Illinois bill ‘decouples’ state, federal taxes, raising revenue and
angering businesses
[November 05, 2025]
By Ben Szalinski
SPRINGFIELD — Illinois lawmakers are sending a bill to Gov. JB Pritzker
that makes a pair of changes to Illinois’ tax code in response to new
federal tax provisions that could reduce state revenue.
The Governor’s Office of Management and Budget projected last month that
Illinois is on track to run a $267 million deficit in fiscal year 2026.
That’s partially a result of corporate tax cuts enacted at the federal
level as part of the One Big Beautiful Bill Act, officially known as
House Resolution 1, that President Donald Trump signed on July 4.
Many states like Illinois tie sizable portions of the tax code to the
federal government’s policies. That means HR1 would also reduce the
amount of revenue the state receives unless Illinois takes the action
Pritzker’s budget office recommended in its report last month that state
lawmakers pass a bill to “decouple” parts of the state’s corporate tax
code from the federal tax code to address this year’s deficit and allow
the state to receive taxes it otherwise would not have received because
of HR1.
The House voted 76-33 and the Senate 37-19 to pass Senate bill 1911. If
signed by the governor, it would erase about $250 million from the
projected fiscal year 2026 deficit.
“The purpose, ultimately, is to make sure that we can pay the bills in
the state of Illinois and not be hampered by Donald Trump and the big
government bill,” Pritzker told reporters in Springfield last week.
Tax changes
One change approved by Congress allows manufacturers to claim a larger
deduction for assets as soon as they go into service, allowing
businesses to save more money in the short-term. By stopping that change
from applying to Illinois, the state would save $144 million in FY26,
according to an analysis by Senate Democrats shared with Capitol News
Illinois.
One change would actually align Illinois’ tax code with the federal
government by redefining a tax on businesses’ overseas profits that
state lawmakers passed in May as part of the FY26 budget. That ensures
the state can collect an expected $90 million in revenue from the tax
this year.
The state is also extending a measure that was put in place in 2021
pertaining to filing taxes as pass-through entities. Senate Democrats
say it will save businesses money on federal taxes without impacting
state coffers. It was slated to expire this year but will be made
permanent under the measure.
“That’s revenue that doesn’t have to go to D.C. that can stay here in
Illinois,” Taxpayers’ Federation of Illinois President Maurice Scholten
told Capitol News Illinois. “Illinois business owners can spend it in
the communities or further invest in their businesses and expand and
hire additional workers.”
Businesses concerned
Some business organizations worry the measure will hurt Illinois’
ability to attract and retain businesses. Illinois Manufacturers’
Association CEO Mark Denzler said changes to the depreciation of assets
deduction will “hamper economic development efforts and put the state at
a competitive disadvantage.”
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Gov. JB Pritzker takes questions in his Capitol office on Thursday,
Oct. 30. (CNI photo by Andrew Adams)
“This measure deprives Illinois manufacturers of important tax benefits
that allow businesses to upgrade equipment, expand facilities and grow
jobs,” Denzler said in a statement. “It represents yet another blow to
our state’s manufacturing industry.”
Pritzker defended the policy, arguing that businesses will still find
Illinois to be an attractive place because of the state’s
infrastructure, education and health care systems. Republicans said the
federal government’s tax cuts would also be beneficial in Illinois.
“When the federal government tries to, you know, add rocket fuel to
manufacturing and other industries, we shouldn’t have to be the
outlier,” Rep. Amy Elik, R-Godfrey, said during debate in the House last
week. “We should be taking advantage of those opportunities and helping
businesses decide to locate here.”
Scholten argued the taxes Illinois is decoupling from will negatively
impact the state in the future.
“This change pushes Illinois’ corporate tax structure even further out
of line when you compare it to other states,” Scholten said. “And we
understand that lawmakers were trying to balance a difficult budget, but
relying on higher business taxes every time revenue falls short can
create a vicious cycle that ultimately weakens Illinois’ tax base in the
long run.”
FY26 revenue remains up
Despite warnings from the governor’s budget office about FY26 ending in
a deficit, the latest data from the General Assembly’s independent
Commission on Government Forecasting and Accountability shows FY26
revenue remains up through October compared to FY25.
The October report released Tuesday shows total general fund revenue for
the year remains 2.9%, or $474 million, above this point last year. Much
of that growth stems from a transfer from the state’s income tax refund
account, but other sources, such as sports betting and sales tax, have
also grown despite concerns about the economy slowing.
Corporate income taxes continue to be down for the year, however. It’s
down 14.1%, or $228 million, for FY26 so far. However, the state brought
in 22% more in corporate income taxes this October than in October 2024
following a substantial decline in September.
Capitol News Illinois is
a nonprofit, nonpartisan news service that distributes state government
coverage to hundreds of news outlets statewide. It is funded primarily
by the Illinois Press Foundation and the Robert R. McCormick Foundation. |
