IVCA Provides Updates for State Legislative Issues – 6/11/2025

Illinois Venture Capital Association Illinois Legislative Report
David Stricklin / Stricklin & Associates

Wednesday, June 11, 2025

IVCA MEASURE LEFT OUT OF OMNIBUS

The IVCA legislation to correct a decision by the Illinois Department of Revenue on Foreign Tax Credits was not included in the final omnibus revenue legislation approved by the Illinois General Assembly at the end of the 2025 Spring Session.

Synopsis As Introduced
Amends the Illinois Income Tax Act. Provides that provisions concerning a credit for foreign taxes shall be applied without regard to provisions concerning distributions of investment partnership income to nonresident partners. Effective immediately.

The IVCA measure passed the House Finance Committee unanimously HB 1396 and was heard without objection in a Senate Revenue Committee subject matter hearing. Still, when it came time to assemble the annual Revenue omnibus package, the provision was seen as a potential “budget pressure” and was left out. We are working with our legislative allies and the Department of Revenue to see evaluate further options. One ongoing challenge is trying to determine the fiscal impact of the proposal. The IDOR has evaluated but not so far been able to assign a figure to the impact, positive or negative in terms of revenue captured by the state. IVCA consistently advocates that the state should always avoid adopting policies which make Illinois an outlier such that it would discourage investment in Illinois. On pages 2-4 of this report is a detailed summary from the Taxpayers’ Federation of Illinois.

BUDGET PASSES WITH $1B IN NEW REVENUE

Illinois Policy Institute Pans FY 26 Version

Civic Federation Gives FY 26 Budget “incomplete” grade

WHAT DIDN’T GET DONE?

Transit package, energy bill, among others; pensions perennial challenge:

TRANSIT BILL LEAVES SENATE STATION BUT STALLS IN THE HOUSE

TIER 2 ISSUE REMAINS UNSOLVED

                                                                                                                       IFT TAX SUMMARY Pgs. 2-3-4

Revenue Omnibus

The General Assembly passed HB2755 which contains the vast majority of the tax changes made this session. Senate Amendment #2 included a digital advertising tax, but Senate Amendment #3 removed the tax. The bill passed the Senate on a vote of 31-25 and the House with a vote of 71-43. Below is a list of the changes and the page number where they can be found.

