Bill > SB2021

This bill amends the Illinois Income Tax Act to remove the existing provision that limited the pass-through entity level tax election to tax years beginning prior to January 1, 2026. The pass-through entity tax (PTET) allows partnerships and S corporations to elect to pay state income tax at the entity level, which provides a potential federal tax benefit for partners and shareholders by converting state income taxes into a business expense. Specifically, the bill eliminates the sunset date for this tax election, effectively making the PTET a permanent option for eligible pass-through entities. Under this provision, qualifying entities can elect to pay a 4.95% tax on their net income, and partners or shareholders can then claim a corresponding tax credit on their individual tax returns. The bill maintains the existing rules around the election process, including requirements for making the election, calculating net income, and handling credits for partners and shareholders. The change provides continued flexibility for pass-through entities in managing their state tax obligations and potentially reducing the federal tax impact of state income taxes.

Budget and Finance

https://www.ilga.gov/legislation/BillStatus.asp?DocNum=2021&GAID=18&DocTypeID=SB&SessionID=114&GA=104