INCOME TAX RATES-CREDITS

Illinois General Assembly - Full Text of SB3658

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104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
SB3658

Introduced 2/5/2026, by Sen. Robert F. Martwick

SYNOPSIS AS INTRODUCED:

35 ILCS 5/201
35 ILCS 5/201.3 new

Amends the Illinois Income Tax Act. Amends the Illinois Income Tax
Act. Sets forth a schedule of income-based tax rates for individuals,
trusts, and estates for taxable years beginning on or after January 1,
2027.
LRB104 19263 HLH 32709 b

A BILL FOR

SB3658
LRB104 19263 HLH 32709 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 Income Tax Act is amended by
5
changing Sections 201, 208, 502, and 901 and by adding
6
Sections 201.3 and 234 as follows:

7

(35 ILCS 5/201)
8

Sec. 201.
Tax imposed.
9

(a) In general. A tax measured by net income is hereby
10
imposed on every individual, corporation, trust and estate for
11
each taxable year ending after July 31, 1969 on the privilege
12
of earning or receiving income in or as a resident of this
13
State. Such tax shall be in addition to all other occupation or
14
privilege taxes imposed by this State or by any municipal
15
corporation or political subdivision thereof.
16

(b) Rates. The tax imposed by subsection (a) of this
17
Section shall be determined as follows, except as adjusted by
18
subsection (d-1):
19

(1) In the case of an individual, trust or estate, for
20

taxable years ending prior to July 1, 1989, an amount
21

equal to 2 1/2% of the taxpayer's net income for the
22

taxable year.
23

(2) In the case of an individual, trust or estate, for

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taxable years beginning prior to July 1, 1989 and ending
2

after June 30, 1989, an amount equal to the sum of (i) 2
3

1/2% of the taxpayer's net income for the period prior to
4

July 1, 1989, as calculated under Section 202.3, and (ii)
5

3% of the taxpayer's net income for the period after June
6

30, 1989, as calculated under Section 202.3.
7

(3) In the case of an individual, trust or estate, for
8

taxable years beginning after June 30, 1989, and ending
9

prior to January 1, 2011, an amount equal to 3% of the
10

taxpayer's net income for the taxable year.
11

(4) In the case of an individual, trust, or estate,
12

for taxable years beginning prior to January 1, 2011, and
13

ending after December 31, 2010, an amount equal to the sum
14

of (i) 3% of the taxpayer's net income for the period prior
15

to January 1, 2011, as calculated under Section 202.5, and
16

(ii) 5% of the taxpayer's net income for the period after
17

December 31, 2010, as calculated under Section 202.5.
18

(5) In the case of an individual, trust, or estate,
19

for taxable years beginning on or after January 1, 2011,
20

and ending prior to January 1, 2015, an amount equal to 5%
21

of the taxpayer's net income for the taxable year.
22

(5.1) In the case of an individual, trust, or estate,
23

for taxable years beginning prior to January 1, 2015, and
24

ending after December 31, 2014, an amount equal to the sum
25

of (i) 5% of the taxpayer's net income for the period prior
26

to January 1, 2015, as calculated under Section 202.5, and

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(ii) 3.75% of the taxpayer's net income for the period
2

after December 31, 2014, as calculated under Section
3

202.5.
4

(5.2) In the case of an individual, trust, or estate,
5

for taxable years beginning on or after January 1, 2015,
6

and ending prior to July 1, 2017, an amount equal to 3.75%
7

of the taxpayer's net income for the taxable year.
8

(5.3) In the case of an individual, trust, or estate,
9

for taxable years beginning prior to July 1, 2017, and
10

ending after June 30, 2017, an amount equal to the sum of
11

(i) 3.75% of the taxpayer's net income for the period
12

prior to July 1, 2017, as calculated under Section 202.5,
13

and (ii) 4.95% of the taxpayer's net income for the period
14

after June 30, 2017, as calculated under Section 202.5.
15

(5.4) In the case of an individual, trust, or estate,
16

for taxable years beginning on or after July 1, 2017,
and
17

beginning prior to January 1, 2027
an amount equal to
18

4.95% of the taxpayer's net income for the taxable year.
19

(5.5) In the case of an individual, trust, or estate,
20

for taxable years beginning on or after January 1, 2027,
21

an amount calculated under the rate structure set forth in
22

Section 201.3.

23

(6) In the case of a corporation, for taxable years
24

ending prior to July 1, 1989, an amount equal to 4% of the
25

taxpayer's net income for the taxable year.
26

(7) In the case of a corporation, for taxable years

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beginning prior to July 1, 1989 and ending after June 30,
2

1989, an amount equal to the sum of (i) 4% of the
3

taxpayer's net income for the period prior to July 1,
4

1989, as calculated under Section 202.3, and (ii) 4.8% of
5

the taxpayer's net income for the period after June 30,
6

1989, as calculated under Section 202.3.
7

(8) In the case of a corporation, for taxable years
8

beginning after June 30, 1989, and ending prior to January
9

1, 2011, an amount equal to 4.8% of the taxpayer's net
10

income for the taxable year.
11

(9) In the case of a corporation, for taxable years
12

beginning prior to January 1, 2011, and ending after
13

December 31, 2010, an amount equal to the sum of (i) 4.8%
14

of the taxpayer's net income for the period prior to
15

January 1, 2011, as calculated under Section 202.5, and
16

(ii) 7% of the taxpayer's net income for the period after
17

December 31, 2010, as calculated under Section 202.5.
18

(10) In the case of a corporation, for taxable years
19

beginning on or after January 1, 2011, and ending prior to
20

January 1, 2015, an amount equal to 7% of the taxpayer's
21

net income for the taxable year.
22

(11) In the case of a corporation, for taxable years
23

beginning prior to January 1, 2015, and ending after
24

December 31, 2014, an amount equal to the sum of (i) 7% of
25

the taxpayer's net income for the period prior to January
26

1, 2015, as calculated under Section 202.5, and (ii) 5.25%

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of the taxpayer's net income for the period after December
2

31, 2014, as calculated under Section 202.5.
3

(12) In the case of a corporation, for taxable years
4

beginning on or after January 1, 2015, and ending prior to
5

July 1, 2017, an amount equal to 5.25% of the taxpayer's
6

net income for the taxable year.
7

(13) In the case of a corporation, for taxable years
8

beginning prior to July 1, 2017, and ending after June 30,
9

2017, an amount equal to the sum of (i) 5.25% of the
10

taxpayer's net income for the period prior to July 1,
11

2017, as calculated under Section 202.5, and (ii) 7% of
12

the taxpayer's net income for the period after June 30,
13

2017, as calculated under Section 202.5.
14

(14) In the case of a corporation, for taxable years
15

beginning on or after July 1, 2017, an amount equal to 7%
16

of the taxpayer's net income for the taxable year.
17

The rates under this subsection (b) are subject to the
18
provisions of Section 201.5.
19

(b-5) Surcharge; sale or exchange of assets, properties,
20
and intangibles of organization gaming licensees. For each of
21
taxable years 2019 through 2027, a surcharge is imposed on all
22
taxpayers on income arising from the sale or exchange of
23
capital assets, depreciable business property, real property
24
used in the trade or business, and Section 197 intangibles (i)
25
of an organization licensee under the Illinois Horse Racing
26
Act of 1975 and (ii) of an organization gaming licensee under

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the Illinois Gambling Act. The amount of the surcharge is
2
equal to the amount of federal income tax liability for the
3
taxable year attributable to those sales and exchanges. The
4
surcharge imposed shall not apply if:
5

