On June 4, Illinois General Assembly passed HB2755, a revenue omnibus bill containing numerous tax changes for businesses. HB2755 comes on the heels of the fiscal year (FY) 2026 budget bill, which passed on May 31, 2025. Both bills are now headed to the governor.
The FY 2026 budget proposes $55.2 billion in spending, up from $53.1 billion last year (before supplemental appropriations). The vast majority of tax changes are in HB2755, which passed without the inclusion of Digital Advertisement Tax present in an earlier version of the bill.
Bill Highlights
The bill makes 50% of global intangible low-taxed income (GILTI) taxable for taxable years ending on or after December 31, 2025. GILTI is not currently taxed in Illinois.
Illinois will move from a Joyce state to a Finnegan state. Entities that have nexus with the state will be required to include sales of entities without nexus into their apportionment factor beginning with the 2025 tax year. Greg Rottjakob, Ryan Principal, State and Local Income Tax, believes that under many circumstances, this change effectively eliminates Illinois’s throwback rule.
The nontax avoidance exemption and the subject to tax exemption are removed from the interest add-back requirement. Furthermore, taxpayers subject to Section 163(j) will also be required to first allocate disallowed interest to nonforeign persons.
The bill creates a tax on sports wagering over the internet or through mobile applications effective July 1, 2025. The tax is $0.25 per wager for the first 20,000,000 wagers each year for each licensee and $0.50 per wager for additional wagers. The tax could generate up to $160 million in revenue.
The bill makes gains and losses from the sale of a pass-through entity allocable to Illinois based on the pass-through entity’s apportionment factor. This would be effective for taxpayers ending on or after the date the bill is signed.
The rate of the state’s telecommunications excise tax will increase 1.65% to fund a 9-8-8 suicide and crisis lifeline. The hotel operators’ occupation tax will be expanded to apply to short-term rentals beginning July 1.
The bill also contains a number of tax amnesty programs that would run from October 1 to November 15 of this year, including a general amnesty program and one for franchise tax. A Remote Retailer Amnesty Program would go into effect from August 1, 2026 through October 31, 2026, for periods beginning January 1, 2021. Remote retailers would pay a simplified 9% rate of tax statewide and have penalties and interest forgiven.
Michael Willer, Principal in Ryan’s Sales and Use Tax practice in Illinois, notes that the Remote Retailer Amnesty Program may incentivize remote retailers that exceeded sales thresholds beginning in January 2021 to consider remitting past due taxes. The forgiveness of penalty and interest, coupled with the simplified tax rate and elimination of specific location reporting for periods covered under the program, will lighten the burden on the taxpayer. Recently, taxpayers have been contacted by the Department of Revenue (DOR) with audit notices for the same issues and periods stipulated by the proposed Remote Retailer Amnesty Program and unfortunately are faced with a higher burden to remit past taxes and bear the additional costs of potential penalties and interest. The DOR should give some consideration and leniency to taxpayers that are currently under audit for this same matter but do not have the opportunity to participate in the future program.
Beginning in 2026, the sales threshold for remote retailers will be $100,000, eliminating the transaction threshold, which currently establishes nexus for retailers with 200 transactions regardless of the dollar amount.
Also, on the sales tax side, the bill authorizes a penalty rate of 15% for retailers that fail to provide documents needed to correctly source sales. The bill also applies Leveling the Playing Field legislation to service use tax and service occupation tax, making sales originating outside Illinois subject to the sales tax rate at the location where items are delivered.
A new manufacturing credit, called the Advancing Innovative Manufacturing for Illinois Tax Credit (AIM), would be created. The credit is equal to up to 7% of certain capital expenditures made by an Illinois manufacturer. Credits under the Reimagining Energy and Vehicles in Illinois Act would have expanded eligibility, including green steel manufacturers, electrical transformer part manufacturers, renewable energy products manufacturers, and certain electric propulsion systems for airliners. The definition of “renewable energy” would also be amended to include nuclear power.
Businesses need to begin planning for these changes immediately, as many of the changes will go into effect this year. Ryan’s income tax, transaction tax, and property tax experts can help get you prepare. Contact one of the Ryan experts below today.
TECHNICAL INFORMATION CONTACTS:
Greg Rottjakob
Principal
Ryan
813.568.9085
greg.rottjakob@ryan.com
Michael Willer
Principal
Ryan
630.515.0477
michael.willer@ryan.com
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