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Senate Amendment 001

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Introduced

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104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
SB3799

Introduced 2/6/2026, by Sen. Celina Villanueva

SYNOPSIS AS INTRODUCED:

35 ILCS 5/201

Amends the Illinois Income Tax Act. In provisions concerning the
entity-level tax, provides that a partnership making an entity-level tax
election may elect to determine its tax base using a full distributive
share method or an Illinois-sourced income method. Effective immediately.
LRB104 20679 HLH 34178 b

A BILL FOR

SB3799
LRB104 20679 HLH 34178 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 Section 201 as follows:

6

(35 ILCS 5/201)
7

Sec. 201.
Tax imposed.
8

(a) In general. A tax measured by net income is hereby
9
imposed on every individual, corporation, trust and estate for
10
each taxable year ending after July 31, 1969 on the privilege
11
of earning or receiving income in or as a resident of this
12
State. Such tax shall be in addition to all other occupation or
13
privilege taxes imposed by this State or by any municipal
14
corporation or political subdivision thereof.
15

(b) Rates. The tax imposed by subsection (a) of this
16
Section shall be determined as follows, except as adjusted by
17
subsection (d-1):
18

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

taxable years ending prior to July 1, 1989, an amount
20

equal to 2 1/2% of the taxpayer's net income for the
21

taxable year.
22

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

taxable years beginning prior to July 1, 1989 and ending

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

1/2% of the taxpayer's net income for the period prior to
3

July 1, 1989, as calculated under Section 202.3, and (ii)
4

3% of the taxpayer's net income for the period after June
5

30, 1989, as calculated under Section 202.3.
6

(3) In the case of an individual, trust or estate, for
7

taxable years beginning after June 30, 1989, and ending
8

prior to January 1, 2011, an amount equal to 3% of the
9

taxpayer's net income for the taxable year.
10

(4) In the case of an individual, trust, or estate,
11

for taxable years beginning prior to January 1, 2011, and
12

ending after December 31, 2010, an amount equal to the sum
13

of (i) 3% of the taxpayer's net income for the period prior
14

to January 1, 2011, as calculated under Section 202.5, and
15

(ii) 5% of the taxpayer's net income for the period after
16

December 31, 2010, as calculated under Section 202.5.
17

(5) In the case of an individual, trust, or estate,
18

for taxable years beginning on or after January 1, 2011,
19

and ending prior to January 1, 2015, an amount equal to 5%
20

of the taxpayer's net income for the taxable year.
21

(5.1) In the case of an individual, trust, or estate,
22

for taxable years beginning prior to January 1, 2015, and
23

ending after December 31, 2014, an amount equal to the sum
24

of (i) 5% of the taxpayer's net income for the period prior
25

to January 1, 2015, as calculated under Section 202.5, and
26

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

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after December 31, 2014, as calculated under Section
2

202.5.
3

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

for taxable years beginning on or after January 1, 2015,
5

and ending prior to July 1, 2017, an amount equal to 3.75%
6

of the taxpayer's net income for the taxable year.
7

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

for taxable years beginning prior to July 1, 2017, and
9

ending after June 30, 2017, an amount equal to the sum of
10

(i) 3.75% of the taxpayer's net income for the period
11

prior to July 1, 2017, as calculated under Section 202.5,
12

and (ii) 4.95% of the taxpayer's net income for the period
13

after June 30, 2017, as calculated under Section 202.5.
14

(5.4) In the case of an individual, trust, or estate,
15

for taxable years beginning on or after July 1, 2017, an
16

amount equal to 4.95% of the taxpayer's net income for the
17

taxable year.
18

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

ending prior to July 1, 1989, an amount equal to 4% of the
20

taxpayer's net income for the taxable year.
21

(7) In the case of a corporation, for taxable years
22

beginning prior to July 1, 1989 and ending after June 30,
23

1989, an amount equal to the sum of (i) 4% of the
24

taxpayer's net income for the period prior to July 1,
25

1989, as calculated under Section 202.3, and (ii) 4.8% of
26

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

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1989, as calculated under Section 202.3.
2

(8) In the case of a corporation, for taxable years
3

beginning after June 30, 1989, and ending prior to January
4

1, 2011, an amount equal to 4.8% of the taxpayer's net
5

income for the taxable year.
6

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

beginning prior to January 1, 2011, and ending after
8

December 31, 2010, an amount equal to the sum of (i) 4.8%
9

of the taxpayer's net income for the period prior to
10

January 1, 2011, as calculated under Section 202.5, and
11

(ii) 7% of the taxpayer's net income for the period after
12

December 31, 2010, as calculated under Section 202.5.
13

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

beginning on or after January 1, 2011, and ending prior to
15

January 1, 2015, an amount equal to 7% of the taxpayer's
16

net income for the taxable year.
17

(11) In the case of a corporation, for taxable years
18

beginning prior to January 1, 2015, and ending after
19

December 31, 2014, an amount equal to the sum of (i) 7% of
20

the taxpayer's net income for the period prior to January
21

1, 2015, as calculated under Section 202.5, and (ii) 5.25%
22

of the taxpayer's net income for the period after December
23

31, 2014, as calculated under Section 202.5.
24

(12) In the case of a corporation, for taxable years
25

beginning on or after January 1, 2015, and ending prior to
26

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

SB3799
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net income for the taxable year.
2

(13) In the case of a corporation, for taxable years
3

beginning prior to July 1, 2017, and ending after June 30,
4

2017, an amount equal to the sum of (i) 5.25% of the
5

taxpayer's net income for the period prior to July 1,
6

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

the taxpayer's net income for the period after June 30,
8

2017, as calculated under Section 202.5.
9

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

beginning on or after July 1, 2017, an amount equal to 7%
11

of the taxpayer's net income for the taxable year.
12

The rates under this subsection (b) are subject to the
13
provisions of Section 201.5.
14

(b-5) Surcharge; sale or exchange of assets, properties,
15
and intangibles of organization gaming licensees. For each of
16
taxable years 2019 through 2027, 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 (i)
20
of an organization licensee under the Illinois Horse Racing
21
Act of 1975 and (ii) of an organization gaming licensee under
22
the Illinois Gambling Act. The amount of the surcharge is
23
equal to the amount of federal income tax liability for the
24
taxable year attributable to those sales and exchanges. The
25
surcharge imposed shall not apply if:
26

(1) the organization gaming license, organization

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license, or racetrack property 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

licensee or the substantial owners of the initial
6

licensee;
7

(B) cancellation, revocation, or termination of
8

any such license by the Illinois Gaming Board or the
9

Illinois Racing Board;
10

(C) a determination by the Illinois Gaming Board
11

that transfer of the license is in the best interests
12

of Illinois gaming;
13

(D) the death of an owner of the equity interest in
14

a licensee;
15

(E) the acquisition of a controlling interest in
16

the stock or substantially all of the assets of a
17

publicly traded company;
18

(F) a transfer by a parent company to a wholly
19

owned subsidiary; or
20

(G) the transfer or sale to or by one person to
21

another person where both persons were initial owners
22

of the license when the license was issued; or
23

(2) the controlling interest in the organization
24

gaming license, organization license, or racetrack
25

property is transferred in a transaction to lineal
26

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

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result of a transaction in accordance with Section 351 of
2

the Internal Revenue Code in which no gain or loss is
3

recognized; or
4

(3) live horse racing was not conducted in 2010 at a
5

racetrack located within 3 miles of the Mississippi River
6

under a license issued pursuant to the Illinois Horse
7

Racing Act of 1975.
8

The transfer of an organization gaming license,
9
organization license, or racetrack property by a person other
10
than the initial licensee to receive the organization gaming
11
license is not subject to a surcharge. The Department shall
12
adopt rules necessary to implement and administer this
13
subsection.
14