(1) the organization gaming license, organization
6

license, or racetrack property is transferred as a result
7

of any of the following:
8

(A) bankruptcy, a receivership, or a debt
9

adjustment initiated by or against the initial
10

licensee or the substantial owners of the initial
11

licensee;
12

(B) cancellation, revocation, or termination of
13

any such license by the Illinois Gaming Board or the
14

Illinois Racing Board;
15

(C) a determination by the Illinois Gaming Board
16

that transfer of the license is in the best interests
17

of Illinois gaming;
18

(D) the death of an owner of the equity interest in
19

a licensee;
20

(E) the acquisition of a controlling interest in
21

the stock or substantially all of the assets of a
22

publicly traded company;
23

(F) a transfer by a parent company to a wholly
24

owned subsidiary; or
25

(G) the transfer or sale to or by one person to
26

another person where both persons were initial owners

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of the license when the license was issued; or
2

(2) the controlling interest in the organization
3

gaming license, organization license, or racetrack
4

property is transferred in a transaction to lineal
5

descendants in which no gain or loss is recognized or as a
6

result of a transaction in accordance with Section 351 of
7

the Internal Revenue Code in which no gain or loss is
8

recognized; or
9

(3) live horse racing was not conducted in 2010 at a
10

racetrack located within 3 miles of the Mississippi River
11

under a license issued pursuant to the Illinois Horse
12

Racing Act of 1975.
13

The transfer of an organization gaming license,
14
organization license, or racetrack property by a person other
15
than the initial licensee to receive the organization gaming
16
license is not subject to a surcharge. The Department shall
17
adopt rules necessary to implement and administer this
18
subsection.
19

(c) Personal Property Tax Replacement Income Tax.
20
Beginning on July 1, 1979 and thereafter, in addition to such
21
income tax, there is also hereby imposed the Personal Property
22
Tax Replacement Income Tax measured by net income on every
23
corporation (including Subchapter S corporations), partnership
24
and trust, for each taxable year ending after June 30, 1979.
25
Such taxes are imposed on the privilege of earning or
26
receiving income in or as a resident of this State. The

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Personal Property Tax Replacement Income Tax shall be in
2
addition to the income tax imposed by subsections (a) and (b)
3
of this Section and in addition to all other occupation or
4
privilege taxes imposed by this State or by any municipal
5
corporation or political subdivision thereof.
6

(d) Additional Personal Property Tax Replacement Income
7
Tax Rates. The personal property tax replacement income tax
8
imposed by this subsection and subsection (c) of this Section
9
in the case of a corporation, other than a Subchapter S
10
corporation and except as adjusted by subsection (d-1), shall
11
be an additional amount equal to 2.85% of such taxpayer's net
12
income for the taxable year, except that beginning on January
13
1, 1981, and thereafter, the rate of 2.85% specified in this
14
subsection shall be reduced to 2.5%, and in the case of a
15
partnership, trust or a Subchapter S corporation shall be an
16
additional amount equal to 1.5% of such taxpayer's net income
17
for the taxable year.
18

(d-1) Rate reduction for certain foreign insurers. In the
19
case of a foreign insurer, as defined by Section 35A-5 of the
20
Illinois Insurance Code, whose state or country of domicile
21
imposes on insurers domiciled in Illinois a retaliatory tax
22
(excluding any insurer whose premiums from reinsurance assumed
23
are 50% or more of its total insurance premiums as determined
24
under paragraph (2) of subsection (b) of Section 304, except
25
that for purposes of this determination premiums from
26
reinsurance do not include premiums from inter-affiliate

SB3658
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LRB104 19263 HLH 32709 b
1
reinsurance arrangements), beginning with taxable years ending
2
on or after December 31, 1999, the sum of the rates of tax
3
imposed by subsections (b) and (d) shall be reduced (but not
4
increased) to the rate at which the total amount of tax imposed
5
under this Act, net of all credits allowed under this Act,
6
shall equal (i) the total amount of tax that would be imposed
7
on the foreign insurer's net income allocable to Illinois for
8
the taxable year by such foreign insurer's state or country of
9
domicile if that net income were subject to all income taxes
10
and taxes measured by net income imposed by such foreign
11
insurer's state or country of domicile, net of all credits
12
allowed or (ii) a rate of zero if no such tax is imposed on
13
such income by the foreign insurer's state of domicile. For
14
the purposes of this subsection (d-1), an inter-affiliate
15
includes a mutual insurer under common management.
16

(1) For the purposes of subsection (d-1), in no event
17

shall the sum of the rates of tax imposed by subsections
18

(b) and (d) be reduced below the rate at which the sum of:
19

(A) the total amount of tax imposed on such
20

foreign insurer under this Act for a taxable year, net
21

of all credits allowed under this Act, plus
22

(B) the privilege tax imposed by Section 409 of
23

the Illinois Insurance Code, the fire insurance
24

company tax imposed by Section 12 of the Fire
25

Investigation Act, and the fire department taxes
26

imposed under Section 11-10-1 of the Illinois

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1

Municipal Code,
2

equals 1.25% for taxable years ending prior to December
3

31, 2003, or 1.75% for taxable years ending on or after
4

December 31, 2003, of the net taxable premiums written for
5

the taxable year, as described by subsection (1) of
6

Section 409 of the Illinois Insurance Code. This paragraph
7

will in no event increase the rates imposed under
8

subsections (b) and (d).
9

(2) Any reduction in the rates of tax imposed by this
10

subsection shall be applied first against the rates
11

imposed by subsection (b) and only after the tax imposed
12

by subsection (a) net of all credits allowed under this
13

Section other than the credit allowed under subsection (i)
14

has been reduced to zero, against the rates imposed by
15

subsection (d).
16

This subsection (d-1) is exempt from the provisions of
17
Section 250.
18

(e) Investment credit. A taxpayer shall be allowed a
19
credit against the Personal Property Tax Replacement Income
20
Tax for investment in qualified property.
21

(1) A taxpayer shall be allowed a credit equal to .5%
22

of the basis of qualified property placed in service
23

during the taxable year, provided such property is placed
24

in service on or after July 1, 1984. There shall be allowed
25

an additional credit equal to .5% of the basis of
26

qualified property placed in service during the taxable

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year, provided such property is placed in service on or
2

after July 1, 1986, and the taxpayer's base employment
3

within Illinois has increased by 1% or more over the
4

preceding year as determined by the taxpayer's employment
5

records filed with the Illinois Department of Employment
6

Security. Taxpayers who are new to Illinois shall be
7

deemed to have met the 1% growth in base employment for the
8

first year in which they file employment records with the
9

Illinois Department of Employment Security. The provisions
10

added to this Section by Public Act 85-1200 (and restored
11

by Public Act 87-895) shall be construed as declaratory of
12

existing law and not as a new enactment. If, in any year,
13

the increase in base employment within Illinois over the
14

preceding year is less than 1%, the additional credit
15

shall be limited to that percentage times a fraction, the
16

numerator of which is .5% and the denominator of which is
17

1%, but shall not exceed .5%. The investment credit shall
18

not be allowed to the extent that it would reduce a
19

taxpayer's liability in any tax year below zero, nor may
20

any credit for qualified property be allowed for any year
21

other than the year in which the property was placed in
22

service in Illinois. For tax years ending on or after
23

December 31, 1987, and on or before December 31, 1988, the
24

credit shall be allowed for the tax year in which the
25

property is placed in service, or, if the amount of the
26

credit exceeds the tax liability for that year, whether it

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exceeds the original liability or the liability as later
2

amended, such excess may be carried forward and applied to
3

the tax liability of the 5 taxable years following the
4

excess credit years if the taxpayer (i) makes investments
5

which cause the creation of a minimum of 2,000 full-time
6

equivalent jobs in Illinois, (ii) is located in an
7

enterprise zone established pursuant to the Illinois
8

Enterprise Zone Act and (iii) is certified by the
9

Department of Commerce and Community Affairs (now
10

Department of Commerce and Economic Opportunity) as
11

complying with the requirements specified in clause (i)
12

and (ii) by July 1, 1986. The Department of Commerce and
13

Community Affairs (now Department of Commerce and Economic
14

Opportunity) shall notify the Department of Revenue of all
15

such certifications immediately. For tax years ending
16

after December 31, 1988, the credit shall be allowed for
17

the tax year in which the property is placed in service,
18

or, if the amount of the credit exceeds the tax liability
19

for that year, whether it exceeds the original liability
20

or the liability as later amended, such excess may be
21

carried forward and applied to the tax liability of the 5
22

taxable years following the excess credit years. The
23

credit shall be applied to the earliest year for which
24

there is a liability. If there is credit from more than one
25

tax year that is available to offset a liability, earlier
26

credit shall be applied first.

