On June 16, Illinois Gov. J.B. Pritzker signed Senate Bill 3019, which contains a set of new indirect tax regimes on targeted advertising services, social media platforms, and digital asset transactions.1 The bill also modifies Illinois’ corporate net operating loss (NOL) limitation and pass-through entity tax (PTET) regime. Finally, the bill expands the scope of the Illinois sports wagering tax to include wagers placed on prediction markets, fantasy sports contests, and provides other tax updates.
Targeted advertising services tax
Beginning Jan. 1, 2027, Illinois will impose a gross receipts tax upon providers of targeted advertising services that annually derive more than $1 million in cumulative gross receipts from such services performed in Illinois.2
“Targeted advertising services” are defined to include programmatic advertising services that utilize personal information about the consumer to whom the advertisement is delivered.3 The term “programmatic” is further defined to mean services capable of being automated and may include services utilizing software-driven workflows or machine learning algorithms to deliver advertisements to a consumer based on defined parameters such as browsing, shopping, or purchase history. The tax applies broadly to targeted advertising services displayed on digital interfaces (e.g., websites and applications), and also includes:
- display advertising;
- video advertising via traditional media (cable television, satellite, etc.);
- social media advertising; and
- native and incentivized/reward advertising.
A carve-out exists for targeted advertising services displayed on digital interfaces owned or operated by or on behalf of a “news media entity” (an entity engaged primarily in the business of newsgathering, reporting, or publishing articles).4 However, a news media entity does not include an entity that is primarily an aggregator or re-publisher of third-party content.
Although the tax is imposed on targeted advertising services provided to an advertiser, targeted advertising services are sourced based on the location of the consumer. Providers are required to determine the location of consumers of their advertising services based on available information to the provider and may develop their own methodology for determining a consumer’s location.5 However, a rebuttable presumption exists under which a consumer is presumed to be located in Illinois if the consumer’s contact information is associated with an Illinois home, mailing or IP address, or other user-consumer data indicates Illinois is the place of primary use.6
The tax is imposed at a rate of 10% upon Illinois-sourced receipts.7 Providers are required to determine whether they meet the $1 million threshold on a quarterly basis. Once the threshold is met, providers are required to file returns for the subsequent year.8 Returns are due monthly, and filers of the return are permitted to claim a discount of 1.75%, which cannot exceed $1,000 per return.9
Although not clarified, this tax appears to be determined on an entity-by-entity basis, and also applies to disregarded entities as the term “provider” is defined broadly to include entities such as limited liability companies. However, an exception exists wherein a controlled group of business entities as defined under Internal Revenue Code (IRC) Sec. 1563(a) will be treated as a single provider.10 The statute only permits a state-level tax on targeted advertising services and preempts home-rule jurisdictions from imposing a local-level tax on targeted advertising services.11
Social media platform fee
S.B. 3019 also creates a fee schedule for social media platforms. Effective Jan. 1, 2027, social media platforms will be charged a fee according to their Illinois user base.12 A social media platform is defined as an online medium that collects a user’s data and allows users to create profiles, share or view user-generated content, and primarily allows users to interact with one another.
The fee is imposed monthly and is based on the number of Illinois users from whom the social media platform collects data. Specifically, platforms with at least 100,000 Illinois users will be charged $0.10 for each additional Illinois user, up to 500,000 total Illinois users. The rate increases to $0.25 for the next 500,000 Illinois users, and then to $0.50 for each additional Illinois user.13 Therefore, platforms with over 1,000,000 Illinois users will be charged $165,000, plus $0.50 for each additional Illinois user.