(c) Personal Property Tax Replacement Income Tax.
15
Beginning on July 1, 1979 and thereafter, in addition to such
16
income tax, there is also hereby imposed the Personal Property
17
Tax Replacement Income Tax measured by net income on every
18
corporation (including Subchapter S corporations), partnership
19
and trust, for each taxable year ending after June 30, 1979.
20
Such taxes are imposed on the privilege of earning or
21
receiving income in or as a resident of this State. The
22
Personal Property Tax Replacement Income Tax shall be in
23
addition to the income tax imposed by subsections (a) and (b)
24
of this Section and in addition to all other occupation or
25
privilege taxes imposed by this State or by any municipal
26
corporation or political subdivision thereof.

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(d) Additional Personal Property Tax Replacement Income
2
Tax Rates. The personal property tax replacement income tax
3
imposed by this subsection and subsection (c) of this Section
4
in the case of a corporation, other than a Subchapter S
5
corporation and except as adjusted by subsection (d-1), shall
6
be an additional amount equal to 2.85% of such taxpayer's net
7
income for the taxable year, except that beginning on January
8
1, 1981, and thereafter, the rate of 2.85% specified in this
9
subsection shall be reduced to 2.5%, and in the case of a
10
partnership, trust or a Subchapter S corporation shall be an
11
additional amount equal to 1.5% of such taxpayer's net income
12
for the taxable year.
13

(d-1) Rate reduction for certain foreign insurers. In the
14
case of a foreign insurer, as defined by Section 35A-5 of the
15
Illinois Insurance Code, whose state or country of domicile
16
imposes on insurers domiciled in Illinois a retaliatory tax
17
(excluding any insurer whose premiums from reinsurance assumed
18
are 50% or more of its total insurance premiums as determined
19
under paragraph (2) of subsection (b) of Section 304, except
20
that for purposes of this determination premiums from
21
reinsurance do not include premiums from inter-affiliate
22
reinsurance arrangements), beginning with taxable years ending
23
on or after December 31, 1999, the sum of the rates of tax
24
imposed by subsections (b) and (d) shall be reduced (but not
25
increased) to the rate at which the total amount of tax imposed
26
under this Act, net of all credits allowed under this Act,

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LRB104 20679 HLH 34178 b
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shall equal (i) the total amount of tax that would be imposed
2
on the foreign insurer's net income allocable to Illinois for
3
the taxable year by such foreign insurer's state or country of
4
domicile if that net income were subject to all income taxes
5
and taxes measured by net income imposed by such foreign
6
insurer's state or country of domicile, net of all credits
7
allowed or (ii) a rate of zero if no such tax is imposed on
8
such income by the foreign insurer's state of domicile. For
9
the purposes of this subsection (d-1), an inter-affiliate
10
includes a mutual insurer under common management.
11

(1) For the purposes of subsection (d-1), in no event
12

shall the sum of the rates of tax imposed by subsections
13

(b) and (d) be reduced below the rate at which the sum of:
14

(A) the total amount of tax imposed on such
15

foreign insurer under this Act for a taxable year, net
16

of all credits allowed under this Act, plus
17

(B) the privilege tax imposed by Section 409 of
18

the Illinois Insurance Code, the fire insurance
19

company tax imposed by Section 12 of the Fire
20

Investigation Act, and the fire department taxes
21

imposed under Section 11-10-1 of the Illinois
22

Municipal Code,
23

equals 1.25% for taxable years ending prior to December
24

31, 2003, or 1.75% for taxable years ending on or after
25

December 31, 2003, of the net taxable premiums written for
26

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

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Section 409 of the Illinois Insurance Code. This paragraph
2

will in no event increase the rates imposed under
3

subsections (b) and (d).
4

(2) Any reduction in the rates of tax imposed by this
5

subsection shall be applied first against the rates
6

imposed by subsection (b) and only after the tax imposed
7

by subsection (a) net of all credits allowed under this
8

Section other than the credit allowed under subsection (i)
9

has been reduced to zero, against the rates imposed by
10

subsection (d).
11

This subsection (d-1) is exempt from the provisions of
12
Section 250.
13

(e) Investment credit. A taxpayer shall be allowed a
14
credit against the Personal Property Tax Replacement Income
15
Tax for investment in qualified property.
16

(1) A taxpayer shall be allowed a credit equal to .5%
17

of the basis of qualified property placed in service
18

during the taxable year, provided such property is placed
19

in service on or after July 1, 1984. There shall be allowed
20

an additional credit equal to .5% of the basis of
21

qualified property placed in service during the taxable
22

year, provided such property is placed in service on or
23

after July 1, 1986, and the taxpayer's base employment
24

within Illinois has increased by 1% or more over the
25

preceding year as determined by the taxpayer's employment
26

records filed with the Illinois Department of Employment

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Security. Taxpayers who are new to Illinois shall be
2

deemed to have met the 1% growth in base employment for the
3

first year in which they file employment records with the
4

Illinois Department of Employment Security. The provisions
5

added to this Section by Public Act 85-1200 (and restored
6

by Public Act 87-895) shall be construed as declaratory of
7

existing law and not as a new enactment. If, in any year,
8

the increase in base employment within Illinois over the
9

preceding year is less than 1%, the additional credit
10

shall be limited to that percentage times a fraction, the
11

numerator of which is .5% and the denominator of which is
12

1%, but shall not exceed .5%. The investment credit shall
13

not be allowed to the extent that it would reduce a
14

taxpayer's liability in any tax year below zero, nor may
15

any credit for qualified property be allowed for any year
16

other than the year in which the property was placed in
17

service in Illinois. For tax years ending on or after
18

December 31, 1987, and on or before December 31, 1988, the
19

credit shall be allowed for the tax year in which the
20

property is placed in service, or, if the amount of the
21

credit exceeds the tax liability for that year, whether it
22

exceeds the original liability or the liability as later
23

amended, such excess may be carried forward and applied to
24

the tax liability of the 5 taxable years following the
25

excess credit years if the taxpayer (i) makes investments
26

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

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equivalent jobs in Illinois, (ii) is located in an
2

