Illinois Governor signs budget legislation enacting numerous tax changes

On June 16, 2026, Illinois Governor Pritzker signed budget revenue legislation, SB 3019 (the Legislation), into law. The Legislation includes significant tax changes, including the following:

Tax on providers of targeted advertising services

The Legislation enacts a new tax beginning Jan. 1, 2027, on providers of targeted advertising services (TAS) at the rate of 10% of the gross receipts from TAS provided in Illinois.

TAS is defined in the Legislation as “any programmatic written, oral, or graphic statement or representation conveyed through a digital interface or any other method of delivery, including, but not limited to, banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services that use personal information about the people to whom the ads are being served.” The Legislation provides an exclusion for “advertisement services on digital interfaces owned or operated by or operated on behalf of a news media entity.”

A provider of TAS includes a person who provides targeted advertising services and had more than $1,000,000 in cumulative gross receipts from those services in Illinois during the previous 12-month period.

The Legislation provides guidance on determining the location of a user-consumer (i.e. a person who receives targeted advertisements). Specifically, the location shall be determined by the provider of TAS using the totality of the user-consumer contact information within the provider’s possession or control. The burden of proving a user-consumer is not in Illinois is on the provider.

Administratively, a provider of TAS must register with the Department of Revenue (Department) and obtain a certificate of registration prior to Jan. 1, 2027. Tax returns are due on or before the 20 of each month for the preceding calendar year and must be filed electronically.

Digital asset tax

Beginning Jan. 1, 2027, a new tax is imposed on the privilege of receiving any digital asset business activity by a customer in Illinois at the rate of 0.2% of the value of the digital asset to which the digital asset business activity relates.

The Legislation defines digital asset business activity to mean “any single occurrence of exchanging, transferring, or storing a digital asset as part of a business or on behalf of a customer who has entered into an agreement with a business for the provision of those services.”

A digital asset broker that sells digital asset business activity must collect and remit the tax. Per the Legislation the tax applies to digital asset brokers with a physical presence in Illinois and to out-of-state brokers that remotely sell digital asset business activity to Illinois customers and have more than $100,000 in digital asset sales to those customers.

For sourcing purposes, an in-person sale is sourced to the physical location of the sale. For electronic or phone sales, the customer is rebuttably presumed to be in Illinois if the customer’s device- or account-related contact information on record with, or available to, the digital asset broker shows an Illinois home address, mailing address, internet protocol address or other data indicating the customer’s “place of primary use” is in Illinois. The burden of proving that a customer is not in Illinois is on the digital asset broker.

A digital asset broker must register with the Department prior to Jan. 1, 2027, and returns must be filed with the Department on or before the 20 day of each month for the preceding calendar month.

Social media platform fee

Beginning Jan. 1, 2027, a new social media platform fee is imposed on social media platforms based on the number of Illinois users from whom the social media platform collects data within a month. The Legislation provides that the fees must be paid to the Secretary of State by the 14 day of the month.

Social media platform is defined as a website or internet medium that “(1) permits a person to become a registered user, establish an account, or create a profile for the purpose of allowing users to create, share, and view user-generated content through that account or profile; (2) enables one or more users to generate content that can be viewed by other users of the medium; and (3) primarily serves as a medium for users to interact with content generated by other users of the medium.” It does not include not-for-profit organizations.

The fee is as follows:

• Social media platforms with over 100,000 Illinois users but not more than 500,000 Illinois users shall pay $0.10 per month on the number of Illinois users over 100,000 but not more than 500,000;
• Social media platforms with over 500,000 Illinois users but not more than 1,000,000 Illinois users shall pay $40,000, plus $0.25 per month multiplied by the number of Illinois users over 500,000 but not more than 1,000,000; and
• Social media platforms with over 1,000,000 Illinois users shall pay $165,000, plus $0.50 per month multiplied by the number of Illinois users over 1,000,000.

Failure to pay the monthly fee results in an additional fee equal to 100% of the unpaid amount, plus any related penalties, for each month the fee remains unpaid.

Pass through entity tax (PTET) changes

For taxable years ending on or after Dec. 31, 2026, a partnership making a PTET election, may make an annual irrevocable election to compute its tax base using one of two methods:

• Full distributive share method - The electing partnership must compute and pay tax on the full distributive share of net income allocable to each Illinois resident partner, regardless of the apportionment provisions. Apportioned business income is used only to determine the tax due on behalf of nonresident partners.
• Illinois-sourced income method - The electing partnership must compute and pay tax only on the portion of each partner’s distributive share of net income derived from or attributable to Illinois sources.

The election applies to all partners of the partnership for the taxable year.

Net operating loss modifications

For tax years ending on or after Dec. 31, 2024, and prior to Dec. 31, 2027, Illinois previously enacted a $500,000 annual limit on the net loss deduction for corporations (other than S Corporations).

The Legislation updates the net loss deduction cap based on the greater of $500,000 or:

• 15% of net income for any for any taxable year ending on or after Dec. 31, 2027, and before Dec. 31, 2028;
• 30% of net income for any taxable year ending on or after De. 31, 2028, and before Dec. 31, 2029;
• 50% of net income for any taxable year ending on or after Dec. 31, 2029, and before Dec. 31, 2030;
• 65% of net income for any taxable year ending on or after Dec. 31, 2030, and before Dec. 31, 2031; and
• 80% of net income for any taxable year ending on or after Dec. 31, 2031.

IRC section 1202 addback

For tax years ending on or after Dec. 31, 2026, partnerships, trusts, estates and individuals must add back any gain from the sale of qualified small business stock (QSBS) that was excluded from federal taxable income under IRC section 1202.

What’s next?

In response to the Legislation, Illinois has issued Informational Bulletin FY 2027-01.

Illinois taxpayers should assess how the Legislation affects their current Illinois filings and evaluate their business activities to understand whether the new tax types described above require additional registrations and associated filings.

Please reach out to your Baker Tilly state tax team with any questions.