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Goldberg Kohn

On June 16, 2026, Governor Pritzker signed into effect a $55.9 billion budget for fiscal year 2027, including the revenue and tax package, Illinois Senate Bill 3019 (“SB 3019”), which contained certain new and controversial taxes and tax law changes––the most material of which we have highlighted below. 

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Most significantly, SB 3019 creates new internet and social media taxes effective January 1, 2027, targeting online and digital businesses, including:

the first-in-the nation Digital Asset Tax Act (the “DATA”), imposing a 0.2% digital-asset tax on “digital asset brokers”;

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a 10% tax on “targeted advertising services”; and

a social media platform fee based on the number of Illinois users.

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In addition, for tax years ending after December 31, 2026, SB 3019 requires taxpayers to addback gain excluded from gross income for federal income tax purposes on the sale of qualified small business stock under Section 1202 of the Internal Revenue Code of 1986, as amended (the “IRC”), thereby eliminating the state income tax benefit for Illinois taxpayers often involved in private equity portfolio investments. 

Moreover, for tax years ending after December 31, 2027, SB 3019 modifies and diminishes the value of the Illinois net operating loss carryover deduction for businesses, and potentially the deferred tax assets on GAAP balance sheets of Illinois businesses.

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Effective January 1, 2027, SB 3019 requires a “digital asset broker,” as defined by reference to the IRC Section 6045(c)(1)(D)<a href="#_ftn1" id="_ftnref1">[1]</a>, to collect a tax of 0.2% on the value of a “digital asset business activity.” A digital asset business activity is defined as a single occurrence of exchanging, transferring, or storing a digital asset as part of a business or on behalf of a customer who has a contract for the provision of such services.&nbsp;

The DATA references the Illinois Digital Assets and Consumer Protection Act’s definition of “digital assets,” under which a digital asset is a digital representation of value that is used as medium of exchange, unit of account, or store of value, and that is not fiat currency whether or not denominated in fiat currency.<a href="#_ftnref2">[2]</a> The most common types of digital assets, often referred to as digital tokens, subject to the DATA include cryptocurrency tokens––commonly used as an alternative form of payment like Bitcoin (BTC) or Ethereum (ETH)––and security tokens which generally represent underlying ownership in businesses, debt, or other investments. While there are other forms of digital assets that are subject to the DATA, the biggest impact is likely to be on transfers of cryptocurrency and security tokens as such tokens are increasing in popularity in the digital investment era.

Registration. To engage in business as a digital asset broker in Illinois on or after January 1, 2027, digital asset brokers must register with the Illinois Department of Revenue by December 31, 2026. Certificates of registration are valid for one year and automatically renew unless the digital asset broker is otherwise notified.

Nexus and Sourcing.  The tax applies to digital asset brokers “maintaining a place of business” in Illinois, and those headquartered outside of Illinois with $100,000 or more of gross receipts from digital asset business activity sales to Illinois customers, determined on a quarterly basis for the preceding 12-month period. In-person sales in Illinois are de facto sales to Illinois customers. For electronic or phone sales, there is a rebuttal presumption that a customer requesting the sale is located in Illinois if the customer’s contact information associated with the device or account on record with a digital asset broker provides an Illinois home or mailing address, or an internet address or other data showing “place of primary use” in Illinois.

Collection. Digital asset brokers must collect the tax by adding the 0.2% levy to the purchase price received from a customer for the digital asset business activity, separately stated as distinct line item. Brokers must also provide a receipt to the customer for each digital asset transaction. Digital asset brokers are liable for the remittance of the tax regardless of whether the tax has been collected, and where such tax is collected, it is to be held in trust for the benefit of the Illinois Department of Revenue until remitted.

Filing and Remittance.&nbsp; Digital asset brokers are required to electronically (i) file a return containing the information specified in the statute, and (ii) remit the tax to the Illinois Department of Revenue on or before the 20th day of each month for the preceding calendar month.

Broker Liability. &nbsp;Failure to comply with the DATA may result in felony criminal prosecution and civil penalties for the digital asset broker and any officer, manager, member, accountant, or other agent who signs the return. The criminal prosecution for any violation of the DATA carries a five-year limitations period from the date of the offense.

Effective January 1, 2027, the Targeted Advertising Services Tax Act (the “TASTA”), enacted as part of SB 3019 requires “providers of targeted advertising services” (“Providers”) in Illinois to register and pay a 10% tax on gross receipts from “targeted advertising services” provided within Illinois.

SB 3019 defines targeted advertising service as any “programmatic” (capable of automating advertising services) written, oral, or graphic statement or representation communicated through a digital interface or other method of delivery, including: banner advertising, search engine advertising, full-screen advertising, and other comparable advertising services<a href="#_ftn3">[3]</a> that use personal information about the people to whom the ads are being served.