enterprise zone established pursuant to the Illinois
3

Enterprise Zone Act and (iii) is certified by the
4

Department of Commerce and Community Affairs (now
5

Department of Commerce and Economic Opportunity) as
6

complying with the requirements specified in clause (i)
7

and (ii) by July 1, 1986. The Department of Commerce and
8

Community Affairs (now Department of Commerce and Economic
9

Opportunity) shall notify the Department of Revenue of all
10

such certifications immediately. For tax years ending
11

after December 31, 1988, the credit shall be allowed for
12

the tax year in which the property is placed in service,
13

or, if the amount of the credit exceeds the tax liability
14

for that year, whether it exceeds the original liability
15

or the liability as later amended, such excess may be
16

carried forward and applied to the tax liability of the 5
17

taxable years following the excess credit years. The
18

credit shall be applied to the earliest year for which
19

there is a liability. If there is credit from more than one
20

tax year that is available to offset a liability, earlier
21

credit shall be applied first.
22

(2) The term "qualified property" means property
23

which:
24

(A) is tangible, whether new or used, including
25

buildings and structural components of buildings and
26

signs that are real property, but not including land

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or improvements to real property that are not a
2

structural component of a building such as
3

landscaping, sewer lines, local access roads, fencing,
4

parking lots, and other appurtenances;
5

(B) is depreciable pursuant to Section 167 of the
6

Internal Revenue Code, except that "3-year property"
7

as defined in Section 168(c)(2)(A) of that Code is not
8

eligible for the credit provided by this subsection
9

(e);
10

(C) is acquired by purchase as defined in Section
11

179(d) of the Internal Revenue Code;
12

(D) is used in Illinois by a taxpayer who is
13

primarily engaged in manufacturing, or in mining coal
14

or fluorite, or in retailing, or was placed in service
15

on or after July 1, 2006 in a River Edge Redevelopment
16

Zone established pursuant to the River Edge
17

Redevelopment Zone Act; and
18

(E) has not previously been used in Illinois in
19

such a manner and by such a person as would qualify for
20

the credit provided by this subsection (e) or
21

subsection (f).
22

(3) For purposes of this subsection (e),
23

"manufacturing" means the material staging and production
24

of tangible personal property by procedures commonly
25

regarded as manufacturing, processing, fabrication, or
26

assembling which changes some existing material into new

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1

shapes, new qualities, or new combinations. For purposes
2

of this subsection (e) the term "mining" shall have the
3

same meaning as the term "mining" in Section 613(c) of the
4

Internal Revenue Code. For purposes of this subsection
5

(e), the term "retailing" means the sale of tangible
6

personal property for use or consumption and not for
7

resale, or services rendered in conjunction with the sale
8

of tangible personal property for use or consumption and
9

not for resale. For purposes of this subsection (e),
10

"tangible personal property" has the same meaning as when
11

that term is used in the Retailers' Occupation Tax Act,
12

and, for taxable years ending after December 31, 2008,
13

does not include the generation, transmission, or
14

distribution of electricity.
15

(4) The basis of qualified property shall be the basis
16

used to compute the depreciation deduction for federal
17

income tax purposes.
18

(5) If the basis of the property for federal income
19

tax depreciation purposes is increased after it has been
20

placed in service in Illinois by the taxpayer, the amount
21

of such increase shall be deemed property placed in
22

service on the date of such increase in basis.
23

(6) The term "placed in service" shall have the same
24

meaning as under Section 46 of the Internal Revenue Code.
25

(7) If during any taxable year, any property ceases to
26

be qualified property in the hands of the taxpayer within

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1

48 months after being placed in service, or the situs of
2

any qualified property is moved outside Illinois within 48
3

months after being placed in service, the Personal
4

Property Tax Replacement Income Tax for such taxable year
5

shall be increased. Such increase shall be determined by
6

(i) recomputing the investment credit which would have
7

been allowed for the year in which credit for such
8

property was originally allowed by eliminating such
9

property from such computation and, (ii) subtracting such
10

recomputed credit from the amount of credit previously
11

allowed. For the purposes of this paragraph (7), a
12

reduction of the basis of qualified property resulting
13

from a redetermination of the purchase price shall be
14

deemed a disposition of qualified property to the extent
15

of such reduction.
16

(8) Unless the investment credit is extended by law,
17

the basis of qualified property shall not include costs
18

incurred after December 31, 2018, except for costs
19

incurred pursuant to a binding contract entered into on or
20

before December 31, 2018.
21

(9) Each taxable year ending before December 31, 2000,
22

a partnership may elect to pass through to its partners
23

the credits to which the partnership is entitled under
24

this subsection (e) for the taxable year. A partner may
25

use the credit allocated to him or her under this
26

paragraph only against the tax imposed in subsections (c)

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LRB104 20679 HLH 34178 b
1

and (d) of this Section. If the partnership makes that
2

election, those credits shall be allocated among the
3

partners in the partnership in accordance with the rules
4

set forth in Section 704(b) of the Internal Revenue Code,
5

and the rules promulgated under that Section, and the
6

allocated amount of the credits shall be allowed to the
7

partners for that taxable year. The partnership shall make
8

this election on its Personal Property Tax Replacement
9

Income Tax return for that taxable year. The election to
10

pass through the credits shall be irrevocable.
11

For taxable years ending on or after December 31,
12

2000, a partner that qualifies its partnership for a
13

subtraction under subparagraph (I) of paragraph (2) of
14

subsection (d) of Section 203 or a shareholder that
15

qualifies a Subchapter S corporation for a subtraction
16

under subparagraph (S) of paragraph (2) of subsection (b)
17

of Section 203 shall be allowed a credit under this
18

subsection (e) equal to its share of the credit earned
19

under this subsection (e) during the taxable year by the
20

partnership or Subchapter S corporation, determined in
21

accordance with the determination of income and
22

distributive share of income under Sections 702 and 704
23

and Subchapter S of the Internal Revenue Code. This
24

paragraph is exempt from the provisions of Section 250.
25

(f) Investment credit; Enterprise Zone; River Edge
26
Redevelopment Zone.

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(1) A taxpayer shall be allowed a credit against the
2

tax imposed by subsections (a) and (b) of this Section for
3

investment in qualified property which is placed in
4

service in an Enterprise Zone created pursuant to the
5

Illinois Enterprise Zone Act or, for property placed in
6

service on or after July 1, 2006, a River Edge
7

Redevelopment Zone established pursuant to the River Edge
8

Redevelopment Zone Act. For partners, shareholders of
9

Subchapter S corporations, and owners of limited liability
10

companies, if the liability company is treated as a
11

partnership for purposes of federal and State income
12

taxation, for taxable years ending before December 31,
13

2023, there shall be allowed a credit under this
14

subsection (f) to be determined in accordance with the
15

determination of income and distributive share of income
16

under Sections 702 and 704 and Subchapter S of the
17

Internal Revenue Code. For taxable years ending on or
18

after December 31, 2023, for partners and shareholders of
19

Subchapter S corporations, the provisions of Section 251
20

shall apply with respect to the credit under this
21

subsection. The credit shall be .5% of the basis for such
22

property. The credit shall be available only in the
23

taxable year in which the property is placed in service in
24

the Enterprise Zone or River Edge Redevelopment Zone and
25

shall not be allowed to the extent that it would reduce a
26

taxpayer's liability for the tax imposed by subsections

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(a) and (b) of this Section to below zero. For tax years
2

