Illinois Enacts Tax Amnesty Programs

On June 16, Illinois enacted its fiscal year 2026 budget bill (H.B. 2755), which includes several significant tax changes, including tax amnesty programs for the franchise tax, corporate income tax, and sales and use tax.

Office of the Secretary of State franchise tax amnesty

The Secretary of State will establish a franchise tax amnesty program that will begin Oct. 1, 2025, and end Nov. 15, 2025. Amnesty will apply to franchise tax liabilities for tax periods ending after June 30, 2019, and on or before June 30, 2025. Upon full payment of all taxes due under the program, penalties and interest will be abated. Taxpayers that have received interrogatories from the Secretary of State are disqualified from participating in the amnesty.

Crowe observation

The Illinois franchise tax often is missed by taxpayers because it is managed by the Secretary of State and not the Department of Revenue. The amnesty program offers companies the chance to come into compliance and have interest and penalties abated with a limited lookback period.

Department of Revenue general tax amnesty

The Department of Revenue will establish an amnesty program that will begin Oct. 1, 2025, and end Nov. 15, 2025, applicable to all taxes collected by the department. The program includes corporate income tax, individual income tax, and sales and use tax. The amnesty will apply to all taxes due for any tax period ending after June 30, 2018, and before July 1, 2024.

Upon full payment of all taxes due, the department will abate all related interest and penalties.

Department of Revenue remote retailer sales tax amnesty

The Department of Revenue will establish a sales tax amnesty program for remote retailers that will begin Aug. 1, 2026, and end Oct. 31, 2026. The program covers sales of tangible personal property made between Jan. 1, 2021, through June 30, 2026, that a remote retailer shipped or delivered to an Illinois address.

An out-of-state seller with no physical presence in Illinois has economic nexus with the state and a sales and use tax filing obligation when it has $100,000 of Illinois retail sales or 200 Illinois sales transactions for the relevant amnesty years.

In lieu of the retailers’ occupation tax otherwise due on such sales, a remote retailer participating in the program pays either of the following alternative simplified tax rates for eligible transactions:

• 9% sales tax rate on gross receipts previously subject to the 6.25% state tax rate
• 1.75% sales tax rate on gross receipts previously subject to the 1% state tax rate, which applies to certain qualified food, drugs, and medical appliances

The rates are intended to reflect both the state sales tax rate and an average local sales tax rate.

Existing Illinois law defines a remote retailer as a retailer that does not maintain (directly or by a subsidiary) an office, distribution house, sales house, warehouse, or other place of business in Illinois or does not have an agent or other representative operating in Illinois under the authority of the retailer or its subsidiary.

Interest or penalties that otherwise might be applicable on eligible transactions reported under the program will be abated.

Looking ahead

Tax amnesty programs allow taxpayers to come into compliance with reduced penalty and tax exposure. Illinois’ amnesty covers most taxes, making this a unique opportunity for taxpayers to review past activity, analyze whether there are areas of noncompliance, and mitigate tax risk in the state. Taxpayers should consult with their tax advisers to evaluate whether Illinois tax amnesty might make sense for them.