• GILTI (601): 50% of GILTI income is subject to tax. This is estimated to generate $200 million for GRF and approximately $70 million for PPRT.
• Joyce to Finnegan (545): Moves Illinois from a Joye state to a Finnegan state. The change was made without making the entities without nexus a “taxpayer.” The entities that do have nexus are to include the non-taxpayer entities’ sales into their apportionment factor. This change applies to the 2025 tax year and is estimated to generate $72 million for GRF plus approximately $25 million for PPRT. 
• Interest & Intangible Income Addbacks and 163(j) Limitation (551): Removes two exemptions from the interest add back, the non-tax avoidance exemption and the subject to tax exemption. The bill also requires taxpayers to first allocate any disallowed interest to non-foreign persons first. This change applies to the 2025 tax year and is estimated to generate $80 million for GRF plus approximately $28 million for PPRT.
• Sports Wagering Tax (138): Creates a wagering tax equal to $0.25 for the first 20,000,000 wagers and $0.50 for any additional wagers. The Governor’s Office estimated this would generate $36 million, but some in the industry estimate this will generate $160 million.  
• Changes to the Sourcing of Sales of Pass-Through Entities (673): Gains and losses from the sale of a pass-through entity are allocable to Illinois based on the entity’s apportionment factor. The provision has an immediate effective date and does not specify which tax year it applies to. The version introduced in the Spring had a January 1, 2026 effective date. DOR has indicated that the change would be effective for tax years ending on or after the date the bill is signed. I would expect official guidance from the Department on this.
• Tobacco Products Tax (153): Drastically expands the definition of tobacco products and increases the tax on tobacco products to 45% of the wholesale price. This change simplifies but increases the tobacco tax structure. Effective July 1. Also increases the retailer’s license from $75 to $150.
• Telecommunications Tax (264): Increases the Telecommunications Excise Tax from 7% to 8.65% beginning July 1, 2025. The increase is to be used for a 9-8-8 Suicide and Crisis Lifeline.
• HOOT Expansion on Short Term Rentals (151): The Hotel Operators’ Occupation Tax applies to short term rentals beginning on July 1.
• DOR Tax Amnesty (1): Creates a tax amnesty for the Department of Revenue from October 1 through November 17.
• Franchise Tax Amnesty (189): Creates an amnesty period for the franchise tax from October 1 through November 15. Taxpayers who have received interrogatories are excluded from amnesty.
• Remote Retailer Amnesty Program (892): Creates a special amnesty program for remote retailers from 8/1/2026 through 10/31/2026. The tax periods at issue go from 1/1/2021 through 6/30/2026. Remote retailers are not precluded from participating in the 2025 amnesty program. The benefit of the remote retailer amnesty program is that the retailers can use a simplified rate of 9% for general merchandise and 1.75% for lower rate items, rather than identify the actual rate for each sale based on the delivery location.
• Leveling the Playing Field Threshold (290): Currently, the threshold for economic nexus for sales tax is either $100,000 of sales or 200 transactions in a year in Illinois. Beginning on January 1, 2026, the threshold will only be $100,000 of sales. 
• 15% Penalty Sales Tax Rate (457): If a retailer fails to provide documents needed to source sales, the Department may impose a 15% penalty sales tax rate.
• Pause on Transfers to Road Fund: As part of the 2019 capital bill, the General Assembly began transferring the sales tax on motor fuel into the Road Fund instead of the general fund. The transition was supposed to be over five years and FY2025 was supposed to be the last year in the transition. However, the General Assembly added one more year, so in FY2026, 20% of the sales tax on motor fuel will continue to go to the general funds, which is estimated to be $171 million.
• Grocery Tax (193): Clean up language for the State’s elimination of the sales tax on groceries.
• Applying Leveling the Playing & to the SUT & SOT (308/318): Applies leveling the playing field to SUT & SOT meaning that sales that originate from outside of Illinois are subject to the sales tax rate at the location where the items are delivered.
• Revenue Sharing (666): Distributions from the State and Local Sales Tax Reform Fund and the Local Government Distributive Fund are continuing appropriations. The sales tax fund receives the 1.25% local share from the 6.25% sales tax. 
• Surplus Definition (743): Defines the term surplus, for determining the surplus in the Income Tax Refund Fund which is then transferred to the General Revenue Fund.
• Motor Vehicle Sales to LLCs (749): Modifies the “drive-away permit exemption” be creating a rebuttable presumption that the exemption does not apply if the purchaser is a LLC and a member of the LLC is an Illinois resident.
• Limousine Rolling Stock Exemption (756): A limousine only qualifies for the rolling stock exemption if it does not provide rideshare services.
• Vehicle Use Tax Exemption (955): Creates a sale for resale exemption for the vehicle use tax.
• Illinois Gives Tax Credit Act Clean Up (959): Minor changes to the Illinois Gives Tax Credit Act.
• Municipal Motor Fuel Tax (963): Existing law allows municipalities in Cook County to impose a $0.03 motor fuel tax. This change allows municipalities in Cook County and another county to impose the tax only in the portion of the municipality in Cook County.
• Motor Fuel Tax Refunds (982): States that incidental use of motor fuel on private roads in the operation of a motor vehicle does not constitute a “purpose other than operating a motor vehicle upon the public highways.”
• Cigarette and Other Tobacco Tax Returns (998): Cigarette and other tobacco tax returns and payments are to be filed or paid electronically.
• American Hostage Tax Liability Postponement Act (1017): The act postpones any tax liability during any period that a person is unlawfully or wrongfully detained abroad or held hostage abroad. The provisions also apply to the person’s spouse. Delinquent property taxes are not to be sold during this period.
• Affordable Housing Special Assessment (1065): Extends and makes various changes to the affordable housing special assessment program.
• Tax Sales (1096): Delays the application for judgment for the 2023 tax sale until next year.
• Property Tax Bills (1098): Each property tax bill shall include each redevelopment project associated with the TIF district the property is located in.
• New River Edge Redevelopment Zones (1102): DCEO may certify two new River Edge Redevelopment Zones in Alton and in Sterling.
• Motor Fuel Licenses (1103): Modernizes the motor fuel tax licenses by eliminating suppliers and redefining distributors and receivers.
• Film Production Services Tax Credit Act (1152): Makes various changes including defining new terms, above the line spending and below the line spending.
• Advancing Innovative Manufacturing for Illinois Tax Credit (1163): Creates the Advancing Innovative Manufacturing for Illinois Tax Credit (AIM) which is a tax credit equal to a percentage of certain capital expenditures made by an Illinois manufacturer. The maximum percentage is 7%.
• Quantum Computing Campuses Tax Credit (1184): The bill reduces the minimum required size of a campus from a half square mile to 100 acres.
• Reimagining Energy and Vehicles (1191): Expands companies that are eligible to green steel manufacturers, electrical transformer part manufacturer, renewable energy products manufacturer, and certain electric propulsion systems for airplanes. Expands the definition of renewable energy to include nuclear power. 
• Apprenticeship Education Expense Credit (1221): Creates a definition of the term “accredited training organization.”
• Edge Credit (1237): Allows a company that recycles and melts steel products and that manufactures new steel wire and rods to elect to use the Edge credit against their withholding liability. Also allows companies that make a capital investment of $100 million in capital improvements and retains 500 employees to utilize the Edge credit against their withholding liability.
• High Impact Business (1253): A business that constructs high voltage direct current converter station facilities can be designated as a high impact business.