ending on or after December 31, 1985, the credit shall be
3

allowed for the tax year in which the property is placed in
4

service, or, if the amount of the credit exceeds the tax
5

liability for that year, whether it exceeds the original
6

liability or the liability as later amended, such excess
7

may be carried forward and applied to the tax liability of
8

the 5 taxable years following the excess credit year. The
9

credit shall be applied to the earliest year for which
10

there is a liability. If there is credit from more than one
11

tax year that is available to offset a liability, the
12

credit accruing first in time shall be applied first.
13

(2) The term qualified property means property which:
14

(A) is tangible, whether new or used, including
15

buildings and structural components of buildings;
16

(B) is depreciable pursuant to Section 167 of the
17

Internal Revenue Code, except that "3-year property"
18

as defined in Section 168(c)(2)(A) of that Code is not
19

eligible for the credit provided by this subsection
20

(f);
21

(C) is acquired by purchase as defined in Section
22

179(d) of the Internal Revenue Code;
23

(D) is used in the Enterprise Zone or River Edge
24

Redevelopment Zone by the taxpayer; and
25

(E) has not been previously used in Illinois in
26

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

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the credit provided by this subsection (f) or
2

subsection (e).
3

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

used to compute the depreciation deduction for federal
5

income tax purposes.
6

(4) If the basis of the property for federal income
7

tax depreciation purposes is increased after it has been
8

placed in service in the Enterprise Zone or River Edge
9

Redevelopment Zone by the taxpayer, the amount of such
10

increase shall be deemed property placed in service on the
11

date of such increase in basis.
12

(5) The term "placed in service" shall have the same
13

meaning as under Section 46 of the Internal Revenue Code.
14

(6) If during any taxable year, any property ceases to
15

be qualified property in the hands of the taxpayer within
16

48 months after being placed in service, or the situs of
17

any qualified property is moved outside the Enterprise
18

Zone or River Edge Redevelopment Zone within 48 months
19

after being placed in service, the tax imposed under
20

subsections (a) and (b) of this Section for such taxable
21

year shall be increased. Such increase shall be determined
22

by (i) recomputing the investment credit which would have
23

been allowed for the year in which credit for such
24

property was originally allowed by eliminating such
25

property from such computation, and (ii) subtracting such
26

recomputed credit from the amount of credit previously

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allowed. For the purposes of this paragraph (6), a
2

reduction of the basis of qualified property resulting
3

from a redetermination of the purchase price shall be
4

deemed a disposition of qualified property to the extent
5

of such reduction.
6

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

to 0.5% of the basis of qualified property placed in
8

service during the taxable year in a River Edge
9

Redevelopment Zone, provided such property is placed in
10

service on or after July 1, 2006, and the taxpayer's base
11

employment within Illinois has increased by 1% or more
12

over the preceding year as determined by the taxpayer's
13

employment records filed with the Illinois Department of
14

Employment Security. Taxpayers who are new to Illinois
15

shall be deemed to have met the 1% growth in base
16

employment for the first year in which they file
17

employment records with the Illinois Department of
18

Employment Security. If, in any year, the increase in base
19

employment within Illinois over the preceding year is less
20

than 1%, the additional credit shall be limited to that
21

percentage times a fraction, the numerator of which is
22

0.5% and the denominator of which is 1%, but shall not
23

exceed 0.5%.
24

(8) For taxable years beginning on or after January 1,
25

2021, there shall be allowed an Enterprise Zone
26

construction jobs credit against the taxes imposed under

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subsections (a) and (b) of this Section as provided in
2

Section 13 of the Illinois Enterprise Zone Act.
3

The credit or credits may not reduce the taxpayer's
4

liability to less than zero. If the amount of the credit or
5

credits exceeds the taxpayer's liability, the excess may
6

be carried forward and applied against the taxpayer's
7

liability in succeeding calendar years in the same manner
8

provided under paragraph (4) of Section 211 of this Act.
9

The credit or credits shall be applied to the earliest
10

year for which there is a tax liability. If there are
11

credits from more than one taxable year that are available
12

to offset a liability, the earlier credit shall be applied
13

first.
14

For partners, shareholders of Subchapter S
15

corporations, and owners of limited liability companies,
16

if the liability company is treated as a partnership for
17

the purposes of federal and State income taxation, for
18

taxable years ending before December 31, 2023, there shall
19

be allowed a credit under this Section to be determined in
20

accordance with the determination of income and
21

distributive share of income under Sections 702 and 704
22

and Subchapter S of the Internal Revenue Code. For taxable
23

years ending on or after December 31, 2023, for partners
24

and shareholders of Subchapter S corporations, the
25

provisions of Section 251 shall apply with respect to the
26

credit under this subsection.

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The total aggregate amount of credits awarded under
2

the Blue Collar Jobs Act (Article 20 of Public Act 101-9)
3

shall not exceed $20,000,000 in any State fiscal year.
4

This paragraph (8) is exempt from the provisions of
5

Section 250.
6

(g) (Blank).
7

(h) Investment credit; High Impact Business.
8

(1) Subject to subsections (b) and (b-5) of Section
9

5.5 of the Illinois Enterprise Zone Act, a taxpayer shall
10

be allowed a credit against the tax imposed by subsections
11

(a) and (b) of this Section for investment in qualified
12

property which is placed in service by a Department of
13

Commerce and Economic Opportunity designated High Impact
14

Business. The credit shall be .5% of the basis for such
15

property. The credit shall not be available (i) until the
16

minimum investments in qualified property set forth in
17

subdivision (a)(3)(A) of Section 5.5 of the Illinois
18

Enterprise Zone Act have been satisfied or (ii) until the
19

time authorized in subsection (b-5) of the Illinois
20

Enterprise Zone Act for entities designated as High Impact
21

Businesses under subdivisions (a)(3)(B), (a)(3)(C), and
22

(a)(3)(D) of Section 5.5 of the Illinois Enterprise Zone
23

Act, and shall not be allowed to the extent that it would
24

reduce a taxpayer's liability for the tax imposed by
25

subsections (a) and (b) of this Section to below zero. The
26

credit applicable to such investments shall be taken in

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the taxable year in which such investments have been
2

completed. The credit for additional investments beyond
3

the minimum investment by a designated high impact
4

business authorized under subdivision (a)(3)(A) of Section
5

5.5 of the Illinois Enterprise Zone Act shall be available
6

only in the taxable year in which the property is placed in
7

service and shall not be allowed to the extent that it
8

would reduce a taxpayer's liability for the tax imposed by
9

subsections (a) and (b) of this Section to below zero. For
10

tax years ending on or after December 31, 1987, the credit
11

shall be allowed for the tax year in which the property is
12

placed in service, or, if the amount of the credit exceeds
13

the tax liability for that year, whether it exceeds the
14

original liability or the liability as later amended, such
15

excess may be carried forward and applied to the tax
16

liability of the 5 taxable years following the excess
17

credit year. The credit shall be applied to the earliest
18

year for which there is a liability. If there is credit
19

from more than one tax year that is available to offset a
20

liability, the credit accruing first in time shall be
21

applied first.
22

Changes made in this subdivision (h)(1) by Public Act
23

88-670 restore changes made by Public Act 85-1182 and
24

reflect existing law.
25

(2) The term qualified property means property which:
26

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

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buildings and structural components of buildings;
2

