- The Illinois FY 2027 budget bill, Senate Bill 3019 (the “Bill”) contains new tax provisions and changes to existing tax provisions.
- The Bill includes modifications to Illinois net operating loss (“NOL”) provisions, decouples from § 1202 of the Internal Revenue Code of 1986, as amended (the “Code”), and adds taxes and fees directed at digital advertising services, social media platforms, and digital assets. The legislation also includes a new 15% tax on adjusted gross fantasy contest receipts received by fantasy contest operator licensees.
- It also changes the way a partnership that makes a pass-through entity tax election determines its tax base.
Background
On June 16, 2026, Illinois Governor JB Pritzker signed the Bill into law. The Bill contains changes to existing Illinois tax laws and enacts new taxes and fees as well. This article will address the significant components of the Bill.
Net Operating Losses
Current Illinois law limits the utilization of NOLs. For tax years ending on or after December 31, 2024, and before December 31, 2027, the Illinois NOL deduction is limited to $500,000. Beginning with tax years ending on or after December 31, 2027, the Bill gradually increases the amount of NOL that can be used to offset Illinois taxable income for corporations other than S corporations. The Bill amends 35 Ill. Comp. Stat. 5/207(d) by allowing a deduction of the greater of $500,000 or a percentage of Illinois taxable income (calculated without regard to the NOL deduction). The percentage is fifteen percent for tax years beginning in tax years ending on or after December 31, 2027, and before December 31, 2028, and it increases every year before finally capping at eighty percent for tax years ending on or after December 31, 2031.
Forvis Mazars Insight: This modification gradually brings Illinois more in alignment with federal rules regarding NOLs; it is worth noting that S corporations and pass-through entities do not reap the benefit of this change as the provisions of 35 Ill. Comp. Stat. 5/207(d) only apply to corporations, other than S corporations.
Section 1202
§ 1202 of the Code excludes gains attributable to qualified small business stock from taxation. The One Big Beautiful Bill Act (“OBBBA”) expanded the scope of this exclusion. The Bill amends 35 Ill. Comp. Stat. 5/203 to require an addback to Illinois adjusted gross income for individuals, trusts and estates and partnerships for any amount of gain excluded from federal gross income under § 1202. These provisions are effective for tax years ending on or after December 31, 2026.
Digital Advertising Services
The Bill includes the “Targeting Advertising Services Tax Act.” It imposes a ten percent tax, beginning on January 1, 2027, on gross receipts received by providers of “targeted advertising services” delivered in Illinois. “Targeted advertising services” are programmatic (in turn, defined as automatic advertising service capability sold via software or algorithm) statements conveyed through a digital interface, or any other method, that draws on the personal information of the people to whom the ads are being provided, specifically including banner ads, ads delivered through search engines, interstitial ads, and “other comparable advertising services”. “Other comparable advertising services” include, but are not limited to, internet video advertising, social media advertising, and multichannel video programming distributor advertising services. The definition of “provider of targeted advertising services” excludes those entities that have gross receipts of less than $1,000,000 from targeted advertising services during the previous 12-month period. Entities that are part of a controlled group of corporations for federal income tax purposes are required to aggregate their gross receipts for purposes of the $1,000,000 threshold.
Traditional news media entities – those that are primarily engaged in newsgathering, reporting or publishing articles or commentary about the news – are exempt from the tax, but this exemption does not apply to aggregators or those that merely republish third party content.
Receipts are sourced to Illinois, and therefore potentially subject to the tax, based upon the totality of the information in the provider’s control, with a rebuttable presumption of Illinois sourcing based upon an Illinois home address, mailing address, IP address, or place of primary use in Illinois. The provider bears the burden of proof in rebutting these presumptions.
The legislation requires providers to obtain a certificate of registration beginning on January 1, 2027, and the registration will auto-renew annually. Returns are due monthly on the 20th for the preceding calendar month.
