, and $1,000 tax credit to help families with child care costs.
Bruce Rauner signed the package into law on Sept. 24.
The package also included a repeal of the state’s $1-a-day minimum wage, a provision that was included in the package but was included because it was opposed by unions.
The bill also provided $1 for every $1 a student’s income earned in 2017, an increase from $1 to $1 an hour, a new $1 state sales tax credit as well as $500 to $2,000 in tax rebates for students enrolled in online education programs.
Padden said it was difficult to see how the tax relief would boost Illinois’ online education market.
“You would expect the companies to be looking at their own bottom lines,” Padden told CNBC.
“But it’s not like we’re in a tax war.”
The tax bill also provides tax breaks for online schools that offer both online and traditional education courses.
The money will be allocated to a new tax credit that will expire in 2019 and the tax rebate will be repealed at the same time.
The Illinois Legislature has also approved a package to support online education.
The measure will be paid for by the Illinois Economic Development Corp. and the state would pay an estimated $100 million annually.
The state also plans to give a $25 million incentive for online educators to expand their courses.
A portion of the money will go to the Illinois Association of Business Schools, an independent, nonprofit organization that promotes entrepreneurship and innovation in education.
The Tax Foundation, an online tax research group, estimated that the bill will increase Illinois’ gross domestic product by $7.8 billion over the first decade of the package.
In an effort to get the word out about online education in Illinois, Illinois State University (ISU) is offering a virtual learning experience.ISU says the virtual learning will run through June and will be free for anyone to attend.
There will be opportunities to learn from a variety of different topics in the virtual environment.
The university says it will also have classes for adults, teens, and even families.ISUs website states that its goal is to create an experience that is both educational and engaging, and will enable the university to provide its students with the tools they need to succeed in today’s global economy.
For more information on Illinois Online MBA Education, visit ISU online education.
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