(B) is depreciable pursuant to Section 167 of the
3

Internal Revenue Code, except that "3-year property"
4

as defined in Section 168(c)(2)(A) of that Code is not
5

eligible for the credit provided by this subsection
6

(h);
7

(C) is acquired by purchase as defined in Section
8

179(d) of the Internal Revenue Code; and
9

(D) is not eligible for the Enterprise Zone
10

Investment Credit provided by subsection (f) of this
11

Section.
12

(3) The basis of qualified property shall be the basis
13

used to compute the depreciation deduction for federal
14

income tax purposes.
15

(4) If the basis of the property for federal income
16

tax depreciation purposes is increased after it has been
17

placed in service in a federally designated Foreign Trade
18

Zone or Sub-Zone located in Illinois by the taxpayer, the
19

amount of such increase shall be deemed property placed in
20

service on the date of such increase in basis.
21

(5) The term "placed in service" shall have the same
22

meaning as under Section 46 of the Internal Revenue Code.
23

(6) If during any taxable year ending on or before
24

December 31, 1996, any property ceases to be qualified
25

property in the hands of the taxpayer within 48 months
26

after being placed in service, or the situs of any

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1

qualified property is moved outside Illinois within 48
2

months after being placed in service, the tax imposed
3

under subsections (a) and (b) of this Section for such
4

taxable year shall be increased. Such increase shall be
5

determined by (i) recomputing the investment credit which
6

would have been allowed for the year in which credit for
7

such property was originally allowed by eliminating such
8

property from such computation, and (ii) subtracting such
9

recomputed credit from the amount of credit previously
10

allowed. For the purposes of this paragraph (6), a
11

reduction of the basis of qualified property resulting
12

from a redetermination of the purchase price shall be
13

deemed a disposition of qualified property to the extent
14

of such reduction.
15

(7) Beginning with tax years ending after December 31,
16

1996, if a taxpayer qualifies for the credit under this
17

subsection (h) and thereby is granted a tax abatement and
18

the taxpayer relocates its entire facility in violation of
19

the explicit terms and length of the contract under
20

Section 18-183 of the Property Tax Code, the tax imposed
21

under subsections (a) and (b) of this Section shall be
22

increased for the taxable year in which the taxpayer
23

relocated its facility by an amount equal to the amount of
24

credit received by the taxpayer under this subsection (h).
25

(h-5) High Impact Business construction jobs credit. For
26
taxable years beginning on or after January 1, 2021, there

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1
shall also be allowed a High Impact Business construction jobs
2
credit against the tax imposed under subsections (a) and (b)
3
of this Section as provided in subsections (i) and (j) of
4
Section 5.5 of the Illinois Enterprise Zone Act.
5

The credit or credits may not reduce the taxpayer's
6
liability to less than zero. If the amount of the credit or
7
credits exceeds the taxpayer's liability, the excess may be
8
carried forward and applied against the taxpayer's liability
9
in succeeding calendar years in the manner provided under
10
paragraph (4) of Section 211 of this Act. The credit or credits
11
shall be applied to the earliest year for which there is a tax
12
liability. If there are credits from more than one taxable
13
year that are available to offset a liability, the earlier
14
credit shall be applied first.
15

For partners, shareholders of Subchapter S corporations,
16
and owners of limited liability companies, for taxable years
17
ending before December 31, 2023, if the liability company is
18
treated as a partnership for the purposes of federal and State
19
income taxation, there shall be allowed a credit under this
20
Section to be determined in accordance with the determination
21
of income and distributive share of income under Sections 702
22
and 704 and Subchapter S of the Internal Revenue Code. For
23
taxable years ending on or after December 31, 2023, for
24
partners and shareholders of Subchapter S corporations, the
25
provisions of Section 251 shall apply with respect to the
26
credit under this subsection.

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1

The total aggregate amount of credits awarded under the
2
Blue Collar Jobs Act (Article 20 of Public Act 101-9) shall not
3
exceed $20,000,000 in any State fiscal year.
4

This subsection (h-5) is exempt from the provisions of
5
Section 250.
6

(i) Credit for Personal Property Tax Replacement Income
7
Tax. For tax years ending prior to December 31, 2003, a credit
8
shall be allowed against the tax imposed by subsections (a)
9
and (b) of this Section for the tax imposed by subsections (c)
10
and (d) of this Section. This credit shall be computed by
11
multiplying the tax imposed by subsections (c) and (d) of this
12
Section by a fraction, the numerator of which is base income
13
allocable to Illinois and the denominator of which is Illinois
14
base income, and further multiplying the product by the tax
15
rate imposed by subsections (a) and (b) of this Section.
16

Any credit earned on or after December 31, 1986 under this
17
subsection which is unused in the year the credit is computed
18
because it exceeds the tax liability imposed by subsections
19
(a) and (b) for that year (whether it exceeds the original
20
liability or the liability as later amended) may be carried
21
forward and applied to the tax liability imposed by
22
subsections (a) and (b) of the 5 taxable years following the
23
excess credit year, provided that no credit may be carried
24
forward to any year ending on or after December 31, 2003. This
25
credit shall be applied first to the earliest year for which
26
there is a liability. If there is a credit under this

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1
subsection from more than one tax year that is available to
2
offset a liability the earliest credit arising under this
3
subsection shall be applied first.
4

If, during any taxable year ending on or after December
5
31, 1986, the tax imposed by subsections (c) and (d) of this
6
Section for which a taxpayer has claimed a credit under this
7
subsection (i) is reduced, the amount of credit for such tax
8
shall also be reduced. Such reduction shall be determined by
9
recomputing the credit to take into account the reduced tax
10
imposed by subsections (c) and (d). If any portion of the
11
reduced amount of credit has been carried to a different
12
taxable year, an amended return shall be filed for such
13
taxable year to reduce the amount of credit claimed.
14

(j) Training expense credit. Beginning with tax years
15
ending on or after December 31, 1986 and prior to December 31,
16
2003, a taxpayer shall be allowed a credit against the tax
17
imposed by subsections (a) and (b) under this Section for all
18
amounts paid or accrued, on behalf of all persons employed by
19
the taxpayer in Illinois or Illinois residents employed
20
outside of Illinois by a taxpayer, for educational or
21
vocational training in semi-technical or technical fields or
22
semi-skilled or skilled fields, which were deducted from gross
23
income in the computation of taxable income. The credit
24
against the tax imposed by subsections (a) and (b) shall be
25
1.6% of such training expenses. For partners, shareholders of
26
subchapter S corporations, and owners of limited liability