Forvis Mazars Insight: This tax closely resembles the Maryland Digital Advertising Tax that applies to tax years beginning after December 31, 2021. That tax has engendered significant litigation, which seems likely for Illinois’ version as well.
Social Media Platform Fee
The Bill amends the Business Corporation Act of 1983 by adding a “social media platform fee.” Codified at 805 Ill. Comp. Stat. 5/15.98, it requires “social media platforms”, beginning January 1, 2027, to report to the Illinois Secretary of State the average number of monthly users of the platform located in Illinois. This report is due on the fourteenth day of the month. The fee for that month is due on the fourteenth day of the following month. The fee is based upon a sliding scale as follows:
| Number of Illinois Users | Fee |
|---|---|
| 100,001-500,000 | $.10 per user |
| 500,001-1,000,000 | $40,000 plus $.25 per user above 500,000 |
| 1,000,000+ | $165,000 plus $.50 per user above 1,000,000 |
Fees are adjusted on January 1st annually to reflect by the annual unadjusted percentage increase in the Consumer Price Index for all urban users as reported by the Bureau of Labor Statistics of the United States Department of Labor for the March preceding each July 1st. “Social media platforms” is a website or internet medium that allows users to register, open an account or create a profile that allows users to create, share and view content, enables one or more users to generate content viewable by others, and primarily serves as a medium for users to interact with content generated by other users. Non-profits described in the Illinois General Not For Profit Act are excluded from the definition of social media platforms. Social media platforms are barred from varying their features or the cost of access for any user based upon the geographical location of the user as a means of recouping the fee.
Forvis Mazars Insight: The bar on passing through the costs to users is similar to a provision in the Maryland Digital Advertising Tax that barred those subject to the tax from expressly passing the tax onto their customers via a line item on the customer’s bill. That provision was found to violate the First Amendment by the Fourth Circuit Court of Appeals in 2025.
Digital Asset Privilege Tax
The Bill includes the Digital Asset Tax Act and imposes a .2% tax, beginning on January 1, 2027, on the privilege of receiving any digital asset business activity by a customer in Illinois. The tax is required to be collected and remitted by digital asset brokers maintaining a place of business in Illinois monthly; remittances for any month are due by the 20th of the following month. The nexus provisions for maintaining a place of business in the state are based upon physical presence or gross receipts from digital asset sales to Illinois customers in excess of $100,000, tested quarterly on a trailing twelve-month basis. Once the $100,000 threshold has been crossed, the digital asset broker is required to collect and remit the tax for a year; at that point, the broker will evaluate whether it met the threshold for the trailing twelve months to determine whether it has an ongoing duty to collect and remit for the next year. Brokers are required to register with the Department of Revenue. The registration is good for a year and auto-renews unless it is revoked.
The tax is based upon the value of the digital asset to which the digital asset business activity relates. The definition of “digital asset” is drawn from Illinois consumer protection laws defining the term, and means “…a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and that is not fiat currency, whether or not denominated in fiat currency.” Digital asset business activity means any occurrence of exchanging, transferring, or storing a digital asset as a part of a business or on behalf of a customer who has entered into an agreement with a business for the provision of these services. Digital asset broker is defined with reference to the federal tax definition found in § 6045(c)(1)(D) of the Code.
Pass-Through Entity Tax Provisions
The Bill amends the Illinois Income Tax Act as it relates to pass-through entity (“PTE”) elections and how income subject to tax is calculated. Under prior law, the tax was calculated on the income apportioned to Illinois for all the partners. The revision retains this option, but adds an option, for tax years ending on or after December 31, 2026, whereby the PTE tax, for partnerships only, can be calculated on the entire share of each Illinois resident owner’s distributive share of business income without regard to apportionment, while non-resident partners continue to be taxed only on Illinois-sourced income.
How Forvis Mazars Can Help
The Bill is complicated and contains significant changes to the Illinois tax laws. Whether it is a change in existing law or a brand-new provision, Forvis Mazars can help you understand the law and the potential impact on your business.