Public Act 104-0006 introduces changes to the Illinois Income Tax Act, impacting many taxpayers and potentially increasing current tax year liabilities for some. These modifications are effective for tax years ending on or after June 16, 2025.
Under the new regulations, gains and losses from sales or exchanges of shares in Subchapter S corporations or interests in partnerships, excluding investment partnerships, will be allocable to Illinois if the pass-through entity is taxable in the state.
Starting with tax years ending on or after December 31, 2025, Illinois will adopt the Finnigan method of apportionment when calculating the sales factor numerator and applying throwback and throw-out rules. Additionally, two Safe Harbor exceptions have been removed from the 80/20 company addback provisions related to interest and intangible expenses.
Illinois will also align with federal filing guidelines concerning allocations of certain interest expenses for taxpayers subject to the IRC Sec. 163(j) deduction limit. Furthermore, the dividend received deduction for Global Intangible Low-Taxed Income (GILTI) is now limited to 50% of the recognized amount.
For more detailed information, refer to FY 2025-29 Bulletin, Legislative Income Tax Changes that May Increase Current Tax Year Liabilities.