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1
companies, if the liability company is treated as a
2
partnership for purposes of federal and State income taxation,
3
for taxable years ending before December 31, 2023, there shall
4
be allowed a credit under this subsection (j) to be determined
5
in accordance with the determination of income and
6
distributive share of income under Sections 702 and 704 and
7
subchapter S of the Internal Revenue Code. For taxable years
8
ending on or after December 31, 2023, for partners and
9
shareholders of Subchapter S corporations, the provisions of
10
Section 251 shall apply with respect to the credit under this
11
subsection.
12

Any credit allowed under this subsection which is unused
13
in the year the credit is earned may be carried forward to each
14
of the 5 taxable years following the year for which the credit
15
is first computed until it is used. This credit shall be
16
applied first to the earliest year for which there is a
17
liability. If there is a credit under this subsection from
18
more than one tax year that is available to offset a liability,
19
the earliest credit arising under this subsection shall be
20
applied first. No carryforward credit may be claimed in any
21
tax year ending on or after December 31, 2003.
22

(k) Research and development credit. For tax years ending
23
after July 1, 1990 and prior to December 31, 2003, and
24
beginning again for tax years ending on or after December 31,
25
2004, and ending prior to January 1, 2032, a taxpayer shall be
26
allowed a credit against the tax imposed by subsections (a)

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

For purposes of this subsection, "qualifying expenditures"
18
means the qualifying expenditures as defined for the federal
19
credit for increasing research activities which would be
20
allowable under Section 41 of the Internal Revenue Code and
21
which are conducted in this State, "qualifying expenditures
22
for increasing research activities in this State" means the
23
excess of qualifying expenditures for the taxable year in
24
which incurred over qualifying expenditures for the base
25
period, "qualifying expenditures for the base period" means
26
the average of the qualifying expenditures for each year in

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1
the base period, and "base period" means the 3 taxable years
2
immediately preceding the taxable year for which the
3
determination is being made.
4

Any credit in excess of the tax liability for the taxable
5
year may be carried forward. A taxpayer may elect to have the
6
unused credit shown on its final completed return carried over
7
as a credit against the tax liability for the following 5
8
taxable years or until it has been fully used, whichever
9
occurs first; provided that no credit earned in a tax year
10
ending prior to December 31, 2003 may be carried forward to any
11
year ending on or after December 31, 2003.
12

If an unused credit is carried forward to a given year from
13
2 or more earlier years, that credit arising in the earliest
14
year will be applied first against the tax liability for the
15
given year. If a tax liability for the given year still
16
remains, the credit from the next earliest year will then be
17
applied, and so on, until all credits have been used or no tax
18
liability for the given year remains. Any remaining unused
19
credit or credits then will be carried forward to the next
20
following year in which a tax liability is incurred, except
21
that no credit can be carried forward to a year which is more
22
than 5 years after the year in which the expense for which the
23
credit is given was incurred.
24

No inference shall be drawn from Public Act 91-644 in
25
construing this Section for taxable years beginning before
26
January 1, 1999.

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1

It is the intent of the General Assembly that the research
2
and development credit under this subsection (k) shall apply
3
continuously for all tax years ending on or after December 31,
4
2004 and ending prior to January 1, 2032, including, but not
5
limited to, the period beginning on January 1, 2016 and ending
6
on July 6, 2017 (the effective date of Public Act 100-22). All
7
actions taken in reliance on the continuation of the credit
8
under this subsection (k) by any taxpayer are hereby
9
validated.
10

(l) Environmental Remediation Tax Credit.
11

(i) For tax years ending after December 31, 1997 and
12

on or before December 31, 2001, a taxpayer shall be
13

allowed a credit against the tax imposed by subsections
14

(a) and (b) of this Section for certain amounts paid for
15

unreimbursed eligible remediation costs, as specified in
16

this subsection. For purposes of this Section,
17

"unreimbursed eligible remediation costs" means costs
18

approved by the Illinois Environmental Protection Agency
19

("Agency") under Section 58.14 of the Environmental
20

Protection Act that were paid in performing environmental
21

remediation at a site for which a No Further Remediation
22

Letter was issued by the Agency and recorded under Section
23

58.10 of the Environmental Protection Act. The credit must
24

be claimed for the taxable year in which Agency approval
25

of the eligible remediation costs is granted. The credit
26

is not available to any taxpayer if the taxpayer or any

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1

related party caused or contributed to, in any material
2

respect, a release of regulated substances on, in, or
3

under the site that was identified and addressed by the
4

remedial action pursuant to the Site Remediation Program
5

of the Environmental Protection Act. After the Pollution
6

Control Board rules are adopted pursuant to the Illinois
7

Administrative Procedure Act for the administration and
8

enforcement of Section 58.9 of the Environmental
9

Protection Act, determinations as to credit availability
10

for purposes of this Section shall be made consistent with
11

those rules. For purposes of this Section, "taxpayer"
12

includes a person whose tax attributes the taxpayer has
13

succeeded to under Section 381 of the Internal Revenue
14

Code and "related party" includes the persons disallowed a
15

deduction for losses by paragraphs (b), (c), and (f)(1) of
16

Section 267 of the Internal Revenue Code by virtue of
17

being a related taxpayer, as well as any of its partners.
18

The credit allowed against the tax imposed by subsections
19

(a) and (b) shall be equal to 25% of the unreimbursed
20

eligible remediation costs in excess of $100,000 per site,
21

except that the $100,000 threshold shall not apply to any
22

site contained in an enterprise zone as determined by the
23

Department of Commerce and Community Affairs (now
24

Department of Commerce and Economic Opportunity). The
25

total credit allowed shall not exceed $40,000 per year
26

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

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1

and shareholders of subchapter S corporations, there shall
2

be allowed a credit under this subsection to be determined
3

in accordance with the determination of income and
4

distributive share of income under Sections 702 and 704
5

and subchapter S of the Internal Revenue Code.
6

(ii) A credit allowed under this subsection that is
7

unused in the year the credit is earned may be carried
8

forward to each of the 5 taxable years following the year
9

for which the credit is first earned until it is used. The
10

term "unused credit" does not include any amounts of
11

unreimbursed eligible remediation costs in excess of the
12

maximum credit per site authorized under paragraph (i).
13

This credit shall be applied first to the earliest year
14

for which there is a liability. If there is a credit under
15

this subsection from more than one tax year that is
16

available to offset a liability, the earliest credit
17

arising under this subsection shall be applied first. A
18

credit allowed under this subsection may be sold to a
19

buyer as part of a sale of all or part of the remediation
20

site for which the credit was granted. The purchaser of a
21

remediation site and the tax credit shall succeed to the
22

unused credit and remaining carry-forward period of the
23

seller. To perfect the transfer, the assignor shall record
24

the transfer in the chain of title for the site and provide
25

written notice to the Director of the Illinois Department
26

of Revenue of the assignor's intent to sell the

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1

remediation site and the amount of the tax credit to be
2

transferred as a portion of the sale. In no event may a
3

credit be transferred to any taxpayer if the taxpayer or a
4

related party would not be eligible under the provisions
5

of subsection (i).
6

(iii) For purposes of this Section, the term "site"
7

shall have the same meaning as under Section 58.2 of the
8

Environmental Protection Act.
9

(m) Education expense credit. Beginning with tax years
10
ending after December 31, 1999, a taxpayer who is the
11
custodian of one or more qualifying pupils shall be allowed a
12
credit against the tax imposed by subsections (a) and (b) of
13
this Section for qualified education expenses incurred on
14
behalf of the qualifying pupils. The credit shall be equal to
15
25% of qualified education expenses, but in no event may the
16
total credit under this subsection claimed by a family that is
17
the custodian of qualifying pupils exceed (i) $500 for tax
18
years ending prior to December 31, 2017, and (ii) $750 for tax
19
years ending on or after December 31, 2017. In no event shall a
20
credit under this subsection reduce the taxpayer's liability
21
under this Act to less than zero. Notwithstanding any other
22
provision of law, for taxable years beginning on or after
23
January 1, 2017, no taxpayer may claim a credit under this
24
subsection (m) if the taxpayer's adjusted gross income for the
25
taxable year exceeds (i) $500,000, in the case of spouses
26
filing a joint federal tax return or (ii) $250,000, in the case