The fee, administered by the Illinois Secretary of State, is increased annually based upon the annual unadjusted percentage increase in the consumer price index.14 Social media companies that do not pay the fee are subject to a penalty of 100% of the unpaid fee and penalties each month, until the fee is paid.15
Notably, the term “user” remains undefined, and the bill does not provide a method for determining the Illinois user base of a social media platform.16 Further, the bill does not define who is considered the taxpayer for the fee (i.e., the corporation owning the social media platform, or a pass-through or disregarded entity). Additionally, no prohibition exists for home-rule jurisdictions from enacting similar taxes as Chicago enacted its social media amusement tax beginning on Jan. 1, 2026.17
Digital asset privilege tax
Beginning Jan. 1, 2027, Illinois will become the first state to impose a digital asset privilege tax, wherein customers who receive “digital asset business activity” in Illinois will be subject to a 0.2% tax on the value of the underlying digital asset on which the activity is performed.18 The term “value” is not specifically defined in the statute.
For the purposes of this tax, a customer is defined as a person (individual or business entity) receiving “digital asset business activity” from a digital asset broker (broker) for valuable consideration. Digital asset business activity includes the “exchange,” “transfer,” or “storage” of a digital asset. These terms are all further defined by statute, where “exchange” includes trading a digital asset for another digital asset or selling for fiat currency, excluding trading on one’s own account as a principal.
“Transfer” encompasses not only crediting a digital asset to another’s account but also moving assets from one account to another account of the same person. Finally, “storage” is defined to mean to either store, hold, or maintain custody or control of a digital asset on behalf of a customer by a broker.19 For the purposes of this tax, “digital asset” is defined to have the same meaning as under the Illinois Digital Assets and Consumer Protection Act, which would include digital assets such as cryptocurrency, stablecoins, and non-fungible tokens.20
Although the tax is imposed upon a customer, brokers are responsible for collecting and remitting the tax on a monthly basis.21 The act specifies that brokers collect the tax based on the purchase price paid to a broker, which includes any monetary value transferred and any or all incidental charges.22 The term “broker” has the same meaning as defined under IRC Sec. 6045(c)(1)(D).23
Brokers responsible for collecting the tax include those maintaining physical locations in the state (e.g., offices, transmission facilities, or representatives in the state) or having at least $100,000 in annual receipts from Illinois customers. The receipts threshold is determined on a quarterly basis. Similar to the targeted advertising services tax, while brokers are permitted to develop their own methodology for determining their Illinois-based customers, the same presumption for determining Illinois-sourced revenue exists as provided under the targeted advertising services tax.24
Prediction markets and fantasy sports exchange wagering
Effective July 1, 2026, Illinois is imposing a new tax on prediction markets.25 Specifically, the bill amends the Sports Wagering Act by creating a new definition of “exchange wager” which is “an agreement, contract, transaction, or swap that is offered, traded or executed on a prediction market or exchange tied” to a sporting contest or event.26 A graduated tax is imposed based on the number of wagers offered.
The tax is 1.75% for each of the first five million exchange wagers, and 3.5% for each additional exchange wager.27 Additionally, the act currently defines sports wagering to include exchange wagering.28 As sports wagering can only be provided by licensed Illinois sports wagering operators, the bill creates additional licensure requirements and fees for licensees offering exchange wagers.29
Beginning July 1, 2026, each fantasy contest operator licensee is subject to an annual 15% tax on the licensee’s adjusted gross fantasy contest receipts.30 “Adjusted gross fantasy contest receipts” subject to the tax are total gross entry fees collected from fantasy contest participants in Illinois, less the in-state participant pro rata share of the total cash prizes paid to any participants. A licensee may only accept entry fees from a person physically located in the state.31
Other income tax updates
For corporate income tax purposes, Illinois currently limits its NOL deduction to a maximum of $500,000. Under this bill, the maximum NOL carryover that a corporate taxpayer may utilize will increase over the course of several years through the adoption of a percentage-based deduction to serve as an alternative to the $500,000 deduction. For tax years ending on or after Dec. 31, 2027, the deduction will be the greater of: (i) 15% of net income; or (ii) $500,000.