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1

(2) The term "qualified property" means property
2

which:
3

(A) is tangible, whether new or used, including
4

buildings and structural components of buildings and
5

signs that are real property, but not including land
6

or improvements to real property that are not a
7

structural component of a building such as
8

landscaping, sewer lines, local access roads, fencing,
9

parking lots, and other appurtenances;
10

(B) is depreciable pursuant to Section 167 of the
11

Internal Revenue Code, except that "3-year property"
12

as defined in Section 168(c)(2)(A) of that Code is not
13

eligible for the credit provided by this subsection
14

(e);
15

(C) is acquired by purchase as defined in Section
16

179(d) of the Internal Revenue Code;
17

(D) is used in Illinois by a taxpayer who is
18

primarily engaged in manufacturing, or in mining coal
19

or fluorite, or in retailing, or was placed in service
20

on or after July 1, 2006 in a River Edge Redevelopment
21

Zone established pursuant to the River Edge
22

Redevelopment Zone Act; and
23

(E) has not previously been used in Illinois in
24

such a manner and by such a person as would qualify for
25

the credit provided by this subsection (e) or
26

subsection (f).

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(3) For purposes of this subsection (e),
2

"manufacturing" means the material staging and production
3

of tangible personal property by procedures commonly
4

regarded as manufacturing, processing, fabrication, or
5

assembling which changes some existing material into new
6

shapes, new qualities, or new combinations. For purposes
7

of this subsection (e) the term "mining" shall have the
8

same meaning as the term "mining" in Section 613(c) of the
9

Internal Revenue Code. For purposes of this subsection
10

(e), the term "retailing" means the sale of tangible
11

personal property for use or consumption and not for
12

resale, or services rendered in conjunction with the sale
13

of tangible personal property for use or consumption and
14

not for resale. For purposes of this subsection (e),
15

"tangible personal property" has the same meaning as when
16

that term is used in the Retailers' Occupation Tax Act,
17

and, for taxable years ending after December 31, 2008,
18

does not include the generation, transmission, or
19

distribution of electricity.
20

(4) The basis of qualified property shall be the basis
21

used to compute the depreciation deduction for federal
22

income tax purposes.
23

(5) If the basis of the property for federal income
24

tax depreciation purposes is increased after it has been
25

placed in service in Illinois by the taxpayer, the amount
26

of such increase shall be deemed property placed in

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1

service on the date of such increase in basis.
2

(6) The term "placed in service" shall have the same
3

meaning as under Section 46 of the Internal Revenue Code.
4

(7) If during any taxable year, any property ceases to
5

be qualified property in the hands of the taxpayer within
6

48 months after being placed in service, or the situs of
7

any qualified property is moved outside Illinois within 48
8

months after being placed in service, the Personal
9

Property Tax Replacement Income Tax for such taxable year
10

shall be increased. Such increase shall be determined by
11

(i) recomputing the investment credit which would have
12

been allowed for the year in which credit for such
13

property was originally allowed by eliminating such
14

property from such computation and, (ii) subtracting such
15

recomputed credit from the amount of credit previously
16

allowed. For the purposes of this paragraph (7), a
17

reduction of the basis of qualified property resulting
18

from a redetermination of the purchase price shall be
19

deemed a disposition of qualified property to the extent
20

of such reduction.
21

(8) Unless the investment credit is extended by law,
22

the basis of qualified property shall not include costs
23

incurred after December 31, 2018, except for costs
24

incurred pursuant to a binding contract entered into on or
25

before December 31, 2018.
26

(9) Each taxable year ending before December 31, 2000,

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1

a partnership may elect to pass through to its partners
2

the credits to which the partnership is entitled under
3

this subsection (e) for the taxable year. A partner may
4

use the credit allocated to him or her under this
5

paragraph only against the tax imposed in subsections (c)
6

and (d) of this Section. If the partnership makes that
7

election, those credits shall be allocated among the
8

partners in the partnership in accordance with the rules
9

set forth in Section 704(b) of the Internal Revenue Code,
10

and the rules promulgated under that Section, and the
11

allocated amount of the credits shall be allowed to the
12

partners for that taxable year. The partnership shall make
13

this election on its Personal Property Tax Replacement
14

Income Tax return for that taxable year. The election to
15

pass through the credits shall be irrevocable.
16

For taxable years ending on or after December 31,
17

2000, a partner that qualifies its partnership for a
18

subtraction under subparagraph (I) of paragraph (2) of
19

subsection (d) of Section 203 or a shareholder that
20

qualifies a Subchapter S corporation for a subtraction
21

under subparagraph (S) of paragraph (2) of subsection (b)
22

of Section 203 shall be allowed a credit under this
23

subsection (e) equal to its share of the credit earned
24

under this subsection (e) during the taxable year by the
25

partnership or Subchapter S corporation, determined in
26

accordance with the determination of income and

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distributive share of income under Sections 702 and 704
2

and Subchapter S of the Internal Revenue Code. This
3

paragraph is exempt from the provisions of Section 250.
4

(f) Investment credit; Enterprise Zone; River Edge
5
Redevelopment Zone.
6

(1) A taxpayer shall be allowed a credit against the
7

tax imposed by subsections (a) and (b) of this Section for
8

investment in qualified property which is placed in
9

service in an Enterprise Zone created pursuant to the
10

Illinois Enterprise Zone Act or, for property placed in
11

service on or after July 1, 2006, a River Edge
12

Redevelopment Zone established pursuant to the River Edge
13

Redevelopment Zone Act. For partners, shareholders of
14

Subchapter S corporations, and owners of limited liability
15

companies, if the liability company is treated as a
16

partnership for purposes of federal and State income
17

taxation, for taxable years ending before December 31,
18

2023, there shall be allowed a credit under this
19

subsection (f) to be determined in accordance with the
20

determination of income and distributive share of income
21

under Sections 702 and 704 and Subchapter S of the
22

Internal Revenue Code. For taxable years ending on or
23

after December 31, 2023, for partners and shareholders of
24

Subchapter S corporations, the provisions of Section 251
25

shall apply with respect to the credit under this
26

subsection. The credit shall be .5% of the basis for such

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property. The credit shall be available only in the
2

taxable year in which the property is placed in service in
3

the Enterprise Zone or River Edge Redevelopment Zone and
4

shall not be allowed to the extent that it would reduce a
5

taxpayer's liability for the tax imposed by subsections
6

(a) and (b) of this Section to below zero. For tax years
7

ending on or after December 31, 1985, the credit shall be
8

allowed for the tax year in which the property is placed in
9

service, or, if the amount of the credit exceeds the tax
10

liability for that year, whether it exceeds the original
11

liability or the liability as later amended, such excess
12

may be carried forward and applied to the tax liability of
13

the 5 taxable years following the excess credit year. The
14

credit shall be applied to the earliest year for which
15

there is a liability. If there is credit from more than one
16

tax year that is available to offset a liability, the
17

credit accruing first in time shall be applied first.
18

(2) The term qualified property means property which:
19

(A) is tangible, whether new or used, including
20

buildings and structural components of buildings;
21

(B) is depreciable pursuant to Section 167 of the
22

Internal Revenue Code, except that "3-year property"
23

as defined in Section 168(c)(2)(A) of that Code is not
24

eligible for the credit provided by this subsection
25

(f);
26

(C) is acquired by purchase as defined in Section

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179(d) of the Internal Revenue Code;
2

