Illinois to Tax Online Ads, Social Media, Prediction Markets (1)

More than $800 million in new tax revenue is expected to flow into Illinois coffers next year under several new levies engineered to prop up the state’s $55.9 billion fiscal 2027 budget.

The General Assembly approved a broad revenue bill (SB 3019) early Monday that includes new taxes on digital advertising, prediction markets, cryptocurrency, and social media platforms. Large corporations would pay more to the state through a change in the way net operating losses are treated. And a plan to eliminate the Illinois Tax Tribunal and pull adjudication of tax disputes into the Illinois Department of Revenue was removed from the final bill.

Consumers scored a small bit of tax relief under a back-to-school sales tax holiday in effect Aug. 7-16. The budget also pauses a 1.3-cent per gallon gas tax increase for six months; it had been scheduled to launch July 1.

The bill passed the Assembly Monday by a 73-41 vote. The Senate concurred 36-19. The additional revenue will support spending in the broader budget bill (HB 111), which also won approval Monday.

Gov. J.B. Pritzker (D) said he looked forward to signing the budget in a statement issued a few hours after the spring legislative session adjourned.

The Illinois Policy Institute, a fiscal policy think tank that favors conservative tax policy, faulted the legislature for stacking up tax increases to balance the budget and rejecting strategies to control spending.

“To cover the rising costs of education, state pensions and health benefits for government workers, the budget uses shortsighted fixes and ignores structural problems,” Bryce Hill, the institute’s director of fiscal analysis, wrote. “Once again, taxpayers will pay the price.”

Advertising, Crypto, Social Media

Illinois will join the growing list of states taxing advertising with a 10% levy on the gross receipts derived from “targeted advertising services” within its borders. The new levy will be applied to any business whose annual cumulative gross receipts from such services exceed $1 million during the previous 12 months. It also would apply to companies earning revenue from digital, social media, and display advertising.

Total revenue from the levy is unclear, but the institute projected it would bring in $200 million for the state.

The bill imposes a levy on cryptocurrency users, for the “privilege of receiving any digital asset business activity by a customer in this State at the rate of 0.2% of the value of the digital asset.” Digital asset brokers, including exchanges, brokerages, and transmission facilities, would be required to collect the tax and remit their collections to the state. The institute estimated the privilege tax would raise $60 million.

The measure also creates a graduated system of fees on social media platforms linked to their in-state users. The institute estimated the new levy would raise more than $200 million.

The new fee system is pegged at 10 cents per month on platforms with more than 100,000 Illinois users, but not more than 500,000. Social media platforms with over 500,000 Illinois users, but not more than 1 million, would pay $40,000, plus 25 cents per month multiplied by the number above 500,000. And those with more than 1 million users would pay $165,000, plus 50 cents per month multiplied by the number of Illinois users over 1million.

The three new taxes would take effect Jan. 1, 2027.

A fourth feature of the bill would pull the booming prediction markets into the tax scheme embedded in Illinois’s Sports Wagering Act. Prediction markets permit players to trade contracts based on the outcome of real-world events including elections, economic data, and sports games. Last year trading volume hovered around $1.2 billion per month, but that has surged to $20 billion per month in 2026, according to a report by the analytics firm TRM Labs. Earlier this year Kentucky became the first state to tax such markets.

Businesses would pay more in taxes under a provision restricting net operating losses to $500,000 or 15% of net income, whichever is greater, during fiscal 2027. The allowed percentage is scheduled to increase each year until it reaches 80% in 2031.

The Illinois Policy Institute’s Hill characterized the change as a corporate income tax hike of $300 million. Capping NOLs, he wrote, “can lead to companies paying far higher effective tax rates than the state’s statutory corporate income tax rate.”

Business interests, however, were successful in defeating Pritzker’s plan to eliminate the independent tax tribunal, said Keith Staats, president of the Taxpayers’ Federation of Illinois.

The budget fully funds the tribunal, and a separate bill (HB 862) makes some minor amendments to the functions of the tribunal. This includes modifications to ethical standards that specify judges cannot continue to serve more than 60 days after their term ends, Staats said.

Illinois Democrats, who control both the House and the Senate by substantial majorities, were also unable to pass the much-discussed 100% tax on payouts from President Donald Trump’s “Anti-Weaponization Fund.” The proposed tax (HB 5794) was introduced just four days before the end of the legislative session and never moved beyond the House Rules Committee.

Illinois was among a handful of Democratic-led states that had floated similar taxes to claw back any payouts from the fund for people alleging mistreatment by the government, which critics said amounted to a “slush fund” for Trump’s allies. The Trump administration plans to scrap the proposed fund, Bloomberg News reported Monday, which would make any possible state strategies moot.

David Harris, director of the state Department of Revenue, declined comment, saying the department is still reviewing the budget legislation.