While the $500,000 amount stays constant, the 15% amount rises to 30%, 50%, 65%, and 80% for tax years ending on or after Dec. 31, 2028, Dec. 31, 2029, Dec. 31, 2030, and Dec. 31, 2031, respectively.32 The increase in the percentage will provide taxpayers with the opportunity to utilize more of their NOLs, but it should be noted that the legislation does not restore a 100% NOL deduction thereafter.
The bill also creates an election for PTET purposes that allows partnerships to make an election to compute their PTET tax base based upon the full distributive share of income for its Illinois resident partners, plus the Illinois-sourced portion of the distributive shares of nonresident partners.33 Previously, the Illinois PTET tax base could only be calculated based on the Illinois-sourced distributive share of partnership income for both Illinois resident and nonresident partners.34 This annual election, which is irrevocable for the tax year in which such election is made, is available for tax years ending on or after Dec. 31, 2026.
For tax years ending on or after Dec. 31, 2026, Illinois requires individuals, trusts and estates, and partnerships to add back any gain excluded due to IRC Sec. 1202 (qualified small business stock transactions).35
Hotel marketplace facilitators
Starting July 1, 2026, Illinois requires hotel marketplace facilitators to collect the Hotel Operators’ Occupation Tax for transactions they facilitate.36 A hotel marketplace facilitator includes a platform that lists or advertises a premises for rent, lease, or let, collects payment from third-party customers, and transmits those payments to the hotel operator for compensation.
Transactions performed by a hotel marketplace facilitator subject to the tax include the renting, leasing, or letting of rooms which cover hotels, motels, as well as short-term rentals.37 A hotel marketplace facilitator is required to register and remit the tax once its cumulative gross receipts exceed $100,000.38
Commentary
Facing an approximate $2.2 billion deficit for fiscal year 2027, Illinois, like many other states, sought revenue-raising options to bridge the deficit.39 However, instead of choosing to decouple Illinois’ income tax regime from more taxpayer-friendly provisions enacted under the One Big Beautiful Bill Act, such as IRC Sec. 174A immediate expensing of domestic R&E,40 Illinois instead chose to enact a variety of new taxes on the digital economy. However, in enacting these new tax regimes, challenges for both taxpayers and potentially the state lie ahead.
The social media fee is a prime example. As indicated, the term “user” is undefined. This raises questions regarding whether the number of users should be counted based on the number of individuals or the number of accounts as an individual may have multiple accounts. Further, certain social media platform operators allow users to have linked accounts across multiple popular platforms. Further, the definition of a social media platform remains ambiguous.
Platforms with a primary purpose of content sharing clearly would be considered social media platforms under the legislation. However, questions arise for other platforms on whether they would qualify as a social media platform. For example, a platform which is primarily developed to allow users to purchase video games may have embedded social media capabilities and can contain robust commentary and shared content about games available on its platform.
Whether this type of platform qualifies as a social media platform subject to the tax remains unclear. As another example, a platform that provides a rating system for third-party products and services may be an even closer call, to the extent that such rating system is generated primarily by users sharing their experiences on the platform.
With respect to the targeted advertising services tax, it is important to consider the breadth of digital advertising. At a high level, digital advertising can involve advertisers seeking to reach consumers; publishers or platform operators that control the digital interface or advertising inventory where ads appear; and intermediaries such as ad servers, supply-side platforms (SSPs), ad exchanges, and demand-side platforms (DSPs) that help automate the buying and selling of advertising.
In a common open-web programmatic transaction, a publisher or platform operator makes an ad opportunity available through an ad server, SSP, and/or exchange. DSPs then evaluate the opportunity against advertiser-defined campaign criteria and permitted targeting or contextual signals and may submit bids to display an advertisement. This simplified model becomes more complicated where large integrated platforms control multiple parts of the transaction, such as the user relationship, ad inventory, data signals, auction mechanics, and buying tools.
