New State Budget Changes Several Illinois Tax Law Provisions

On June 5, 2024, Illinois Gov. J.B. Pritzker signed legislation, H.B. 4951, which amends several tax law provisions affecting businesses operating in Illinois. These changes will take effect on January 1, 2025.

Net Operating Loss Deductions
The legislation includes corporate income tax changes that increase and extend the amount of the annual limitation on the net operating loss (NOL) deduction for C corporations. The $100,000 limitation for tax years ending on or after December 31, 2021, and before December 31, 2024, has been increased to $500,000 for tax years ending on or after December 31, 2024, and before December 31, 2027.
The three years during which NOLs are suspended will not count against the carry-forward period, so taxpayers will not lose their NOLs, but their ability to claim them will be delayed.

Franchise Taxes
The franchise tax of the Business Corporation Act administered by the Secretary of State exempts specific tax amounts based on the year the annual report is due. HB 4951 increases the $5,000 franchise tax exemption to $10,000 for annual reports due on or after January 1, 2025. The current $5,000 exemption remains in place for any annual reports due for the remainder of 2024.

Leases
Lessors can claim a resale exemption when purchasing equipment for re-lease to customers and then must collect tax on the lease stream. Before this change, lessors paid tax when purchasing equipment for re-lease to customers and did not collect tax on the lease stream.
There are two exceptions from the leasing tax: property subject to the Chicago personal property lease transaction tax and software licenses meeting the state’s five-part test for licensed software.

Local Taxes
In 2019, Illinois passed the Level the Playing Field for Illinois Retail Act, which requires remote retailers (i.e., out-of-state retailers with no physical presence in Illinois) to collect local tax based on destination. Now remote sellers (i.e., out-of-state retailers with a physical presence in Illinois that are currently required to collect Illinois use tax at a rate of only 6.25%) are required to collect local taxes based on destination rates.

If you have any questions regarding these new Illinois tax provisions, please consult your Weiss tax advisor.