(D) is used in the Enterprise Zone or River Edge
3

Redevelopment Zone by the taxpayer; and
4

(E) has not been previously used in Illinois in
5

such a manner and by such a person as would qualify for
6

the credit provided by this subsection (f) or
7

subsection (e).
8

(3) The basis of qualified property shall be the basis
9

used to compute the depreciation deduction for federal
10

income tax purposes.
11

(4) If the basis of the property for federal income
12

tax depreciation purposes is increased after it has been
13

placed in service in the Enterprise Zone or River Edge
14

Redevelopment Zone by the taxpayer, the amount of such
15

increase shall be deemed property placed in service on the
16

date of such increase in basis.
17

(5) The term "placed in service" shall have the same
18

meaning as under Section 46 of the Internal Revenue Code.
19

(6) If during any taxable year, any property ceases to
20

be qualified property in the hands of the taxpayer within
21

48 months after being placed in service, or the situs of
22

any qualified property is moved outside the Enterprise
23

Zone or River Edge Redevelopment Zone within 48 months
24

after being placed in service, the tax imposed under
25

subsections (a) and (b) of this Section for such taxable
26

year shall be increased. Such increase shall be determined

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by (i) recomputing the investment credit which would have
2

been allowed for the year in which credit for such
3

property was originally allowed by eliminating such
4

property from such computation, and (ii) subtracting such
5

recomputed credit from the amount of credit previously
6

allowed. For the purposes of this paragraph (6), a
7

reduction of the basis of qualified property resulting
8

from a redetermination of the purchase price shall be
9

deemed a disposition of qualified property to the extent
10

of such reduction.
11

(7) There shall be allowed an additional credit equal
12

to 0.5% of the basis of qualified property placed in
13

service during the taxable year in a River Edge
14

Redevelopment Zone, provided such property is placed in
15

service on or after July 1, 2006, and the taxpayer's base
16

employment within Illinois has increased by 1% or more
17

over the preceding year as determined by the taxpayer's
18

employment records filed with the Illinois Department of
19

Employment Security. Taxpayers who are new to Illinois
20

shall be deemed to have met the 1% growth in base
21

employment for the first year in which they file
22

employment records with the Illinois Department of
23

Employment Security. If, in any year, the increase in base
24

employment within Illinois over the preceding year is less
25

than 1%, the additional credit shall be limited to that
26

percentage times a fraction, the numerator of which is

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0.5% and the denominator of which is 1%, but shall not
2

exceed 0.5%.
3

(8) For taxable years beginning on or after January 1,
4

2021, there shall be allowed an Enterprise Zone
5

construction jobs credit against the taxes imposed under
6

subsections (a) and (b) of this Section as provided in
7

Section 13 of the Illinois Enterprise Zone Act.
8

The credit or credits may not reduce the taxpayer's
9

liability to less than zero. If the amount of the credit or
10

credits exceeds the taxpayer's liability, the excess may
11

be carried forward and applied against the taxpayer's
12

liability in succeeding calendar years in the same manner
13

provided under paragraph (4) of Section 211 of this Act.
14

The credit or credits shall be applied to the earliest
15

year for which there is a tax liability. If there are
16

credits from more than one taxable year that are available
17

to offset a liability, the earlier credit shall be applied
18

first.
19

For partners, shareholders of Subchapter S
20

corporations, and owners of limited liability companies,
21

if the liability company is treated as a partnership for
22

the purposes of federal and State income taxation, for
23

taxable years ending before December 31, 2023, there shall
24

be allowed a credit under this Section to be determined in
25

accordance with the determination of income and
26

distributive share of income under Sections 702 and 704

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and Subchapter S of the Internal Revenue Code. For taxable
2

years ending on or after December 31, 2023, for partners
3

and shareholders of Subchapter S corporations, the
4

provisions of Section 251 shall apply with respect to the
5

credit under this subsection.
6

The total aggregate amount of credits awarded under
7

the Blue Collar Jobs Act (Article 20 of Public Act 101-9)
8

shall not exceed $20,000,000 in any State fiscal year.
9

This paragraph (8) is exempt from the provisions of
10

Section 250.
11

(g) (Blank).
12

(h) Investment credit; High Impact Business.
13

(1) Subject to subsections (b) and (b-5) of Section
14

5.5 of the Illinois Enterprise Zone Act, a taxpayer shall
15

be allowed a credit against the tax imposed by subsections
16

(a) and (b) of this Section for investment in qualified
17

property which is placed in service by a Department of
18

Commerce and Economic Opportunity designated High Impact
19

Business. The credit shall be .5% of the basis for such
20

property. The credit shall not be available (i) until the
21

minimum investments in qualified property set forth in
22

subdivision (a)(3)(A) of Section 5.5 of the Illinois
23

Enterprise Zone Act have been satisfied or (ii) until the
24

time authorized in subsection (b-5) of the Illinois
25

Enterprise Zone Act for entities designated as High Impact
26

Businesses under subdivisions (a)(3)(B), (a)(3)(C), and

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(a)(3)(D) of Section 5.5 of the Illinois Enterprise Zone
2

Act, and shall not be allowed to the extent that it would
3

reduce a taxpayer's liability for the tax imposed by
4

subsections (a) and (b) of this Section to below zero. The
5

credit applicable to such investments shall be taken in
6

the taxable year in which such investments have been
7

completed. The credit for additional investments beyond
8

the minimum investment by a designated high impact
9

business authorized under subdivision (a)(3)(A) of Section
10

5.5 of the Illinois Enterprise Zone Act shall be available
11

only in the taxable year in which the property is placed in
12

service and shall not be allowed to the extent that it
13

would reduce a taxpayer's liability for the tax imposed by
14

subsections (a) and (b) of this Section to below zero. For
15

tax years ending on or after December 31, 1987, the credit
16

shall be allowed for the tax year in which the property is
17

placed in service, or, if the amount of the credit exceeds
18

the tax liability for that year, whether it exceeds the
19

original liability or the liability as later amended, such
20

excess may be carried forward and applied to the tax
21

liability of the 5 taxable years following the excess
22

credit year. The credit shall be applied to the earliest
23

year for which there is a liability. If there is credit
24

from more than one tax year that is available to offset a
25

liability, the credit accruing first in time shall be
26

applied first.