Because the Illinois tax on targeted advertising services is imposed on the provider of targeted advertising services to the advertiser, and because the statute does not assign tax responsibility by reference to common ad-tech labels such as platform, DSP, SSP, or exchange, taxpayers potentially within the scope of the tax may need to closely analyze contracts, revenue flows, and the actual functions performed by each party to determine whether, and upon which party, the tax applies.
On the compliance side, difficulties may arise of determining which entity will be the filer of the tax return. While disregarded entities are clearly subject to the tax, the tax also appears to require reporting via a quasi-combined filing group as this new tax regime treats a federal controlled group of corporations as a single provider subject to the tax. However, the federal standard provides a more stringent ownership requirement than a combined filing group for Illinois income tax purposes. Accordingly, taxpayers potentially subject to this tax will need to closely analyze their organizational structure to determine the proper filer or filers.
Illinois’ digital asset privilege tax breaks new ground as the first state-level tax targeting cryptocurrency and other digital asset transactions, and its structure raises numerous administrability and compliance questions. Foremost among these is the undefined term “value.” Because digital assets — particularly cryptocurrencies and stablecoins — can experience significant intraday price volatility, taxpayers and brokers alike will need guidance on whether “value” refers to fair market value at the time of the transaction, the purchase price paid to the broker, or some other measure.
Although the statute directs brokers to collect the tax based on the “purchase price paid to a broker,” which suggests transaction-based sourcing, this term is not fully reconciled with the “value” of the underlying digital asset upon which the tax is nominally imposed.
The reliance on the IRC Sec. 6045(c)(1)(D) definition of “broker” also imports a body of federal law that is itself still evolving. Treasury’s final digital asset broker reporting regulations, effective for 2025 transactions and reported on Form 1099-DA, expanded the class of persons treated as brokers to include certain custodial trading platforms and payment processors. Illinois’ incorporation of this federal definition means that any future changes at the federal level, including potential rollbacks affecting non-custodial or decentralized finance (DeFi) participants, will directly impact this tax regime.
Brokers operating across multiple platforms, particularly those facilitating peer-to-peer or on-chain transfers, will need to evaluate whether traditional customer-location data (billing address, IP address) is sufficient to meet the state’s sourcing presumption, especially when customers use privacy-preserving wallets or VPNs.
Illinois’ extension of its sports wagering tax regime to prediction markets reflects a broader national debate over how to classify — and tax — the rapidly growing prediction market industry, which includes federally regulated platforms, as well as numerous offshore operators. By defining “exchange wager” to include any agreement, contract, transaction, or swap tied to a sporting event that is offered, traded, or executed on a prediction market, Illinois has effectively equated event-contract trading with traditional sports betting for state tax purposes.
This characterization is significant because prediction market operators have generally taken the position that their products are regulated derivatives under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC), rather than gambling subject to state licensure.
Beyond the preemption question, the statute leaves key computational issues unresolved. Most notably, the bill does not specify how to calculate an "exchange wager" for purposes of applying the graduated rate structure (1.75% on the first five million wagers, increasing to 3.5% thereafter). It is unclear whether each contract, each trade (including offsetting trades on a two-sided market), or each unique user position constitutes a separate “wager.”
Because exchange-traded event contracts frequently involve high-volume, low-value transactions and rapid position turnover, the choice of counting methodology could dramatically affect the effective tax rate. The bill's requirement that prediction market operators obtain sports wagering licensure, a process historically calibrated for a limited number of operators partnered with in-state casinos, also creates practical barriers to entry that may deter market participants and invite legal challenges.
Finally, the change to the state’s NOL deduction restrictions will provide eventual relief, albeit in several incremental steps. Restricting the ability of a taxpayer to take a nominal $500,000 deduction over the last several years in Illinois has resulted in profitable companies being unable to offset their income with attributes derived in comparatively leaner economic times. The ability to utilize NOLs through a percentage limitation as an alternative to a flat limitation should help to ameliorate some situations in which the NOL tax attribute otherwise would be effectively trapped.
