On June 16, 2026, Illinois Governor JB Pritzker signed the state budget bills into law. Among the bills signed is an omnibus tax bill, SB 3019 (Pub. Act 104-0468), which includes business and individual tax changes.

SB 3019 creates three new taxes aimed at online business activity — a tax on targeted advertising services, a digital-asset tax and a social media platform fee — and expands the sports wagering tax to prediction market wagers relative to sporting events. In addition, SB 3019:

• Modifies the limitation on the Illinois net loss deduction (NLD) and the elective pass-through entity tax (PTET)
• Requires taxpayers to add back deferred gain excluded under Internal Revenue Code Section 1202
• Extends various tax credits.

The following summarizes the key provisions in SB 3019.

Tax on targeted advertising services

Beginning January 1, 2027, a new 10% tax applies to gross receipts from targeted advertising services (TAS) provided in Illinois.¹ TAS is provided in Illinois when the location of the user-consumer of the targeted advertisement is in Illinois.

The TAS provider determines the location of the user-consumer by using the totality of the user-consumer contact information in the provider's possession or control. There is a rebuttable presumption that a user-consumer is located in Illinois if the contact information associated with a device or an account on record with the TAS provider indicates an Illinois home address, mailing address or internet protocol address or other user-consumer data showing a "place of primary use" in Illinois.

The law defines TAS as "any programmatic² written, oral, or graphic statement or representation conveyed through a digital interface or any other method of delivery, including … banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services³ that use personal information about the people to whom the ads are being served." Those services do not include advertisement services on digital interfaces owned or operated by or on behalf of a news media entity.

Business entities that are part of a controlled group of corporations⁴ are treated as a single entity for purposes of meeting the definition of a provider for purposes of this tax.

TAS providers that exceed the $1 million gross-receipts threshold must register with the Department of Revenue (Department) and obtain a certification of registration from the Department by the end of 2026, in order to engage in such business in Illinois on or after January 1, 2027. Certificates of registration are valid for one year and will automatically be renewed for an additional year unless otherwise notified by the Department.

TAS tax returns are due on or before the 20th day of each month for the preceding calendar month. The law specifies information that must be included in the return. TAS providers must file returns and make payments electronically.

At the time of filing a return, a provider may take a discount of 1.75%, not to exceed $1,000 per return period. The discount may not be claimed on late-filed returns or payments not timely made or electronically remitted.

The law prohibits home rule counties and municipalities from imposing a tax on TAS.

Digital-asset tax

Beginning January 1, 2027, a new digital-asset tax applies to the privilege of receiving from a digital asset broker⁵ any digital asset business activity by a customer in Illinois. The tax rate is 0.2% of the value of digital asset business activities (i.e., exchange,⁶ transfer,⁷ or storage⁸ of a digital asset as part of a business or on behalf of a customer who has contracted with the business for the provision of those services). Tax will be imposed on brokers, exchanges, custodians or wallet providers that have a physical presence in Illinois or at least $100,000 in in-state digital-asset receipts.

It is rebuttably presumed that sales occurring electronically or by phone are made by customers located in Illinois if the contact information associated with a device or account on record with or available to the digital asset broker indicates an Illinois home address, mailing address, internet protocol address or other data showing "place of primary use" in Illinois. For sales occurring in person, the physical location controls the sourcing.

Digital assets brokers must register with the Department and obtain a certification of registration by the end of 2026, in order to engage in such business in Illinois on or after January 1, 2027. Certificates of registration are valid for one year and will automatically be renewed for an additional year unless otherwise notified by the Department.

Digital-asset tax returns are due on or before the 20th day of each month for the preceding calendar month. The law specifies information that must be included in the return. Returns and payments must be filed/made electronically.

Social media platform fee

Beginning January 1, 2027, a new social media platform fee is imposed on social media platforms⁹ based on the number of users on whom it collects data within a month. The law requires monthly reporting and remittance by the 14th day of each month, reporting the average number of monthly Illinois-based platform users to the Secretary of State (Secretary), who will administer the tax.

The social media platform fee applies at a tiered rate as follows, for social media platform companies that have:

• Over 100,000 but not more than 500,000 Illinois users per month — $0.10 per user
• Over 500,000 but not more than 1 million Illinois users per month — $40,000 plus $0.25 per user for the number of users over 500,000 but not more than 1 million
• Over 1 million Illinois users per month — $165,000 plus $0.50 per user for the number of users over 1 million

The fees are subject to increase annually beginning January 1, 2028, based on consumer price index increases.

If a social media platform does not pay the fee due, a penalty equal to 100% of the unpaid fee and any penalties will apply each month until the fee is paid.

NLD limitation

A law enacted in 2024 (HB 4951) placed a $500,000 annual cap on the NLD allowed for corporations (other than S corporations) for each tax year ending on or after December 31, 2024, and before December 31, 2027. (See Tax Alert 2024-1178).

