SPRINGFIELD, Ill. (IRN) – Illinois is losing $2.5 billion a year due to federal tax loopholes, according to a new study.

The figure comes from the Illinois Public Interest Research Group, which complains that federal tax law allows companies to set up subsidiaries in tax havens such as Bermuda or the Cayman Islands, where they don’t really do business, and book their profits there.

Program associate Anu Dathan says this affects state tax collection too. “There are these loopholes in the federal tax code, but because Illinois’ tax code is so closely linked with the federal tax code, when the federal government loses money, the Illinois state government also loses money,” she said.

Dathan says the $2.5 billion represents 125 times the amount the state aims to save by closing mental health facilities.

The study says the tax havens – which are legal – benefited corporations by $1.9 billion and individuals by $607 million in reduced Illinois income tax in 2012.

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