The tax is imposed upon Providers engaged in the business of providing targeted advertising services to a person who contracts with the provider for targeted advertising services (a “user-advertiser”) in Illinois. Targeted advertising services are considered provided within Illinois when the location of the person (“user-consumer”) to whom the targeted advertisement is conveyed is in Illinois.  To determine this, Providers are required to consider the totality of the user-consumer’s contact information within its possession or control, including technical and nontechnical information which may be included in the contract for digital advertising services. There is a rebuttable presumption that a user-consumer is in Illinois if the contact information associated with a device or account indicates a home address, mailing address or internet protocol address in Illinois, or other user-consumer data showing a place of primary use in Illinois.

Exclusions. The TASTA excludes advertising services on digital interfaces owned or operated by or on behalf of news media entities and does not apply to Providers with less than $1 million annual cumulative gross receipts from targeted advertising services provided in Illinois.<a href="#_ftn4">[4]</a>

Registration. Providers must electronically register with the Illinois Department of Revenue and obtain a certificate of registration by the end of 2026 in order to engage in such business in Illinois beginning January 1, 2027. Certificates of registration are valid for one year and automatically renew unless the Provider is otherwise notified.

Filing and Remittance. Like the digital asset tax, Providers are required to electronically (i) file a return containing the information specified in the statute, and (ii) remit the targeted advertising services tax to the Illinois Department of Revenue on or before the 20th day of each month for the preceding calendar month. To reimburse Providers for expenses for record-keeping, preparing and filing returns and remitting the tax, Providers who timely and correctly file the return and remit the tax may discount the amount of tax imposed by the TASTA by 1.75% (up to $1,000) per return period.

Provider Liability.  Failure to comply with the TASTA may result in felony criminal prosecution and civil penalties for the Provider and any officer, manager, member, accountant, or other agent who signs the return. The criminal prosecution for any violation of the TASTA carries a five-year limitations period from the date of the offense.

Beginning January 1, 2027, “social media platforms”<a href="#_ftn5">[5]</a> must report to the Illinois Secretary of State the average number of monthly users located in Illinois and pay a monthly fee within the first 14 days of each month based on that user count. The tiered monthly fee structure for 2027 is as follows:

100,001 to 500,000 Illinois users: $0.10 per user per month;

500,001 to 1,000,000 Illinois users: $40,000 monthly base fee + $0.25 per user per month; and,

1,000,001+ Illinois users: $165,000 monthly base fee + $0.50 per user per month.

Annual Adjustment. Each January, the fees are subject to increase by an amount equal to the annual unadjusted percentage increase in the Consumer Price Index.

Penalties. If a social media platform fails to pay the monthly fees, an additional fee in the amount equal to 100% of the unpaid fee, including penalties, will apply each month until fully satisfied.

Anti-Recoupment Provision. If a social media platform varies the cost of access, features, services or in-app purchases for any user based on the geographic origin of the user for purposes of recouping the social media fees, such user may bring a civil action in the Illinois circuit court.

The new taxes upon online and digital business activity are already raising compliance and legal concerns and are expected to face constitutional challenges.  Indeed, on June 22, 2026, the Illinois General Assembly introduced House Bill 5798 which, if enacted, would repeal the DATA effective immediately.

Commerce Clause. If not repealed, the digital advertising tax raises questions under the Commerce Clause. Because the tax applies to each “digital asset business activity,” multi-step transactions involving the same digital asset may result in cumulative taxation that is arguably unduly burdensome on interstate commerce.

Permanent Internet Tax Freedom Act. The imposition of the digital asset tax based on the digital nature and transfer of the asset, rather than the underlying economics, may violate federal law under the Permanent Internet Tax Freedom Act’s (the “PITFA”) prohibition on discriminatory taxes on electronic commerce. The targeted advertising services tax is expected to face a similar challenge under the PIFTA given that it applies exclusively to digital advertising and not to other media such as print, radio or television. Likewise, the social media platform fee may discriminate against electronic commerce by imposing a tax on online social platforms while offline social venues––such as community centers, clubs and networking groups––remain untaxed.

Compliance Concerns. In addition to the reporting obligations, the digital asset tax, targeted services tax and social media platform fee each also impose complex compliance obligations.  Each requires tracking the customer’s location, which may not be easily obtained, and raise privacy concerns.  In addition, the digital asset tax requires brokers to track the value of each digital asset activity and provide customers with receipts for each transaction, both of which are especially burdensome for brokers processing a high volume of transactions. Finally, for purposes of determining the average number of monthly users for the social media platform fee, SB 3019 does not address dormant users or users who are in multiple states in any given month.

Under IRC Section 1202, taxpayers who sell qualified small business stock may exclude a certain amount of gain from gross income for federal income tax purposes.  More than over half the states conform to Section 1202 and respect this exclusion for state income tax purposes, and Illinois was previously among them. Under SB 3019, however, for tax years ending on or after December 31, 2026, Illinois taxpayers must add back any excluded qualified small business stock gain to their state tax base.

