Illinois Gov. JB Pritzker has signed legislation (S.B. 1911) to update the state’s adherence to several tax law changes made by the One Big Beautiful Bill Act (OBBBA). The Illinois Office of Management and Budget estimates the provisions in S.B. 1911 will prevent a $267 million gap in the state’s 2026 budget.
GILTI/NCTI
In June, Illinois changed its tax law to subject 50% of global intangible low-taxed income (GILTI) to tax. The OBBBA, enacted in July, replaced GILTI with net controlled foreign corporation tested income (NCTI). S.B. 1911 brings Illinois law into conformity with OBBBA changes and provides that 50% of NCTI will be subject to tax. The law change does not provide for apportionment factor representation and is effective for tax years ending on or after December 31, 2025.
Bonus Depreciation
The OBBBA created Section 168(n) to allow 100% expensing of some nonresidential real property used in production activities occurring in the U.S. Similar to the decoupling of federal bonus depreciation under Section 168(k), S.B. 1911 decouples Illinois from Section 168(n), which means Illinois taxpayers will be required to depreciate the asset over its useful life. The change is effective for tax years 2026 and thereafter.
Pass-Through Entity Tax
The optional Illinois pass-through entity tax was due to expire in 2025. S.B. 1911 makes the tax permanent but does not change how it is calculated.
Excess Business Losses
The OBBBA made permanent the Section 461(l)(1)(B) excess business loss limitation for noncorporate taxpayers. In response, S.B. 1911 makes permanent the deduction of excess business loss for trusts and estates for Illinois purposes.
STAR Bonds
S.B. 1911 creates the Statewide Innovative Development and Economy Act to allow the state to create sales tax and revenue (STAR) bond districts that are intended to attract major tourism, entertainment, retail, and mixed-used projects. Future sales tax revenue generated from those projects will be used to repay bondholders, and proceeds will be used to finance the project’s qualified expansion costs.
BDO Insight
- The Illinois legislature will reconvene soon and is expected to consider decoupling from additional OBBBA provisions, particularly those that would significantly decrease state revenue.
- The lack of apportionment factor representation for NCTI subject to Illinois tax might be subject to constitutional challenges.
Please visit BDO’s State & Local Tax Services page for more information on how BDO can help.