On June 1, 2026, the Illinois General Assembly passed S.B. 3019. In part one of this Legal Alert series, we addressed the tax on targeted advertising services and a Social Media Platform Fee. In this part two, we address a variety of other changes, including the new Digital Asset Privilege Tax, an expansion of the Sports Wagering Tax to prediction markets, a limitation of corporate income net operating loss carryovers, and others. The law is now awaiting signature from Governor Pritzker.

Additional Tax Proposals

In addition to the Targeted Advertising Services Tax and the Social Media Platform Fee, S.B. 3019 makes numerous other tax changes, including:

  • Digital Asset Privilege Tax: This tax may be the first-in-the-nation targeted tax on cryptocurrency. Beginning January 1, 2027, a new tax applies to a business that exchanges, transfers, or stores a digital asset for or on behalf of a customer. The rate of tax is 0.2% of the value of the digital asset. A “digital asset” is primarily defined as, subject to several exclusions, “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.”[1]
  • Prediction Markets: The bill imposes a tax on “exchange wagers.” An exchange wager includes “an agreement, contract, transaction, or swap that is offered, traded, or executed on a prediction market or exchange tied to a sporting contest or sporting event.” The tax rates are: (1) 1.75% of each exchange wager up to 5 million exchange wagers during a fiscal year; and (2) 3.5% of each exchange wager thereafter.  This tax is in addition to the existing Illinois taxes on sports wagering.
  • Tax on Fantasy Contests: Another unique tax is imposed on those businesses that provide fantasy sports. S.B. 3019 creates a tax on fantasy contest operators that includes businesses that offer online contests of skill between two or more participants with an entry fee. Beginning July 1, 2026, Illinois would impose a 15% tax on the fantasy contest operator licensee’s “adjusted gross fantasy contest receipts.” 
  • Income Tax Net Losses Carryovers: Beginning with the tax year ending on or after December 31, 2027, corporate loss carryover deductions are limited to a percentage of a corporation’s net income. For the first year, the carryover deduction is limited to 15% or $500,000, whichever is greater. The percentage limitation increases each year until it reaches 80% of net income for any taxable year ending on or after December 31, 2031. 
  • Hotel Operators’ Occupation Tax: Beginning July 1, 2026, the bill expands the Hotel Operators’ Occupation Tax to “hotel marketplace facilitators” that, during a 12-month period, have gross rental receipts from renting, leasing, or letting rooms in Illinois hotels on its own behalf or on behalf of marketplace hotel operators to guests of $100,000 or more.
  • Tobacco Products Tax: Beginning January 1, 2027, the bill changes the tax base from the “wholesale price of tobacco products” to the “actual cost paid by a distributor or remote retail seller.” However, if the “actual cost paid” is not available due to matters beyond the distributor or remote retail seller’s control, then the “actual cost list paid” is used as the tax base. The bill also proposes a tax upon persons “engaged in business as remote retail sellers of cigars, pipe tobacco, or alternative nicotine products and who make sales to Illinois consumers on which the tax has not been paid by a distributor,” as long as the person meets a gross receipts threshold. Also, for 2027-2029, the tax per cigar would be limited to $0.75 per cigar, except for little cigars.
  • Sales Tax Holiday: The bill establishes a sales tax holiday from August 7, 2026 – August 16, 2026, with respect to “sales tax holiday items” (e.g., clothing that have a retail selling price of less than $125, school supplies, etc.) at the rate of 1.25%.
  • I.R.C. § 1202: I.R.C. § 1202 provides for a partial exclusion for gain from certain small business stock. For taxable years ending on and after December 31, 2026, the bill would add to individuals,’ trusts and estates,’ and partnerships’ base/taxable income “an amount equal to the amount of gain excluded from gross income under Section 1202 of the Internal Revenue Code.” 
  • Pass-through Entity Tax: For taxable years ending on or after December 31, 2026, the bill would allow partnerships may elect to determine the tax base using the full distributive share method or the Illinois-sourced income method.
  • Motor Fuel Tax Increase Delayed: Normally, the motor fuel tax increases each year on July 1 based on the increase in the Consumer Price Index. The bill delays this year’s increase until January 1, 2027.

We will continue to watch for any updates on S.B. 3019, including whether it is signed into law by the governor.

[1] 205 ILCS 731/1-5(a).