1 S.B. 3019, Laws 2026.
2 S.B. 3019, §§ 1-10, 1-15.
3 Id.
4 Id.
5 Id. at § 1-20.
6 Primary place of use references the definition set forth under the Illinois Mobile Telecommunications Sourcing Conformity Act. (35 ILL. COMP. STAT. 638/1). Under this act, the primary place of use means the street address representative of where the customer's use of the mobile telecommunications service primarily occurs, which must be: (i) the residential street address or the primary business street address of the customer; and (ii) within the licensed service area of the home service provider.
7 S.B. 3019, § 1-15.
8 Id. at § 1-10.
9 Id. at § 1-35.
10 A controlled group of corporations under IRC Sec. 1563(a) can be satisfied by meeting one of four specific types of ownership requirements but is most commonly met under the parent subsidiary control group under Sec. 1563(a)(1). A parent-subsidiary controlled group exists when one or more chains of corporations is connected through stock ownership via a common parent corporation wherein stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of all classes of stock of each of the corporations, except the common parent corporation, is owned by one or more of the other corporations.
11 S.B. 3019, § 1-70.
12 S.B. 3019, § 5-5, adding 805 Ill. Comp. Stat. 5/15.98(a).
13 S.B. 3019, § 5-5, adding 805 Ill. Comp. Stat. 5/15.98(b).
14 S.B. 3019, § 5-5, adding 805 Ill. Comp. Stat. 5/15.98(e).
15 S.B. 3019, § 5-5, adding 805 Ill. Comp. Stat. 5/15.98(b).
16 See generally, S.B. 3019, § 5-5, adding 805 Ill. Comp. Stat. 5/15.98.
17 Municipal Code of Chicago §§ 4-156-1000 - 1040.
18 S.B. 3019, §§ 3-5 – 3-70.
19 S.B. 3019, § 3-15.
20 205 Ill. Comp. Stat. 731/1-5(a).
21 205 Ill. Comp. Stat. 731/1-5(a).
22 S.B. 3019, §§ 3-35, 3-40.
23 S.B. 3019, § 3-15.
24 Compare, S.B. 3019, §§ 1-20, and 3-25.
25 See, S.B. 3019, § 130-5, amending 230 Ill. Comp. Stat. 45/25-10, 45/25-90.
26 S.B. 3019, § 130-5, amending 230 Ill. Comp. Stat. 45/25-10.
27 S.B. 3019, § 130-5, adding 230 Ill. Comp. Stat. 45/25-90(d-20).
28 S.B. 3019, § 130-5, amending 230 Ill. Comp. Stat. 45/25-10.
29 S.B. 3019, § 140-10, amending 230 ILL. COMP. STAT. 45/25-45.
30 S.B. 3019, § 130-5, adding 230 ILL. COMP. STAT. 45/25-120.7.
31 S.B. 3019, § 130-5, adding 230 ILL. COMP. STAT. 45/25-120.4(c).
32 S.B. 3019, § 10-5, amending 35 ILL. COMP. STAT. 5/207(d).
33 S.B. 3019, § 825-5, adding 35 ILL. COMP. STAT. 5/201(p)(2.1).
34 ILL. COMP. STAT. 5/201(p)(2).
35 S.B. 3019, § 120-5, adding 35 ILL. COMP. STAT. 125-5(a)(2)(D-26), (c)(2)(G-18), (d)(2)(D-13).
36 S.B. 3019, § 35-5, amending 35 ILL. COMP. STAT. 145/2.
37 S.B. 3019, § 35-5, amending 35 ILL. COMP. STAT. 145/2(12), (13).
38 S.B. 3019, § 35-5, amending 35 ILL. COMP. STAT. 145/3(B-10).
39 See, Illinois Economic and Fiscal Policy Report (October 8, 2025).
40 For further discussion, see GT SALT Alert: New York state and city decouple from some OBBBA provisions
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