SB 3019 modifies the NLD cap, phasing in the amount that can be claimed. As modified, the NLD cap is the greater of $500,000 or:

• 15% of net income for any tax year ending on or after December 31, 2027, and before December 31, 2028
• 30% of net income for any tax year ending on or after December 31, 2028, and before December 31, 2029
• 50% of net income for any tax year ending on or after December 31, 2029, and before December 31, 2030
• 65% of net income for any tax year ending on or after December 31, 2030, and before December 31, 2031
• 80% of net income for any tax year ending on or after December 31, 2031

Similar to current law, taxpayers will not count, for purposes of the NLD carryover period, any year in which the NLD to be used would have been restricted.

IRC Section 1202 addback

For tax years ending on or after December 31, 2026, individuals, trusts and estates, and partnerships must add back the gain excluded from gross income under IRC Section 1202 from certain qualified small business stock.

PTET modification

Effective for tax years ending on or after December 31, 2026, a partnership making the PTET election may elect to determine its tax base under one of the following methods:

• The Illinois-sourced income method (the previous method used), under which the partnership computes and pays tax only on the portion of each partner's distributive share of net income derived from or attributable to sources in Illinois

or

• The full distributive share method, under which the partnership computes and pays tax on the resident partners' full distributive share of net income, while the apportioned business income is used to determine the tax paid on behalf of nonresident partners

Consistent with the PTET election, this election is made annually and applies to all partners of the partnership for the tax year. The Department will prescribe how to make the election. The election is irrevocable for the tax year.

Tax credits and incentives

SB 3019 extends the sunset period for several tax credits and incentive programs, as follows:

• Affordable housing donation credit extended until tax years ending on December 31, 2036 (from December 31, 2026)
• Live theatre production credit extended to tax years beginning before January 1, 2039 (from January 1, 2027)
• If in any state fiscal year, less than $2 million is awarded for long-run productions and pre-Broadway productions, the difference may be allocated to commercial Broadway touring shows
• Research and development tax credit extended to tax years ending before January 1, 2037 (from January 1, 2032)
• Angel investment credit extended to tax years ending on or before December 31, 2032 (from December 31, 2026)
• River edge redevelopment zone rehabilitation cost credits extended to tax years ending before January 1, 2034 (from January 1, 2029)
• The law did not modify the river edge construction job credit, which is currently scheduled to sunset for tax years ending before January 1, 2029
• Apprenticeship education expense credit extended to tax years beginning on or before January 1, 2032 (from January 1, 2027)
• Reimagining Energy and Vehicles in Illinois Act (REV Act), which allows the Department of Commerce and Economic Opportunity to enter into agreements until December 31, 2028 (from December 31, 2027)

Other changes

SB 3019 contains several other tax-related changes, including the following:

• Expand, as of SB 3019's June 16, 2026 effective date, the sports wagering tax to include wagers on prediction markets or exchanges tied to a sporting contest or event
• The exchange wagers¹⁰ are subject to a transaction tax equal to 1.75% of each exchange wager.
• The rate of the transaction tax increases to 3.5% after the first 5 million exchange wages conducted by a licensee during the fiscal year.
• Impose a 15% privilege tax on a fantasy contest operator licensee's adjusted gross fantasy contest receipts, beginning July 1, 2026, and for each 12-month period thereafter
• The law makes clear that "sports wagering" does not include fantasy contests.
• Increase the tire fee to be collected from retail customers to $2.50 (from $0.50) per new or used tire sold and delivered in Illinois (with a collection allowance of $0.10 per tire allowed to retail sellers), effective July 1, 2026
• Modify the hotel operators' occupation tax to treat a hotel marketplace facilitator as the hotel operator for tax purposes, beginning July 1, 2026, if the hotel marketplace facilitator rents, leases or lets a hotel room and meets the tax remittance threshold (currently $100,000 in cumulative gross rental receipts)
• Modify the hotel operators' occupation tax to treat a re-renter that is headquartered out of state and has no physical presence in the state as a hotel operator for tax purposes, beginning July 1, 2026, if the re-renter's cumulative gross receipts are $100,000 or more from renting hotel rooms in Illinois

The legislature also passed SB 3645, which would repeal and extend the effective dates of various acts. Among the changes is a revision to the effective date of the Interchange Fee Prohibition Act, moving it from July 1, 2026, to July 1, 2027. The act, which prohibits interchange fees from being collected on the Illinois sales or excise tax portion or the gratuity portion of an electronic payment, has been subject to ongoing litigation. SB 3645 has not yet been sent to the governor, but he is expected to sign it.

Implications

Because the social media platform fee differs significantly from the Chicago social media amusement tax (see Tax Alert 2026-0377), future guidance or administrative rules for one tax may not apply to the other.

While the new TAS tax and digital asset tax will be administered by the Department, the new social media platform fee will be administered by the Secretary of State. None of these new taxes are effective until 2027 as the legislature expects to address additional details before any of the taxes go into effect. The legislature also has the option of changing the effective date as it has done with the Interchange Fee Prohibition Act, which is subject to ongoing litigation.