ESTATE TAX-SPECIAL USE

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104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
HB4736

Introduced , by Rep. Sharon Chung

SYNOPSIS AS INTRODUCED:

35 ILCS 405/2

from Ch. 120, par. 405A-2
35 ILCS 405/5

from Ch. 120, par. 405A-5

Amends the Illinois Estate and Generation-Skipping Transfer Tax Act.
Makes changes concerning the taxes due under the Act on estates that
contain qualified farm property. Provides that, for the purposes of
calculating the State Death Tax Credit, those estates are subject to an
exemption of $6,000,000 (rather than an exclusion amount of $4,000,000),
which shall be deducted from the net estate value after the net estate
value is computed in accordance with the Act. Provides that the exemption
shall be adjusted each year according to the increase in the Consumer Price
Index. Makes changes concerning the calculation of the deceased spousal
unused exclusion amount for those estates. Provides for a special use
valuation to provide that the value of the qualified farm property shall be
calculated without regard to certain limitations under the Internal
Revenue Code. Makes changes concerning the definition of "qualified heir".
Effective January 1, 2027.
LRB104 17738 HLH 31169 b

A BILL FOR

HB4736
LRB104 17738 HLH 31169 b
1

AN ACT concerning revenue.

2

Be it enacted by the People of the State of Illinois,
3
represented in the General Assembly:

4

Section 5.
The Illinois Estate and Generation-Skipping
5
Transfer Tax Act is amended by changing Sections 2 and 5 as
6
follows:

7

(35 ILCS 405/2)

(from Ch. 120, par. 405A-2)
8

Sec. 2.
Definitions.
In this Act:

9

"Federal estate tax" means the tax due to the United
10
States with respect to a taxable transfer under Chapter 11 of
11
the Internal Revenue Code.
12

"Federal generation-skipping transfer tax" means the tax
13
due to the United States with respect to a taxable transfer
14
under Chapter 13 of the Internal Revenue Code.
15

"Federal return" means the federal estate tax return with
16
respect to the federal estate tax and means the federal
17
generation-skipping transfer tax return with respect to the
18
federal generation-skipping transfer tax.
19

"Federal transfer tax" means the federal estate tax or the
20
federal generation-skipping transfer tax.
21

"Illinois estate tax" means the tax due to this State with
22
respect to a taxable transfer.
23

"Illinois generation-skipping transfer tax" means the tax

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LRB104 17738 HLH 31169 b
1
due to this State with respect to a taxable transfer that gives
2
rise to a federal generation-skipping transfer tax.
3

"Illinois transfer tax" means the Illinois estate tax or
4
the Illinois generation-skipping transfer tax.
5

"Internal Revenue Code" means, unless otherwise provided,
6
the Internal Revenue Code of 1986, as amended from time to
7
time.
8

"Non-resident trust" means a trust that is not a resident
9
of this State for purposes of the Illinois Income Tax Act, as
10
amended from time to time.
11

"Person" means and includes any individual, trust, estate,
12
partnership, association, company or corporation.
13

"Qualified heir" means a qualified heir as defined in
14
Section 2032A(e)(1) of the Internal Revenue Code
and as
15
defined in subsection (d) of Section 5 of this Act
.
16

"Resident trust" means a trust that is a resident of this
17
State for purposes of the Illinois Income Tax Act, as amended
18
from time to time.
19

"State" means any state, territory or possession of the
20
United States and the District of Columbia.
21

"State tax credit" means:
22

(a) For persons dying on or after January 1, 2003 and
23
through December 31, 2005, an amount equal to the full credit
24
calculable under Section 2011 or Section 2604 of the Internal
25
Revenue Code as the credit would have been computed and
26
allowed under the Internal Revenue Code as in effect on

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LRB104 17738 HLH 31169 b
1
December 31, 2001, without the reduction in the State Death
2
Tax Credit as provided in Section 2011(b)(2) or the
3
termination of the State Death Tax Credit as provided in
4
Section 2011(f) as enacted by the Economic Growth and Tax
5
Relief Reconciliation Act of 2001, but recognizing the
6
increased applicable exclusion amount through December 31,
7
2005.
8

(b)
Except as provided in subsection (c), for

For
persons
9
dying after December 31, 2005 and on or before December 31,
10
2009, and for persons dying after December 31, 2010, an amount
11
equal to the full credit calculable under Section 2011 or 2604
12
of the Internal Revenue Code as the credit would have been
13
computed and allowed under the Internal Revenue Code as in
14
effect on December 31, 2001, without the reduction in the
15
State Death Tax Credit as provided in Section 2011(b)(2) or
16
the termination of the State Death Tax Credit as provided in
17
Section 2011(f) as enacted by the Economic Growth and Tax
18
Relief Reconciliation Act of 2001, but recognizing the
19
exclusion amount of only (i) $2,000,000 for persons dying
20
prior to January 1, 2012, (ii) $3,500,000 for persons dying on
21
or after January 1, 2012 and prior to January 1, 2013, and
22
(iii) $4,000,000 for persons dying on or after January 1,
23
2013, and with reduction to the adjusted taxable estate for
24
any qualified terminable interest property election as defined
25
in subsection (b-1) of this Section.
26

