On May 31, 2025, the Illinois General Assembly passed HB2755 as part of the FY2026 budget bill, which contains a number of significant tax changes to the Illinois Income Tax Act and other taxes. Governor Pritzker appears set to sign the budget before July 1st.
Major changes made by HB2755 include: (1) expanding the corporate income tax base with provisions specifically targeting multinational corporations, (2) expanding the Hotel Operatorâs Occupation Tax (âHOOTâ) tax base by including short-term rentals, and (3) establishing income and franchise tax amnesty programs.
- Illinois Income Tax
- Interest & Intangible Income Addbacks and 163(j) Limitation: For taxable years ending on or after December 31, 2025, two exemptions from the interest addback are eliminated: the non-tax avoidance exemption and the subject to tax exemption. Â Additionally, for purposes of the IRC section 163(j) limitation, the amount of interest for which a deduction is allowed shall be treated as allocable first to persons who are ânot foreign personsâ and then to such foreign persons.
- Global Intangible Low-Taxed Income (âGILTIâ):For taxable years ending on or after December 31, 2025, 50% of a taxpayerâs GILTI income is subject to tax. Illinois historically has not taxed GILTI.
- Sourcing of Sales of Passthrough Entities: Effective immediately, gains and losses from the sale of a passthrough entity are allocable to Illinois based on the passthrough entityâs Illinois apportionment factor.Â
- Moving Illinois From Joyce to Finnegan: Moves Illinois from a Joyce state to a Finnegan state for tax years ending on or after December 31, 2025. Â As a Finnegan state, the numerator of a unitary groupâs apportionment factor must now include Illinois sales of entities that do not have nexus with Illinois.
- HOOT
- Expanding HOOT to Short-Term Rentals (STRs): Effective July 1, 2025, the HOOT is expanded to apply to short term rentals whereas currently, it only applied to hotels.
- Tax Amnesty
- Illinois Department of Revenue Amnesty: Creates a tax amnesty program from October 1 through November 15, 2025. The program provides that upon payment by a taxpayer of all taxes due, the Illinois Dept. of Revenue will abate interest or penalties that may be applicable or seek civil/criminal penalties for the amnesty period.  Taxpayers who are party to an ongoing civil or criminal litigation for nonpayment, delinquency, or fraud are not eligible.
- Illinois Franchise Tax Amnesty: Creates an Illinois Franchise Tax amnesty from October 1 through November 15, 2025 covering taxable periods ending after June 30, 2019 and on or before June 30, 2025. The program provides that upon payment of all franchise taxes and license fees due, the Secretary of State will abate all interest and penalties for the applicable period. Taxpayers who are party to an ongoing civil, administrative, or criminal investigation or litigation are not eligible.Â
Given the scope of the changes, the full impact of HB2755âs provisions will be determined in subsequent months and years. To this end, aggressive expansion of the corporate income tax to target multinational corporations creates serious constitutional issues which will likely be addressed in future litigation.
Contact the Authors: Ted Bots, Drew Hemmings, David Simon-Fajardo