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Changes made in this subdivision (h)(1) by Public Act
2

88-670 restore changes made by Public Act 85-1182 and
3

reflect existing law.
4

(2) The term qualified property means property which:
5

(A) is tangible, whether new or used, including
6

buildings and structural components of buildings;
7

(B) is depreciable pursuant to Section 167 of the
8

Internal Revenue Code, except that "3-year property"
9

as defined in Section 168(c)(2)(A) of that Code is not
10

eligible for the credit provided by this subsection
11

(h);
12

(C) is acquired by purchase as defined in Section
13

179(d) of the Internal Revenue Code; and
14

(D) is not eligible for the Enterprise Zone
15

Investment Credit provided by subsection (f) of this
16

Section.
17

(3) The basis of qualified property shall be the basis
18

used to compute the depreciation deduction for federal
19

income tax purposes.
20

(4) If the basis of the property for federal income
21

tax depreciation purposes is increased after it has been
22

placed in service in a federally designated Foreign Trade
23

Zone or Sub-Zone located in Illinois by the taxpayer, the
24

amount of such increase shall be deemed property placed in
25

service on the date of such increase in basis.
26

(5) The term "placed in service" shall have the same

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1

meaning as under Section 46 of the Internal Revenue Code.
2

(6) If during any taxable year ending on or before
3

December 31, 1996, any property ceases to be qualified
4

property in the hands of the taxpayer within 48 months
5

after being placed in service, or the situs of any
6

qualified property is moved outside Illinois within 48
7

months after being placed in service, the tax imposed
8

under subsections (a) and (b) of this Section for such
9

taxable year shall be increased. Such increase shall be
10

determined by (i) recomputing the investment credit which
11

would have been allowed for the year in which credit for
12

such property was originally allowed by eliminating such
13

property from such computation, and (ii) subtracting such
14

recomputed credit from the amount of credit previously
15

allowed. For the purposes of this paragraph (6), a
16

reduction of the basis of qualified property resulting
17

from a redetermination of the purchase price shall be
18

deemed a disposition of qualified property to the extent
19

of such reduction.
20

(7) Beginning with tax years ending after December 31,
21

1996, if a taxpayer qualifies for the credit under this
22

subsection (h) and thereby is granted a tax abatement and
23

the taxpayer relocates its entire facility in violation of
24

the explicit terms and length of the contract under
25

Section 18-183 of the Property Tax Code, the tax imposed
26

under subsections (a) and (b) of this Section shall be

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1

increased for the taxable year in which the taxpayer
2

relocated its facility by an amount equal to the amount of
3

credit received by the taxpayer under this subsection (h).
4

(h-5) High Impact Business construction jobs credit. For
5
taxable years beginning on or after January 1, 2021, there
6
shall also be allowed a High Impact Business construction jobs
7
credit against the tax imposed under subsections (a) and (b)
8
of this Section as provided in subsections (i) and (j) of
9
Section 5.5 of the Illinois Enterprise Zone Act.
10

The credit or credits may not reduce the taxpayer's
11
liability to less than zero. If the amount of the credit or
12
credits exceeds the taxpayer's liability, the excess may be
13
carried forward and applied against the taxpayer's liability
14
in succeeding calendar years in the manner provided under
15
paragraph (4) of Section 211 of this Act. The credit or credits
16
shall be applied to the earliest year for which there is a tax
17
liability. If there are credits from more than one taxable
18
year that are available to offset a liability, the earlier
19
credit shall be applied first.
20

For partners, shareholders of Subchapter S corporations,
21
and owners of limited liability companies, for taxable years
22
ending before December 31, 2023, if the liability company is
23
treated as a partnership for the purposes of federal and State
24
income taxation, there shall be allowed a credit under this
25
Section to be determined in accordance with the determination
26
of income and distributive share of income under Sections 702

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1
and 704 and Subchapter S of the Internal Revenue Code. For
2
taxable years ending on or after December 31, 2023, for
3
partners and shareholders of Subchapter S corporations, the
4
provisions of Section 251 shall apply with respect to the
5
credit under this subsection.
6

The total aggregate amount of credits awarded under the
7
Blue Collar Jobs Act (Article 20 of Public Act 101-9) shall not
8
exceed $20,000,000 in any State fiscal year.
9

This subsection (h-5) is exempt from the provisions of
10
Section 250.
11

(i) Credit for Personal Property Tax Replacement Income
12
Tax. For tax years ending prior to December 31, 2003, a credit
13
shall be allowed against the tax imposed by subsections (a)
14
and (b) of this Section for the tax imposed by subsections (c)
15
and (d) of this Section. This credit shall be computed by
16
multiplying the tax imposed by subsections (c) and (d) of this
17
Section by a fraction, the numerator of which is base income
18
allocable to Illinois and the denominator of which is Illinois
19
base income, and further multiplying the product by the tax
20
rate imposed by subsections (a) and (b) of this Section.
21

Any credit earned on or after December 31, 1986 under this
22
subsection which is unused in the year the credit is computed
23
because it exceeds the tax liability imposed by subsections
24
(a) and (b) for that year (whether it exceeds the original
25
liability or the liability as later amended) may be carried
26
forward and applied to the tax liability imposed by

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1
subsections (a) and (b) of the 5 taxable years following the
2
excess credit year, provided that no credit may be carried
3
forward to any year ending on or after December 31, 2003. This
4
credit shall be applied first to the earliest year for which
5
there is a liability. If there is a credit under this
6
subsection from more than one tax year that is available to
7
offset a liability the earliest credit arising under this
8
subsection shall be applied first.
9

If, during any taxable year ending on or after December
10
31, 1986, the tax imposed by subsections (c) and (d) of this
11
Section for which a taxpayer has claimed a credit under this
12
subsection (i) is reduced, the amount of credit for such tax
13
shall also be reduced. Such reduction shall be determined by
14
recomputing the credit to take into account the reduced tax
15
imposed by subsections (c) and (d). If any portion of the
16
reduced amount of credit has been carried to a different
17
taxable year, an amended return shall be filed for such
18
taxable year to reduce the amount of credit claimed.
19

(j) Training expense credit. Beginning with tax years
20
ending on or after December 31, 1986 and prior to December 31,
21
2003, a taxpayer shall be allowed a credit against the tax
22
imposed by subsections (a) and (b) under this Section for all
23
amounts paid or accrued, on behalf of all persons employed by
24
the taxpayer in Illinois or Illinois residents employed
25
outside of Illinois by a taxpayer, for educational or
26
vocational training in semi-technical or technical fields or

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1
semi-skilled or skilled fields, which were deducted from gross
2
income in the computation of taxable income. The credit
3
against the tax imposed by subsections (a) and (b) shall be
4
1.6% of such training expenses. For partners, shareholders of
5
subchapter S corporations, and owners of limited liability
6
companies, if the liability company is treated as a
7
partnership for purposes of federal and State income taxation,
8
for taxable years ending before December 31, 2023, there shall
9
be allowed a credit under this subsection (j) to be determined
10
in accordance with the determination of income and
11
distributive share of income under Sections 702 and 704 and
12
subchapter S of the Internal Revenue Code. For taxable years
13
ending on or after December 31, 2023, for partners and
14
shareholders of Subchapter S corporations, the provisions of
15
Section 251 shall apply with respect to the credit under this
16
subsection.
17

Any credit allowed under this subsection which is unused
18
in the year the credit is earned may be carried forward to each
19
of the 5 taxable years following the year for which the credit
20
is first computed until it is used. This credit shall be
21
applied first to the earliest year for which there is a
22
liability. If there is a credit under this subsection from
23
more than one tax year that is available to offset a liability,
24
the earliest credit arising under this subsection shall be
25
applied first. No carryforward credit may be claimed in any
26
tax year ending on or after December 31, 2003.