(b-1) The person required to file the Illinois return may

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LRB104 17738 HLH 31169 b
1
elect on a timely filed Illinois return a marital deduction
2
for qualified terminable interest property under Section
3
2056(b)(7) of the Internal Revenue Code for purposes of the
4
Illinois estate tax that is separate and independent of any
5
qualified terminable interest property election for federal
6
estate tax purposes. For purposes of the Illinois estate tax,
7
the inclusion of property in the gross estate of a surviving
8
spouse is the same as under Section 2044 of the Internal
9
Revenue Code.
10

(c) For persons dying on or after January 1, 2027 whose
11
estates contain property that qualifies for the special use
12
valuation under subsection (d) of Section 5 of this Act, and
13
who make an Illinois estate tax election under that
14
subsection, whether the person who is required to file an
15
Illinois return makes a special use valuation election on his
16
or her federal estate tax return or not, an amount equal to the
17
full credit calculable under Section 2011 or 2604 of the
18
Internal Revenue Code as the credit would have been computed
19
and allowed under the Internal Revenue Code on December 31,
20
2001, without the reduction in the State Death Tax Credit as
21
provided in Section 2011(b)(2) of the Internal Revenue Code or
22
the termination of the State Death Tax Credit as provided in
23
Section 2011(f) as enacted by the Economic Growth and Tax
24
Relief Reconciliation Act of 2001, but recognizing the
25
exemption amount calculated under this subsection (c), which
26
shall be deducted from the net estate value after the net

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LRB104 17738 HLH 31169 b
1
estate value is computed in accordance with this Act, and with
2
reduction to the adjusted taxable estate for any qualified
3
terminable interest property election, as defined in
4
subsection (b-1) of this Section. In no event shall the
5
exemption under this Section reduce the estate's value to less
6
than zero.

7

For persons dying on or after January 1, 2027 whose
8
estates qualify under this subsection (c), the exemption
9
amount under this subsection (c) shall be the base exemption
10
amount for the calendar year in which person dies, plus, if the
11
person qualifies for inclusion of the deceased spousal unused
12
exemption amount under the provisions of this subsection, the
13
indexed deceased spousal unused exemption amount. The Attorney
14
General shall annually publish a table containing the annual
15
multipliers to be used when calculating the indexed deceased
16
spousal unused exemption amount.
17

For persons dying on or after January 1, 2027 and before
18
January 1, 2028, the base exemption amount under this
19
subsection (c) is $6,000,000. On January 1, 2028, and on
20
January 1 of each subsequent year, the base exemption amount
21
under this subsection (c) for person dying during that
22
calendar year shall be the base exemption amount for the
23
previous calendar year, multiplied by one plus the percentage
24
increase, if any, in the Consumer Price Index for the 12 months
25
ending in September of the calendar year immediately preceding
26
the calendar year in which the increase takes place, rounded

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LRB104 17738 HLH 31169 b
1
to the nearest whole dollar.

2

For the purposes of this subsection (c), a surviving
3
spouse whose estate qualifies under this subsection (c)
4
qualifies for inclusion of the deceased spousal unused
5
exemption amount if the last deceased spouse of the surviving
6
spouse died on or after January 1, 2027. A deceased spousal
7
unused exemption amount may not be taken into account by the
8
surviving spouse under this subsection unless the person
9
required to file the Illinois estate tax return for the estate
10
of the deceased spouse files an Illinois estate tax return on
11
which such amount is computed and makes an election on such
12
return that the amount may be so taken into account. Such an
13
election, once made, shall be irrevocable. No election may be
14
made under this subsection if the return for the deceased
15
spouse is filed after the time prescribed by law, including
16
extensions, for filing such return.

17

(d)
In the case of any trust for which a State or federal
18
qualified terminable interest property election is made, the
19
trustee may not retain non-income producing assets for more
20
than a reasonable amount of time without the consent of the
21
surviving spouse.
22

(e) As used in this Act:
23

"Consumer Price Index" means the index published by the
24
Bureau of Labor Statistics of the United States Department of
25
Labor that measures the average change in prices of goods and
26
services purchased by all urban consumers, United States city

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LRB104 17738 HLH 31169 b
1
average, all items, 1982-84 = 100.

2

"Deceased spousal unused exemption amount" means the
3
excess of the applicable exemption amount of the last deceased
4
spouse of the surviving spouse, as determined under subsection
5
(c), over the amount with respect to which the tentative
6
maximum State Death Tax Credit would have been determined
7
under Section 2011 or 2604 of the Internal Revenue Code on
8
December 31, 2001.

