On May 31, 2026, the Illinois General Assembly approved the Revenue Omnibus bill, which includes several significant tax changes affecting businesses, pass-through owners, and certain digital and investment activities. The bill passed the legislature and awaits Governor Pritzker’s signature.

The bill includes an expanded pass-through entity tax election, extended net operating loss deduction limits, and several new taxes and fees aimed at digital advertising, social media platforms, cryptocurrency transactions, and qualified small business stock gains. Taxpayers with Illinois owners, Illinois operations, or business activity directed at Illinois should consider whether these changes affect 2026 planning, estimated tax payments, or transaction modeling.

1. Expanded Pass-Through Entity Tax (PTET) Election

• • Illinois’ optional PTET allows partnerships and S corporations to pay Illinois income tax at the entity level at a rate of 4.95%.
  • Under prior law, the PTET base was limited to income apportioned to Illinois.
  • Effective for taxable years ending on or after December 31, 2026, entities may elect a “full distributive share method” where PTET is computed on 100% of each Illinois-resident owner’s share of business income, regardless of where that income is earned.
  • Nonresidents will still be taxed on their Illinois apportioned income.
  • Alternatively, the “Illinois-sourced income method” remains available, where PTET is calculated on income apportioned to Illinois for all partners – regardless of residency status.
  • The election is made annually and is irrevocable for that taxable year.
  • Although Illinois Department of Revenue (IDOR) has provided limited estimated tax interest and penalty relief in prior situations, IDOR has yet to issue guidance related to the remaining estimated payments due in calendar year 2026. Taxpayers should therefore make a good‑faith effort to update second‑quarter estimates due June 15, 2026, to reflect the revised PTET calculation.

2. Extended Net Operating Loss (NOL) Deduction Limits

• • Illinois has limited the use of net operating loss deductions for C corporations in recent years. Currently, the carryover deduction is capped at $500,000 for taxable years ending on or after December 31, 2024, and prior to December 31, 2027.
  • Rather than allowing the current limitation to expire, the new law extends and tightens the cap beginning in tax year 2027.

3. New 10% Tax on Digital Advertising

• • Effective January 1, 2027, Illinois will impose a 10% tax on providers of targeted advertising services.
  • The tax is measured by the gross receipts derived from those services provided in Illinois.
  • The legislation applies to taxpayers with more than $1 million of Illinois digital advertising revenue during the previous 12-month period.
  • The tax is imposed under a separate Targeted Advertising Services Tax Act rather than under Illinois’ existing sales tax regime.
  • Targeted advertising services generally include advertising delivered using personal information about the intended audience.
  • The tax is sourced to Illinois based on the location of the user or device receiving the advertising.

4. Social Media Platform Fees

• • Effective January 1, 2027, Illinois will impose a new monthly fee on large, social media platforms based on the number of active Illinois users.
  • Platforms with 100,000 to 500,000 Illinois users will owe $0.10 per month for each user over 100,000.
  • Platforms with 500,000 to 1 million Illinois users will owe a base monthly fee of $40,000 plus $0.25 per month for each user over 500,000.
  • Platforms with 1 million or more Illinois users will owe $165,000 per month, plus $0.50 for each user over 1 million.
  • The legislation provides that the fee may not be directly charged to consumers.

5. Cryptocurrency and Digital Asset Transaction Tax

• • Effective January 1, 2027, Illinois will impose a 0.2% tax on businesses that exchange, transfer, or store digital assets for or on behalf of customers.
  • The tax is measured by the value of the digital asset involved in the transaction.
  • Covered activities include exchange services, custodial wallet services, and asset transfers.
  • The provision applies to businesses with an Illinois presence or at least $100,000 of annual Illinois digital asset business receipts.
  • The legislation uses multiple indicators to determine whether activity is attributable to Illinois, including customer location and other account information.

6. Qualified Small Business Stock Gains Now Taxable

• • Illinois will decouple from the federal gain exclusion for Qualified Small Business Stock under IRC Section 1202.
  • As a result, gain that may be excluded in whole or in part for federal income tax purposes will be required to be added back to Illinois taxable income.

Given these changes, and particularly the expanded PTET election available for 2026, taxpayers should consider whether action is needed before year-end or with respect to 2026 estimated tax planning. Please contact a member of your Miller Cooper State and Local Tax team to discuss.