Tax insight

Illinois budget includes income, sales, and excise tax revisions

Insight
5 minute read
June 09, 2025

Update: The legislation was signed by Governor JB Pritzker (D) on June 16, 2025.

What happened?

Budget-related tax legislation passed by the Illinois General Assembly on June 1 includes significant income tax changes, including a 50% GILTI inclusion rule, Finnigan apportionment adoption, revisions to existing related party expense addback provisions, and rules for allocating nonbusiness income from the sale of a pass-through entity interest. The legislation also includes significant indirect tax changes, such as revisions to economic nexus and marketplace facilitator provisions, expanding the election to remit tax based on property cost price, and various new and increased excise tax levies. The legislation further establishes three separate tax amnesty programs: a general tax amnesty, a remote retailer tax amnesty, and a franchise tax and license fee amnesty.

[H.B. 2755, passed Legislature, 6/1/2025]

Why is it relevant?

Tax changes in the legislation, if enacted, may have a significant impact on certain taxpayers and industries, including those with large amounts of GILTI, intercompany expenses, and nonbusiness income from sales of partnership and other pass-through entity interests. Remote sellers, marketplace facilitators, purchasers, and various industries subject to excise taxes would be among those impacted by the indirect tax changes contained in the budget legislation.

Actions to consider

Taxpayers should consider modeling the impact of the income tax changes and assess the effect on estimated payments, as most of these changes would be effective for the 2025 tax year. The sales tax changes generally would be effective January 1, 2026, while several excise tax impositions would be effective July 1, 2025. Further, many taxpayers may want to consider the relative benefits of the several amnesties established under the legislation.

It is possible that additional tax measures and modifications could be adopted during a special session or during the fall veto session, which is yet to be scheduled. Among the remaining issues to be addressed is mass transit funding, for which a retail delivery fee has been advanced (but not passed) by the legislature. Taxpayers should monitor the legislature for future legislative sessions and potential additional tax changes.