9

"Indexed deceased spousal unused exemption amount" means
10
the deceased spousal unused exemption amount, increased on
11
each January 1 to occur on or after the date of death of the
12
deceased spouse by the annual unadjusted percentage increase
13
(but not less than zero) in the Consumer Price Index for the 12
14
months ending with the preceding September. These adjustments
15
shall be cumulative and compounded.

16

"Taxable transfer" means an event that gives rise to a
17
state tax credit, including any credit as a result of the
18
imposition of an additional tax under Section 2032A(c) of the
19
Internal Revenue Code.
20

"Transferee" means a transferee within the meaning of
21
Section 2603(a)(1) and Section 6901(h) of the Internal Revenue
22
Code.
23

"Transferred property" means:

24

(1) With respect to a taxable transfer occurring at
25

the death of an individual, the deceased individual's
26

gross estate as defined in Section 2031 of the Internal

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LRB104 17738 HLH 31169 b
1

Revenue Code.

2

(2) With respect to a taxable transfer occurring as a
3

result of a taxable termination as defined in Section
4

2612(a) of the Internal Revenue Code, the taxable amount
5

determined under Section 2622(a) of the Internal Revenue
6

Code.

7

(3) With respect to a taxable transfer occurring as a
8

result of a taxable distribution as defined in Section
9

2612(b) of the Internal Revenue Code, the taxable amount
10

determined under Section 2621(a) of the Internal Revenue
11

Code.

12

(4) With respect to an event which causes the
13

imposition of an additional estate tax under Section
14

2032A(c) of the Internal Revenue Code, the qualified real
15

property that was disposed of or which ceased to be used
16

for the qualified use, within the meaning of Section
17

2032A(c)(1) of the Internal Revenue Code.
18

"Trust" includes a trust as defined in Section 2652(b)(1)
19
of the Internal Revenue Code.
20
(Source: P.A. 96-789, eff. 9-8-09; 96-1496, eff. 1-13-11;
21
97-636, eff. 6-1-12; revised 7-24-25.)

22

(35 ILCS 405/5)

(from Ch. 120, par. 405A-5)
23

Sec. 5.
Determination of tax situs and valuation.
24

(a) Illinois estate tax.

25

(1) For purposes of the Illinois estate tax, in the

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LRB104 17738 HLH 31169 b
1

case of a decedent who was a resident of this State at the
2

time of death, all of the transferred property has a tax
3

situs in this State, including any such property held in
4

trust, except real or tangible personal property
5

physically situated in another state.

6

(2) For purposes of the Illinois estate tax, in the
7

case of a decedent who was not a resident of this State at
8

the time of death, the transferred property having a tax
9

situs in this State, including any such property held in
10

trust, is only the real estate and tangible personal
11

property physically situated in this State.
12

(b) Illinois generation-skipping transfer tax.

13

(1) For purposes of the Illinois generation-skipping
14

transfer tax, all transferred property from or in a
15

resident trust has a tax situs in this State, including
16

any such property held in trust, except real or tangible
17

personal property physically situated in another state on
18

the date that the taxable transfer occurs.

19

(2) For purposes of the Illinois generation-skipping
20

transfer tax, none of the transferred property from or in
21

a non-resident trust has a tax situs in this State, except
22

that portion of the transferred property that is real or
23

tangible personal property physically situated in this
24

State, including any such property held in trust, on the
25

date that the taxable transfer occurs.
26

(c) Valuation. Except as otherwise expressly provided, for

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LRB104 17738 HLH 31169 b
1
purposes of this Act, the gross value of transferred property
2
shall be its value as finally determined for purposes of the
3
federal transfer tax, undiminished by any mortgages, liens or
4
other encumbrances upon such transferred property for which
5
the decedent was personally liable.
6

(d) Special Use Valuation. For purposes of the Illinois
7
estate tax, the gross value of transferred property used for
8
farming purposes that constitutes "qualified real property"
9
allowed under Section 2032A of the Internal Revenue Code, as
10
in effect on January 1, 2026, for which an election has been
11
made by the person required to file the Illinois return shall
12
be its value as determined under Section 2032A without regard
13
to any limitation on the reduction in the fair market value. In
14
addition to a qualified heir or member of the family allowed
15
under Section 2032A of the Internal Revenue Code, any lineal
16
descendant of a grandparent of the decedent, or the spouse of
17
any such lineal descendant, shall also be considered a
18
qualified heir or member of the family; as used in this
19
subsection, a lineal descendant includes any person who is
20
legally adopted by the grandparent or legally adopted by a
21
lineal descendant of the grandparent. The person required to
22
file an Illinois return may make a Section 2032A election for
23
Illinois estate tax purposes which is separate and independent
24
of any election made under Section 2032A for federal estate
25
tax purposes.

26
(Source: P.A. 93-30, eff. 6-20-03.)

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LRB104 17738 HLH 31169 b
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Section 99.
Effective date.
This Act takes effect January
2
1, 2027.

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