A breakdown of the FY2027 budget’s digital advertising tax, crypto tax, and other new state and local tax provisions affecting Illinois businesses.
On June 1, 2026, the Illinois General Assembly passed Senate Bill 3019, the revenue component of the state’s roughly $55.9 billion FY2027 budget. Projected to raise more than $800 million, the bill is now awaiting Governor Pritzker’s signature. Most of these changes were added through a late amendment, and they reach advertising, technology, digital assets, gaming, and corporate income tax.
The provisions most likely to affect Illinois businesses are summarized here. Many of them turn on specific thresholds, definitions, and effective dates, so the real-world impact will depend on the particulars of your operations.
Key Effective Dates at a Glance
- July 1, 2026: Fantasy contest tax; hotel marketplace facilitator tax
- August 7–16, 2026: Back-to-school sales tax holiday
- January 1, 2027: Targeted advertising tax, social media platform fee, digital asset tax, and tobacco tax changes; the delayed motor fuel increase also takes effect
- Tax years ending on or after December 31, 2026: Section 1202 addback; pass-through entity election
- Tax years ending on or after December 31, 2027: NOL carryover cap begins, phasing up to 80% by 2031
Targeted Advertising Services Tax
Effective January 1, 2027, SB 3019 establishes a 10% tax on gross receipts from targeted advertising services provided in Illinois. The tax reaches only “programmatic” advertising, broadly meaning ads sold and placed through automated, software-driven systems. It carves out advertising delivered on digital interfaces owned or operated by news media entities, and it does not apply to providers below a $1 million annual Illinois gross-receipts threshold for targeted advertising. Members of a controlled group are aggregated when testing that threshold, and localities are preempted from imposing their own tax on these services. Businesses with meaningful digital advertising revenue tied to Illinois users should evaluate exposure early.
The provision mirrors Maryland’s digital advertising tax, which a Maryland court struck down on constitutional grounds, and trade groups have already urged Governor Pritzker to veto it. Legal challenges in Illinois are likely, which makes the effective date a moving target worth watching.
Social Media Platform Fee
Beginning January 1, 2027, social media platforms will owe a monthly fee based on their number of Illinois users, on a tiered scale that runs from roughly $0.10 to $0.50 per user per month as platform size increases. Platforms with at least one million Illinois users pay the top rate, a base fee plus $0.50 per user, and the law seeks to bar them from passing the cost on to consumers. Platforms will need to stand up reporting processes to track and substantiate Illinois user counts.
Digital Asset Privilege Tax
In what may be the first targeted state tax on cryptocurrency in the nation, SB 3019 imposes a tax beginning January 1, 2027 on businesses that exchange, transfer, store, or provide custodial services for a digital asset on behalf of a customer. The rate is 0.2% of the value of the digital asset, and the definition of “digital asset” is broad. Exchanges, custodians, and other digital-asset businesses with Illinois customers should assess how the tax applies to their activity.
Gaming and Wagering
SB 3019 broadens sports wagering taxation in two ways. It taxes “exchange wagers” on prediction markets tied to sporting contests at 1.75% per wager (up to five million wagers in a fiscal year) and 3.5% after that, on top of the existing sports wagering taxes. Separately, beginning July 1, 2026, fantasy contest operators face a 15% tax on adjusted gross fantasy contest receipts.
Corporate and Income Tax Changes
Several provisions reach well beyond the digital economy:
- Net operating loss carryovers. For tax years ending on or after December 31, 2027, corporate NOL carryover deductions are capped at a percentage of net income. The cap starts at the greater of 15% or $500,000 and rises each year, reaching 80% for tax years ending on or after December 31, 2031.
- IRC Section 1202. For tax years ending on or after December 31, 2026, gain excluded federally under Section 1202 (qualified small business stock) is added back to the Illinois base for individuals, trusts, estates, and partnerships.
- Pass-through entity tax. For tax years ending on or after December 31, 2026, partnerships may elect between the full distributive share method and the Illinois-sourced income method.
Other Notable Provisions
- Hotel Operators’ Occupation Tax. Beginning July 1, 2026, the tax expands to hotel marketplace facilitators meeting a $100,000 Illinois gross-rental-receipts threshold.
- Tobacco products tax. Beginning January 1, 2027, the tax base shifts to actual cost paid, with new obligations for certain remote retail sellers and a $0.75-per-cigar cap (excluding little cigars) for 2027–2029.
- Sales tax holiday. A reduced 1.25% state rate applies from August 7–16, 2026 to items like clothing under $125 and school supplies.
- Motor fuel tax. This year’s scheduled CPI-based increase, roughly 1.3 cents per gallon, is paused for six months until January 1, 2027.
What This Means for Your Business
SB 3019 is a substantial tax package, and its provisions take effect on staggered dates starting in mid-2026. If you operate a digital platform, hold or custody digital assets, or carry significant net operating losses, it is worth modeling the impact before the first effective dates arrive. Businesses outside those categories may still want to confirm where they stand.
If you have questions about how SB 3019 applies to your situation, our State and Local Tax team can help. Email salt@dhjj.com to talk it through.