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of all other taxpayers. This subsection is exempt from the
2
provisions of Section 250 of this Act.
3

For purposes of this subsection:
4

"Qualifying pupils" means individuals who (i) are
5
residents of the State of Illinois, (ii) are under the age of
6
21 at the close of the school year for which a credit is
7
sought, and (iii) during the school year for which a credit is
8
sought were full-time pupils enrolled in a kindergarten
9
through twelfth grade education program at any school, as
10
defined in this subsection.
11

"Qualified education expense" means the amount incurred on
12
behalf of a qualifying pupil in excess of $250 for tuition,
13
book fees, and lab fees at the school in which the pupil is
14
enrolled during the regular school year.
15

"School" means any public or nonpublic elementary or
16
secondary school in Illinois that is in compliance with Title
17
VI of the Civil Rights Act of 1964 and attendance at which
18
satisfies the requirements of Section 26-1 of the School Code,
19
except that nothing shall be construed to require a child to
20
attend any particular public or nonpublic school to qualify
21
for the credit under this Section.
22

"Custodian" means, with respect to qualifying pupils, an
23
Illinois resident who is a parent, the parents, a legal
24
guardian, or the legal guardians of the qualifying pupils.
25

(n) River Edge Redevelopment Zone site remediation tax
26
credit.

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1

(i) For tax years ending on or after December 31,
2

2006, a taxpayer shall be allowed a credit against the tax
3

imposed by subsections (a) and (b) of this Section for
4

certain amounts paid for unreimbursed eligible remediation
5

costs, as specified in this subsection. For purposes of
6

this Section, "unreimbursed eligible remediation costs"
7

means costs approved by the Illinois Environmental
8

Protection Agency ("Agency") under Section 58.14a of the
9

Environmental Protection Act that were paid in performing
10

environmental remediation at a site within a River Edge
11

Redevelopment Zone for which a No Further Remediation
12

Letter was issued by the Agency and recorded under Section
13

58.10 of the Environmental Protection Act. The credit must
14

be claimed for the taxable year in which Agency approval
15

of the eligible remediation costs is granted. The credit
16

is not available to any taxpayer if the taxpayer or any
17

related party caused or contributed to, in any material
18

respect, a release of regulated substances on, in, or
19

under the site that was identified and addressed by the
20

remedial action pursuant to the Site Remediation Program
21

of the Environmental Protection Act. Determinations as to
22

credit availability for purposes of this Section shall be
23

made consistent with rules adopted by the Pollution
24

Control Board pursuant to the Illinois Administrative
25

Procedure Act for the administration and enforcement of
26

Section 58.9 of the Environmental Protection Act. For

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1

purposes of this Section, "taxpayer" includes a person
2

whose tax attributes the taxpayer has succeeded to under
3

Section 381 of the Internal Revenue Code and "related
4

party" includes the persons disallowed a deduction for
5

losses by paragraphs (b), (c), and (f)(1) of Section 267
6

of the Internal Revenue Code by virtue of being a related
7

taxpayer, as well as any of its partners. The credit
8

allowed against the tax imposed by subsections (a) and (b)
9

shall be equal to 25% of the unreimbursed eligible
10

remediation costs in excess of $100,000 per site.
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. This
15

credit shall be applied first to the earliest year for
16

which there is a liability. If there is a credit under this
17

subsection from more than one tax year that is available
18

to offset a liability, the earliest credit arising under
19

this subsection shall be applied first. A credit allowed
20

under this subsection may be sold to a buyer as part of a
21

sale of all or part of the remediation site for which the
22

credit was granted. The purchaser of a remediation site
23

and the tax credit shall succeed to the unused credit and
24

remaining carry-forward period of the seller. To perfect
25

the transfer, the assignor shall record the transfer in
26

the chain of title for the site and provide written notice

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1

to the Director of the Illinois Department of Revenue of
2

the assignor's intent to sell the remediation site and the
3

amount of the tax credit to be transferred as a portion of
4

the sale. In no event may a credit be transferred to any
5

taxpayer if the taxpayer or a related party would not be
6

eligible under the provisions of subsection (i).
7

(iii) For purposes of this Section, the term "site"
8

shall have the same meaning as under Section 58.2 of the
9

Environmental Protection Act.
10

(o) For each of taxable years during the Compassionate Use
11
of Medical Cannabis Program, a surcharge is imposed on all
12
taxpayers on income arising from the sale or exchange of
13
capital assets, depreciable business property, real property
14
used in the trade or business, and Section 197 intangibles of
15
an organization registrant under the Compassionate Use of
16
Medical Cannabis Program Act. The amount of the surcharge is
17
equal to the amount of federal income tax liability for the
18
taxable year attributable to those sales and exchanges. The
19
surcharge imposed does not apply if:
20

(1) the medical cannabis cultivation center
21

registration, medical cannabis dispensary registration, or
22

the property of a registration is transferred as a result
23

of any of the following:
24

(A) bankruptcy, a receivership, or a debt
25

adjustment initiated by or against the initial
26

registration or the substantial owners of the initial

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1

registration;
2

(B) cancellation, revocation, or termination of
3

any registration by the Illinois Department of Public
4

Health;
5

(C) a determination by the Illinois Department of
6

Public Health that transfer of the registration is in
7

the best interests of Illinois qualifying patients as
8

defined by the Compassionate Use of Medical Cannabis
9

Program Act;
10

(D) the death of an owner of the equity interest in
11

a registrant;
12

(E) the acquisition of a controlling interest in
13

the stock or substantially all of the assets of a
14

publicly traded company;
15

(F) a transfer by a parent company to a wholly
16

owned subsidiary; or
17

(G) the transfer or sale to or by one person to
18

another person where both persons were initial owners
19

of the registration when the registration was issued;
20

or
21

(2) the cannabis cultivation center registration,
22

medical cannabis dispensary registration, or the
23

controlling interest in a registrant's property is
24

transferred in a transaction to lineal descendants in
25

which no gain or loss is recognized or as a result of a
26

transaction in accordance with Section 351 of the Internal

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1

Revenue Code in which no gain or loss is recognized.
2

(p) Pass-through entity tax.
3

(1) For taxable years ending on or after December 31,
4

2021, a partnership (other than a publicly traded
5

partnership under Section 7704 of the Internal Revenue
6

Code) or Subchapter S corporation may elect to apply the
7

provisions of this subsection. A separate election shall
8

be made for each taxable year. Such election shall be made
9

at such time, and in such form and manner as prescribed by
10

the Department, and, once made, is irrevocable.
11

(2) Entity-level tax. A partnership or Subchapter S
12

corporation electing to apply the provisions of this
13

subsection shall be subject to a tax for the privilege of
14

earning or receiving income in this State in an amount
15

equal to 4.95% of the taxpayer's net income for the
16

taxable year.
17

(2.1) For taxable years beginning on or after January
18

1, 2026, a partnership making an election under this
19

subsection may elect, in the manner prescribed by the
20

Department, to determine the tax base for the purposes of
21

this subsection under one of the following methods:

22

(A) Full distributive share method. The electing
23

partnership shall compute and pay tax on the full
24

distributive share of net income allocable to each
25

partner who is an Illinois resident, notwithstanding
26

the apportionment provisions of Section 304. The

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1

apportioned business income shall be used solely for
2

determining the tax due on behalf of nonresident
3

partners.

4

(B) Illinois-sourced income method. The electing
5

partnership shall compute and pay tax only on that
6

portion of each partner's distributive share of net
7

income that is derived from or attributable to sources
8

within this State, determined in accordance with
9

Section 304 and the rules adopted under that Section.

10

The election under this paragraph (2.1) shall be made
11

annually and shall apply to all partners of the
12

partnership for the taxable year. The method elected shall
13

be irrevocable for that taxable year. The Department shall
14

prescribe the manner and form of the election under this
15

paragraph (2.1).

16

(3) Net income defined.
17

(A) In general. For purposes of paragraph (2), the
18

term net income has the same meaning as defined in
19

Section 202 of this Act, except that, for tax years
20

ending on or after December 31, 2023, a deduction
21

shall be allowed in computing base income for
22

distributions to a retired partner to the extent that
23

the partner's distributions are exempt from tax under
24

Section 203(a)(2)(F) of this Act. In addition, the
25

following modifications shall not apply:
26

(i) the standard exemption allowed under

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1

Section 204;
2

(ii) the deduction for net losses allowed
3

under Section 207;
4

(iii) in the case of an S corporation, the
5

modification under Section 203(b)(2)(S); and
6

(iv) in the case of a partnership, the
7

modifications under Section 203(d)(2)(H) and
8

Section 203(d)(2)(I).
9

(B) Special rule for tiered partnerships. If a
10

taxpayer making the election under paragraph (1) is a
11

partner of another taxpayer making the election under
12

paragraph (1), net income shall be computed as
13

provided in subparagraph (A), except that the taxpayer
14

shall subtract its distributive share of the net
15

income of the electing partnership (including its
16

distributive share of the net income of the electing
17

partnership derived as a distributive share from
18

electing partnerships in which it is a partner).
19

(4) Credit for entity level tax. Each partner or
20

shareholder of a taxpayer making the election under this
21

Section shall be allowed a credit against the tax imposed
22

under subsections (a) and (b) of Section 201 of this Act
23

for the taxable year of the partnership or Subchapter S
24

corporation for which an election is in effect ending
25

within or with the taxable year of the partner or
26

shareholder in an amount equal to 4.95% times the partner

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1

or shareholder's distributive share of the net income of
2

the electing partnership or Subchapter S corporation, but
3

not to exceed the partner's or shareholder's share of the
4

tax imposed under paragraph (1) which is actually paid by
5

the partnership or Subchapter S corporation. If the
6

taxpayer is a partnership or Subchapter S corporation that
7

is itself a partner of a partnership making the election
8

under paragraph (1), the credit under this paragraph shall
9

be allowed to the taxpayer's partners or shareholders (or
10

if the partner is a partnership or Subchapter S
11

corporation then its partners or shareholders) in
12

accordance with the determination of income and
13

distributive share of income under Sections 702 and 704
14

and Subchapter S of the Internal Revenue Code. If the
15

amount of the credit allowed under this paragraph exceeds
16

the partner's or shareholder's liability for tax imposed
17

under subsections (a) and (b) of Section 201 of this Act
18

for the taxable year, such excess shall be treated as an
19

overpayment for purposes of Section 909 of this Act.
20

(5) Nonresidents. A nonresident individual who is a
21

partner or shareholder of a partnership or Subchapter S
22

corporation for a taxable year for which an election is in
23

effect under paragraph (1) shall not be required to file
24

an income tax return under this Act for such taxable year
25

if the only source of net income of the individual (or the
26

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

SB3799
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1

joint return) is from an entity making the election under
2

paragraph (1) and the credit allowed to the partner or
3

shareholder under paragraph (4) equals or exceeds the
4

individual's liability for the tax imposed under
5

subsections (a) and (b) of Section 201 of this Act for the
6

taxable year.
7

(6) Liability for tax. Except as provided in this
8

paragraph, a partnership or Subchapter S making the
9

election under paragraph (1) is liable for the
10

entity-level tax imposed under paragraph (2). If the
11

electing partnership or corporation fails to pay the full
12

amount of tax deemed assessed under paragraph (2), the
13

partners or shareholders shall be liable to pay the tax
14

assessed (including penalties and interest). Each partner
15

or shareholder shall be liable for the unpaid assessment
16

based on the ratio of the partner's or shareholder's share
17

of the net income of the partnership over the total net
18

income of the partnership. If the partnership or
19

Subchapter S corporation fails to pay the tax assessed
20

(including penalties and interest) and thereafter an
21

amount of such tax is paid by the partners or
22

shareholders, such amount shall not be collected from the
23

partnership or corporation.
24

(7) Foreign tax. For purposes of the credit allowed
25

under Section 601(b)(3) of this Act, tax paid by a
26

partnership or Subchapter S corporation to another state

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1

which, as determined by the Department, is substantially
2

similar to the tax imposed under this subsection, shall be
3

considered tax paid by the partner or shareholder to the
4

extent that the partner's or shareholder's share of the
5

income of the partnership or Subchapter S corporation
6

allocated and apportioned to such other state bears to the
7

total income of the partnership or Subchapter S
8

corporation allocated or apportioned to such other state.
9

(8) Suspension of withholding. The provisions of
10

Section 709.5 of this Act shall not apply to a partnership
11

or Subchapter S corporation for the taxable year for which
12

an election under paragraph (1) is in effect.
13

(9) Requirement to pay estimated tax. For each taxable
14

year for which an election under paragraph (1) is in
15

effect, a partnership or Subchapter S corporation is
16

required to pay estimated tax for such taxable year under
17

Sections 803 and 804 of this Act if the amount payable as
18

estimated tax can reasonably be expected to exceed $500.
19

(10) The provisions of this subsection shall apply
20

only with respect to taxable years for which the
21

limitation on individual deductions applies under Section
22

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

26

Section 99.
Effective date.
This Act takes effect upon

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1
becoming law.

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