Illinois Tax Law Changes – June 2026

On May 31, 2026, the Illinois General Assembly approved a Revenue Omnibus bill introducing several significant tax changes affecting businesses, including pass-through entities. The legislation, currently awaiting the Governor’s signature, includes updates that may impact 2026 tax planning, estimated payments, and transaction modeling for taxpayers with Illinois connections.

A key change expands the Pass-Through Entity Tax (PTET) election beginning with tax years ending on or after December 31, 2026. In addition to the existing Illinois-sourced income method, entities may elect a new “full distributive share” approach, allowing PTET to be applied to 100% of Illinois-resident owners’ income regardless of where it is earned. This creates planning opportunities but also adds complexity, particularly as guidance on 2026 estimated payments remains limited.

The legislation also extends and tightens net operating loss (NOL) deduction limitations for C corporations beyond 2026. Beginning in 2027, deductions will be phased in based on a percentage of net income, starting at 15% and gradually increasing to 80% by 2031, while retaining a $500,000 cap. This change may significantly impact cash tax obligations and long-term forecasting.

Overall, these changes represent a broad expansion of Illinois’ tax base and may significantly affect your business. Businesses with Illinois activity should evaluate the impact of these provisions on their 2026 planning and beyond. For assistance in assessing these changes and optimizing your tax strategy, please contact a member of our team.