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1

(k) Research and development credit. For tax years ending
2
after July 1, 1990 and prior to December 31, 2003, and
3
beginning again for tax years ending on or after December 31,
4
2004, and ending prior to January 1, 2032, a taxpayer shall be
5
allowed a credit against the tax imposed by subsections (a)
6
and (b) of this Section for increasing research activities in
7
this State. The credit allowed against the tax imposed by
8
subsections (a) and (b) shall be equal to 6 1/2% of the
9
qualifying expenditures for increasing research activities in
10
this State. For partners, shareholders of subchapter S
11
corporations, and owners of limited liability companies, if
12
the liability company is treated as a partnership for purposes
13
of federal and State income taxation, for taxable years ending
14
before December 31, 2023, there shall be allowed a credit
15
under this subsection to be determined in accordance with the
16
determination of income and distributive share of income under
17
Sections 702 and 704 and subchapter S of the Internal Revenue
18
Code. For taxable years ending on or after December 31, 2023,
19
for partners and shareholders of Subchapter S corporations,
20
the provisions of Section 251 shall apply with respect to the
21
credit under this subsection.
22

For purposes of this subsection, "qualifying expenditures"
23
means the qualifying expenditures as defined for the federal
24
credit for increasing research activities which would be
25
allowable under Section 41 of the Internal Revenue Code and
26
which are conducted in this State, "qualifying expenditures

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1
for increasing research activities in this State" means the
2
excess of qualifying expenditures for the taxable year in
3
which incurred over qualifying expenditures for the base
4
period, "qualifying expenditures for the base period" means
5
the average of the qualifying expenditures for each year in
6
the base period, and "base period" means the 3 taxable years
7
immediately preceding the taxable year for which the
8
determination is being made.
9

Any credit in excess of the tax liability for the taxable
10
year may be carried forward. A taxpayer may elect to have the
11
unused credit shown on its final completed return carried over
12
as a credit against the tax liability for the following 5
13
taxable years or until it has been fully used, whichever
14
occurs first; provided that no credit earned in a tax year
15
ending prior to December 31, 2003 may be carried forward to any
16
year ending on or after December 31, 2003.
17

If an unused credit is carried forward to a given year from
18
2 or more earlier years, that credit arising in the earliest
19
year will be applied first against the tax liability for the
20
given year. If a tax liability for the given year still
21
remains, the credit from the next earliest year will then be
22
applied, and so on, until all credits have been used or no tax
23
liability for the given year remains. Any remaining unused
24
credit or credits then will be carried forward to the next
25
following year in which a tax liability is incurred, except
26
that no credit can be carried forward to a year which is more

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1
than 5 years after the year in which the expense for which the
2
credit is given was incurred.
3

No inference shall be drawn from Public Act 91-644 in
4
construing this Section for taxable years beginning before
5
January 1, 1999.
6

It is the intent of the General Assembly that the research
7
and development credit under this subsection (k) shall apply
8
continuously for all tax years ending on or after December 31,
9
2004 and ending prior to January 1, 2032, including, but not
10
limited to, the period beginning on January 1, 2016 and ending
11
on July 6, 2017 (the effective date of Public Act 100-22). All
12
actions taken in reliance on the continuation of the credit
13
under this subsection (k) by any taxpayer are hereby
14
validated.
15

(l) Environmental Remediation Tax Credit.
16

(i) For tax years ending after December 31, 1997 and
17

on or before December 31, 2001, a taxpayer shall be
18

allowed a credit against the tax imposed by subsections
19

(a) and (b) of this Section for certain amounts paid for
20

unreimbursed eligible remediation costs, as specified in
21

this subsection. For purposes of this Section,
22

"unreimbursed eligible remediation costs" means costs
23

approved by the Illinois Environmental Protection Agency
24

("Agency") under Section 58.14 of the Environmental
25

Protection Act that were paid in performing environmental
26

remediation at a site for which a No Further Remediation

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1

Letter was issued by the Agency and recorded under Section
2

58.10 of the Environmental Protection Act. The credit must
3

be claimed for the taxable year in which Agency approval
4

of the eligible remediation costs is granted. The credit
5

is not available to any taxpayer if the taxpayer or any
6

related party caused or contributed to, in any material
7

respect, a release of regulated substances on, in, or
8

under the site that was identified and addressed by the
9

remedial action pursuant to the Site Remediation Program
10

of the Environmental Protection Act. After the Pollution
11

Control Board rules are adopted pursuant to the Illinois
12

Administrative Procedure Act for the administration and
13

enforcement of Section 58.9 of the Environmental
14

Protection Act, determinations as to credit availability
15

for purposes of this Section shall be made consistent with
16

those rules. For purposes of this Section, "taxpayer"
17

includes a person whose tax attributes the taxpayer has
18

succeeded to under Section 381 of the Internal Revenue
19

Code and "related party" includes the persons disallowed a
20

deduction for losses by paragraphs (b), (c), and (f)(1) of
21

Section 267 of the Internal Revenue Code by virtue of
22

being a related taxpayer, as well as any of its partners.
23

The credit allowed against the tax imposed by subsections
24

(a) and (b) shall be equal to 25% of the unreimbursed
25

eligible remediation costs in excess of $100,000 per site,
26

except that the $100,000 threshold shall not apply to any

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1

site contained in an enterprise zone as determined by the
2

Department of Commerce and Community Affairs (now
3

Department of Commerce and Economic Opportunity). The
4

total credit allowed shall not exceed $40,000 per year
5

with a maximum total of $150,000 per site. For partners
6

and shareholders of subchapter S corporations, there shall
7

be allowed a credit under this subsection to be determined
8

in accordance with the determination of income and
9

distributive share of income under Sections 702 and 704
10

and subchapter S of the Internal Revenue Code.
11

(ii) A credit allowed under this subsection that is
12

unused in the year the credit is earned may be carried
13

forward to each of the 5 taxable years following the year
14

for which the credit is first earned until it is used. The
15

term "unused credit" does not include any amounts of
16

unreimbursed eligible remediation costs in excess of the
17

maximum credit per site authorized under paragraph (i).
18

This credit shall be applied first to the earliest year
19

for which there is a liability. If there is a credit under
20

this subsection from more than one tax year that is
21

available to offset a liability, the earliest credit
22

arising under this subsection shall be applied first. A
23

credit allowed under this subsection may be sold to a
24

buyer as part of a sale of all or part of the remediation
25

site for which the credit was granted. The purchaser of a
26

remediation site and the tax credit shall succeed to the

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1

unused credit and remaining carry-forward period of the
2

seller. To perfect the transfer, the assignor shall record
3

the transfer in the chain of title for the site and provide
4

written notice to the Director of the Illinois Department
5

of Revenue of the assignor's intent to sell the
6

remediation site and the amount of the tax credit to be
7

transferred as a portion of the sale. In no event may a
8

credit be transferred to any taxpayer if the taxpayer or a
9

related party would not be eligible under the provisions
10

of subsection (i).
11

(iii) For purposes of this Section, the term "site"
12

shall have the same meaning as under Section 58.2 of the
13

Environmental Protection Act.
14

(m) Education expense credit. Beginning with tax years
15
ending after December 31, 1999, a taxpayer who is the
16
custodian of one or more qualifying pupils shall be allowed a
17
credit against the tax imposed by subsections (a) and (b) of
18
this Section for qualified education expenses incurred on
19
behalf of the qualifying pupils. The credit shall be equal to
20
25% of qualified education expenses, but in no event may the
21
total credit under this subsection claimed by a family that is
22
the custodian of qualifying pupils exceed (i) $500 for tax
23
years ending prior to December 31, 2017, and (ii) $750 for tax
24
years ending on or after December 31, 2017. In no event shall a
25
credit under this subsection reduce the taxpayer's liability
26
under this Act to less than zero. Notwithstanding any other

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1
provision of law, for taxable years beginning on or after
2
January 1, 2017, no taxpayer may claim a credit under this
3
subsection (m) if the taxpayer's adjusted gross income for the
4
taxable year exceeds (i) $500,000, in the case of spouses
5
filing a joint federal tax return or (ii) $250,000, in the case
6
of all other taxpayers. This subsection is exempt from the
7
provisions of Section 250 of this Act.
8

For purposes of this subsection:
9

"Qualifying pupils" means individuals who (i) are
10
residents of the State of Illinois, (ii) are under the age of
11
21 at the close of the school year for which a credit is
12
sought, and (iii) during the school year for which a credit is
13
sought were full-time pupils enrolled in a kindergarten
14
through twelfth grade education program at any school, as
15
defined in this subsection.
16

"Qualified education expense" means the amount incurred on
17
behalf of a qualifying pupil in excess of $250 for tuition,
18
book fees, and lab fees at the school in which the pupil is
19
enrolled during the regular school year.
20

"School" means any public or nonpublic elementary or
21
secondary school in Illinois that is in compliance with Title
22
VI of the Civil Rights Act of 1964 and attendance at which
23
satisfies the requirements of Section 26-1 of the School Code,
24
except that nothing shall be construed to require a child to
25
attend any particular public or nonpublic school to qualify
26
for the credit under this Section.