For qualified small business stock issued before July 5, 2025, the per-taxpayer, per-issuer exclusion gain was generally capped at $10 million; the One Big Beautiful Bill Act raised the cap to $15 million for qualified small business stock issued on or after July 5, 2025 (with inflation adjustments beginning in 2027). <a href="#_ftn6">[6]</a>   Assuming the requirements for a 100% exclusion are met, the exclusion on the sale of qualified small business stock issued before July 5, 2025 yields approximately $2.38 million of federal tax savings, plus another $495,000 for an Illinois taxpayer.  Private equity, venture capital, and start-up entrepreneurs often structure their businesses specifically to capture the benefit of the qualified small business stock exclusion. By requiring Illinois taxpayers to add back gain that remains excludible for federal purposes and tax it as capital gain income at the state level, SB 3019 may discourage Illinois investors or Illinois business from pursuing these structures.

SB 3019 modifies the limitation on the net operating loss (“NOL”) carryover deduction under the Illinois Income Tax Act. For tax years ending on or after December 31, 2027, corporate NOL carryover deductions will be disallowed to the extent the deduction exceeds the greater of (1) a certain percentage of net income or (2) $500,000. The applicable percentage of net income increases each year through 2031, as summarized below.

Percentage of Net Income

Ending on or after 12/31/2027 and before 12/31/2028

Ending on or after 12/31/2028 and before 12/31/2029

Ending on or after 12/31/2029 and before 12/31/2030

Ending on or after 12/31/2030 and before 12/31/2031

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For purposes of determining the taxable year to which a net loss may be carried, taxpayers will not count any taxable year for which a deduction is disallowed.  

The implied value of NOL carryovers are often included as part of the deferred tax asset on a company’s GAAP balance sheet as NOL carryovers allow taxpayers to utilize their current and prior period losses to offset taxable income and tax payments in future tax periods. NOL carryovers indeed are often promoted as a positive tax attribute of a target corporation in sales of stock or other merger and acquisition activities, as the buyer of the target corporation’s stock will generally be able to utilize benefits of the NOL carryover deductions in future years, subject to certain limitations.<a href="#_ftn7">[7]</a> Accordingly, SB 3019 may result in a decrease in the valuation of the deferred tax assets of Illinois businesses on their balance sheet and may also then have book income implications.  Illinois businesses should consult with their tax advisors and accountants on the impact of this Illinois law change.

If you would like further information on these provisions or to speak with our tax lawyers at Goldberg Kohn, Inc., please reach out to us,

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<a href="#_ftnref1" id="_ftn1">[1]</a> A “broker” is defined in IRC Section 6045(c)(1)(D) as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”&nbsp;

<a id="_ftn1" href="#_ftnref1">[</a><a href="#_ftnref2">2</a><a id="_ftn1" href="#_ftnref1">]</a> 205 Ill. Comp. Stat.  731/1-5(a) (2025).

<a href="#_ftnref3">[3]</a> The TASTA defines “other comparable advertising services” to include: “(1) display advertising; (2) internet programmatic video advertising; (3) multichannel video programming distributor advertising conveyed via cable television, satellite television, or a digital fiber-optic distribution system; (4) advertising on social media; (5) native advertising; and (6) incentivized or rewarded advertising.”

<a href="#_ftnref4">[4]</a> Providers are to determine the last day of each quarter whether it meets the $1,000,000 threshold for the preceding 12-month period. Providers who are a part of a controlled group under IRC Section 1563(a) are treated as a single entity under the TASTA when employing this test.

<a href="#_ftnref5">[5]</a> SB 3019 amends the Business Corporation Act of 1983 to add “social media platform”––defined as “a website or internet medium that: (1) permits a person to become a registered user, establish an account, or create a profile for the purpose of allowing users to create, share, and view user-generated content through such account of profile; (2) enables one or more users to generate content that can be viewed by other users of the medium, and (3) primarily serves as a medium for users to interact with content generated by other users of the medium.” Social media platforms do not include not-for-profit organizations as defined in the General Not for Profit Corporation Act of 1986.

<a href="#_ftnref6">[6]</a> There are complex requirements for stock to qualify as qualified small business stock for IRC Section 1202 purposes and readers should contact their own tax advisors (or feel free to contact the Goldberg Kohn Tax lawyers listed in this advisory) to discuss.

<a href="#_ftnref7">[7]</a> While SB 3019 limits NOL carryovers at the state level, NOL carryovers are additionally generally limited at the federal level under IRC Sections 382 and Section 384, in order to prevent the trafficking of net operating losses when there is an ownership change by one (1) or more 5% shareholders increased by more than 50% over a rolling three-year testing period.

Illinois Enacts Controversial New Taxes as Part of FY2027 Budget (SB 3019)

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