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1

"Custodian" means, with respect to qualifying pupils, an
2
Illinois resident who is a parent, the parents, a legal
3
guardian, or the legal guardians of the qualifying pupils.
4

(n) River Edge Redevelopment Zone site remediation tax
5
credit.
6

(i) For tax years ending on or after December 31,
7

2006, a taxpayer shall be allowed a credit against the tax
8

imposed by subsections (a) and (b) of this Section for
9

certain amounts paid for unreimbursed eligible remediation
10

costs, as specified in this subsection. For purposes of
11

this Section, "unreimbursed eligible remediation costs"
12

means costs approved by the Illinois Environmental
13

Protection Agency ("Agency") under Section 58.14a of the
14

Environmental Protection Act that were paid in performing
15

environmental remediation at a site within a River Edge
16

Redevelopment Zone for which a No Further Remediation
17

Letter was issued by the Agency and recorded under Section
18

58.10 of the Environmental Protection Act. The credit must
19

be claimed for the taxable year in which Agency approval
20

of the eligible remediation costs is granted. The credit
21

is not available to any taxpayer if the taxpayer or any
22

related party caused or contributed to, in any material
23

respect, a release of regulated substances on, in, or
24

under the site that was identified and addressed by the
25

remedial action pursuant to the Site Remediation Program
26

of the Environmental Protection Act. Determinations as to

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1

credit availability for purposes of this Section shall be
2

made consistent with rules adopted by the Pollution
3

Control Board pursuant to the Illinois Administrative
4

Procedure Act for the administration and enforcement of
5

Section 58.9 of the Environmental Protection Act. For
6

purposes of this Section, "taxpayer" includes a person
7

whose tax attributes the taxpayer has succeeded to under
8

Section 381 of the Internal Revenue Code and "related
9

party" includes the persons disallowed a deduction for
10

losses by paragraphs (b), (c), and (f)(1) of Section 267
11

of the Internal Revenue Code by virtue of being a related
12

taxpayer, as well as any of its partners. The credit
13

allowed against the tax imposed by subsections (a) and (b)
14

shall be equal to 25% of the unreimbursed eligible
15

remediation costs in excess of $100,000 per site.
16

(ii) A credit allowed under this subsection that is
17

unused in the year the credit is earned may be carried
18

forward to each of the 5 taxable years following the year
19

for which the credit is first earned until it is used. This
20

credit shall be applied first to the earliest year for
21

which there is a liability. If there is a credit under this
22

subsection from more than one tax year that is available
23

to offset a liability, the earliest credit arising under
24

this subsection shall be applied first. A credit allowed
25

under this subsection may be sold to a buyer as part of a
26

sale of all or part of the remediation site for which the

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1

credit was granted. The purchaser of a remediation site
2

and the tax credit shall succeed to the unused credit and
3

remaining carry-forward period of the seller. To perfect
4

the transfer, the assignor shall record the transfer in
5

the chain of title for the site and provide written notice
6

to the Director of the Illinois Department of Revenue of
7

the assignor's intent to sell the remediation site and the
8

amount of the tax credit to be transferred as a portion of
9

the sale. In no event may a credit be transferred to any
10

taxpayer if the taxpayer or a related party would not be
11

eligible under the provisions of subsection (i).
12

(iii) For purposes of this Section, the term "site"
13

shall have the same meaning as under Section 58.2 of the
14

Environmental Protection Act.
15

(o) For each of taxable years during the Compassionate Use
16
of Medical Cannabis Program, a surcharge is imposed on all
17
taxpayers on income arising from the sale or exchange of
18
capital assets, depreciable business property, real property
19
used in the trade or business, and Section 197 intangibles of
20
an organization registrant under the Compassionate Use of
21
Medical Cannabis Program Act. The amount of the surcharge is
22
equal to the amount of federal income tax liability for the
23
taxable year attributable to those sales and exchanges. The
24
surcharge imposed does not apply if:
25

(1) the medical cannabis cultivation center
26

registration, medical cannabis dispensary registration, or

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1

the property of a registration is transferred as a result
2

of any of the following:
3

(A) bankruptcy, a receivership, or a debt
4

adjustment initiated by or against the initial
5

registration or the substantial owners of the initial
6

registration;
7

(B) cancellation, revocation, or termination of
8

any registration by the Illinois Department of Public
9

Health;
10

(C) a determination by the Illinois Department of
11

Public Health that transfer of the registration is in
12

the best interests of Illinois qualifying patients as
13

defined by the Compassionate Use of Medical Cannabis
14

Program Act;
15

(D) the death of an owner of the equity interest in
16

a registrant;
17

(E) the acquisition of a controlling interest in
18

the stock or substantially all of the assets of a
19

publicly traded company;
20

(F) a transfer by a parent company to a wholly
21

owned subsidiary; or
22

(G) the transfer or sale to or by one person to
23

another person where both persons were initial owners
24

of the registration when the registration was issued;
25

or
26

(2) the cannabis cultivation center registration,

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1

medical cannabis dispensary registration, or the
2

controlling interest in a registrant's property is
3

transferred in a transaction to lineal descendants in
4

which no gain or loss is recognized or as a result of a
5

transaction in accordance with Section 351 of the Internal
6

Revenue Code in which no gain or loss is recognized.
7

(p) Pass-through entity tax.
8

(1) For taxable years ending on or after December 31,
9

2021, a partnership (other than a publicly traded
10

partnership under Section 7704 of the Internal Revenue
11

Code) or Subchapter S corporation may elect to apply the
12

provisions of this subsection. A separate election shall
13

be made for each taxable year. Such election shall be made
14

at such time, and in such form and manner as prescribed by
15

the Department, and, once made, is irrevocable.
16

(2) Entity-level tax. A partnership or Subchapter S
17

corporation electing to apply the provisions of this
18

subsection shall be subject to a tax for the privilege of
19

earning or receiving income in this State in an amount
20

equal to 4.95% of the taxpayer's net income for the
21

taxable year.
22

(3) Net income defined.
23

(A) In general. For purposes of paragraph (2), the
24

term net income has the same meaning as defined in
25

Section 202 of this Act, except that, for tax years
26

ending on or after December 31, 2023, a deduction

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LRB104 19263 HLH 32709 b
1

shall be allowed in computing base income for
2

distributions to a retired partner to the extent that
3

the partner's distributions are exempt from tax under
4

Section 203(a)(2)(F) of this Act. In addition, the
5

following modifications shall not apply:
6

(i) the standard exemption allowed under
7

Section 204;
8

(ii) the deduction for net losses allowed
9

under Section 207;
10

(iii) in the case of an S corporation, the
11

modification under Section 203(b)(2)(S); and
12

(iv) in the case of a partnership, the
13

modifications under Section 203(d)(2)(H) and
14

Section 203(d)(2)(I).
15

(B) Special rule for tiered partnerships. If a
16

taxpayer making the election under paragraph (1) is a
17

partner of another taxpayer making the election under
18

paragraph (1), net income shall be computed as
19

provided in subparagraph (A), except that the taxpayer
20

shall subtract its distributive share of the net
21

income of the electing partnership (including its
22

distributive share of the net income of the electing
23

partnership derived as a distributive share from
24

electing partnerships in which it is a partner).
25

(4) Credit for entity level tax. Each partner or
26

shareholder of a taxpayer making the election under this

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LRB104 19263 HLH 32709 b
1

Section shall be allowed a credit against the tax imposed
2

under subsections (a) and (b) of Section 201 of this Act
3

for the taxable year of the partnership or Subchapter S
4

corporation for which an election is in effect ending
5

within or with the taxable year of the partner or
6

shareholder in an amount equal to 4.95% times the partner
7

or shareholder's distributive share of the net income of
8

the electing partnership or Subchapter S corporation, but
9

not to exceed the partner's or shareholder's share of the
10

tax imposed under paragraph (1) which is actually paid by
11

the partnership or Subchapter S corporation. If the
12

taxpayer is a partnership or Subchapter S corporation that
13

is itself a partner of a partnership making the election
14

under paragraph (1), the credit under this paragraph shall
15

be allowed to the taxpayer's partners or shareholders (or
16

if the partner is a partnership or Subchapter S
17

corporation then its partners or shareholders) in
18

accordance with the determination of income and
19

distributive share of income under Sections 702 and 704
20

and Subchapter S of the Internal Revenue Code. If the
21

amount of the credit allowed under this paragraph exceeds
22

the partner's or shareholder's liability for tax imposed
23

under subsections (a) and (b) of Section 201 of this Act
24

for the taxable year, such excess shall be treated as an
25

overpayment for purposes of Section 909 of this Act.
26

(5) Nonresidents. A nonresident individual who is a

SB3658
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LRB104 19263 HLH 32709 b
1

partner or shareholder of a partnership or Subchapter S
2

corporation for a taxable year for which an election is in
3

effect under paragraph (1) shall not be required to file
4

an income tax return under this Act for such taxable year
5

if the only source of net income of the individual (or the
6

individual and the individual's spouse in the case of a
7

joint return) is from an entity making the election under
8

paragraph (1) and the credit allowed to the partner or
9

shareholder under paragraph (4) equals or exceeds the
10

individual's liability for the tax imposed under
11

subsections (a) and (b) of Section 201 of this Act for the
12

taxable year.
13

(6) Liability for tax. Except as provided in this
14

paragraph, a partnership or Subchapter S making the
15

election under paragraph (1) is liable for the
16

entity-level tax imposed under paragraph (2). If the
17

electing partnership or corporation fails to pay the full
18

amount of tax deemed assessed under paragraph (2), the
19

partners or shareholders shall be liable to pay the tax
20

assessed (including penalties and interest). Each partner
21

or shareholder shall be liable for the unpaid assessment
22

based on the ratio of the partner's or shareholder's share
23

of the net income of the partnership over the total net
24

income of the partnership. If the partnership or
25

Subchapter S corporation fails to pay the tax assessed
26

(including penalties and interest) and thereafter an

SB3658
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LRB104 19263 HLH 32709 b
1

amount of such tax is paid by the partners or
2

shareholders, such amount shall not be collected from the
3

partnership or corporation.
4

(7) Foreign tax. For purposes of the credit allowed
5

under Section 601(b)(3) of this Act, tax paid by a
6

partnership or Subchapter S corporation to another state
7

which, as determined by the Department, is substantially
8

similar to the tax imposed under this subsection, shall be
9

considered tax paid by the partner or shareholder to the
10

extent that the partner's or shareholder's share of the
11

income of the partnership or Subchapter S corporation
12

allocated and apportioned to such other state bears to the
13

total income of the partnership or Subchapter S
14

corporation allocated or apportioned to such other state.
15

(8) Suspension of withholding. The provisions of
16

Section 709.5 of this Act shall not apply to a partnership
17

or Subchapter S corporation for the taxable year for which
18

an election under paragraph (1) is in effect.
19

(9) Requirement to pay estimated tax. For each taxable
20

year for which an election under paragraph (1) is in
21

effect, a partnership or Subchapter S corporation is
22

required to pay estimated tax for such taxable year under
23

Sections 803 and 804 of this Act if the amount payable as
24

estimated tax can reasonably be expected to exceed $500.
25

(10) The provisions of this subsection shall apply
26

only with respect to taxable years for which the

SB3658
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LRB104 19263 HLH 32709 b
1

limitation on individual deductions applies under Section
2

164(b)(6) of the Internal Revenue Code.
3
(Source: P.A. 103-9, eff. 6-7-23; 103-396, eff. 1-1-24;
4
103-595, eff. 6-26-24; 103-605, eff. 7-1-24; 104-453, eff.
5
12-12-25.)

6

(35 ILCS 5/201.3 new)
7

Sec. 201.3.
Tax rates.
In the case of an individual,
8
trust, or estate, for taxable years beginning on or after
9
January 1, 2027, the amount of the tax imposed by subsection
10
(a) of Section 201 of this Act shall be determined according to
11
the following tax rate structure:
12

(1) for taxpayers who do not file a joint return and
13

have a net income of $500,000 or less:

14

(A) 4.00% of the portion of the taxpayer's net
15

income that does not exceed $25,000;

16

(B) 4.125% of the portion of the taxpayer's net
17

income that exceeds $25,000 but does not exceed
18

$50,000;

19

(C) 4.25% of the portion of the taxpayer's net
20

income that exceeds $50,000 but does not exceed
21

$100,000;

22

(D) 4.75% of the portion of the taxpayer's net
23

income that exceeds $100,000 but does not exceed
24

$150,000;

25

(E) 4.95% of the portion of the taxpayer's net

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LRB104 19263 HLH 32709 b
1

income that exceeds 150,000 but does not exceed
2

$250,000;

3

(F) 5.45% of the portion of the taxpayer's net
4

income that exceeds 250,000 but does not exceed
5

$375,000;

6

(G) 5.95% of the portion of the taxpayer's net
7

income that exceeds $375,000 but does not exceed
8

$500,000; and

9

(2) for taxpayers who do not file a joint return and
10

have a net income that exceeds $500,000, 6.95% of the
11

taxpayer's net income;

12

(3) for taxpayers who file a joint return and have a
13

net income of $1,000,000 or less:

14

(A) 4.00% of the portion of the taxpayer's net
15

income that does not exceed $50,000;

16

(B) 4.125% of the portion of the taxpayer's net
17

income that exceeds $50,000 but does not exceed
18

$100,000;

19

(C) 4.25% of the portion of the taxpayer's net
20

income that exceeds $100,000 but does not exceed
21

$200,000;

22

(D) 4.75% of the portion of the taxpayer's net
23

income that exceeds$200,000 but does not exceed
24

$300,000;

25

(E) 4.95% of the portion of the taxpayer's net
26

income that exceeds $300,000 but does not exceed

SB3658
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LRB104 19263 HLH 32709 b
1

$500,000; and

2

(F) 5.45% of the portion of the taxpayer's net
3

income that exceeds $500,000 but does not exceed
4

$750,000; and

5

(G) 5.95% of the portion of the taxpayer's net
6

income that exceeds $750,000 but does not exceed
7

$1,000,000; and

8

(4) for taxpayers who file a joint return and have a
9

net income of more than $1,000,000, 6.95% of the
10

taxpayer's net income.

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