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SB 3786

DCEO-TAX CREDIT REPORT

104th Regular Session Introduced by Chris Balkema and 4 co-sponsors

Illinois grants three tax credits: a legacy credit for Illinois-headquartered firms, plus employee and collective-bargaining credits for Illinois-resident workers.

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Bill Summary · SB 3786

Summary of SB 3786 (104th General Assembly) – Illinois

Proposed by Sen. Seth Lewis; with co-sponsors Sen. Darby Hills and Sen. Chris Balkema. Introduced February 5, 2026. Referred to Revenue; related committee deadlines and activity noted. Effective date: immediate upon enactment.

1) Purpose and intent

  • Create new tax credits under the Illinois Income Tax Act to encourage business activity, Illinois-based headquarters, and employment in the state.
  • Establish three targeted credits designed to reward (a) long-term Illinois headquarters presence, (b) employment of state residents by Illinois-based employers, and (c) collective-bargaining-adjacent employment.

2) Key provisions and changes

A. New Legacy Credit (Section 246)

  • Eligibility: Any sole proprietorship, LLC, or corporation that is headquartered in Illinois for the taxable year beginning on or after January 1, 2026.
  • Credit amount: $100 multiplied by the number of years the taxpayer has been headquartered in Illinois as of the last day of the taxable year.
  • Allocation for S corporations: Credit passes through to shareholders according to Subchapter S rules.
  • Tax applicability: Credit cannot reduce tax liability below zero. Any excess credit may be carried forward to up to 15 taxable years following the excess year, applied in priority to earlier-year credits if multiple credits exist.
  • Administrative note: Exempt from Section 7250 provisions.

B. Employee Tax Credit (Section 247)

  • Eligibility: Any sole proprietorship, LLC, or corporation with a business location in Illinois.
  • Credit amount: $100 for each employee who is a resident of Illinois and on the employer’s payroll with at least 6 consecutive months of employment by year-end.
  • Allocation for S corporations: Pass-through to shareholders as per Subchapter S rules.
  • Tax applicability: Credit cannot reduce tax liability below zero. Excess may be carried forward for up to 15 years. Apply earliest-year credits first.
  • Administrative note: Exempt from Section 7250 provisions.

C. Collective Bargaining Employee Tax Credit (Section 248)

  • Eligibility: Any sole proprietorship, LLC, or corporation with a business location in Illinois.
  • Credit amount: $25 for each employee who is a resident of Illinois, who qualifies under National Labor Relations Board definitions, and who has at least 6 consecutive months of employment by year-end.
  • Allocation for S corporations: Pass-through to shareholders per Subchapter S rules.
  • Tax applicability: Credit cannot reduce tax liability below zero. Excess may be carried forward for up to 15 years. Apply earliest-year credits first.
  • Administrative note: Exempt from Section 8250 provisions.

3) Who would be affected

  • Businesses headquartered in Illinois (legacy credit) and any business with a location in Illinois (employee and collective bargaining credits) that file Illinois individual or corporate income taxes.
  • Taxpayers that are sole proprietors, partnerships, LLCs, or corporations, including Subchapter S corporations (with passthrough treatment to shareholders).
  • Illinois resident employees who meet the 6-month employment requirement for the employee credits.
  • Employers engaged in or supporting collective bargaining arrangements for the collective bargaining credit.

4) Procedural and timeline aspects

  • Effective date: Immediate upon becoming law (i.e., in effect for taxable years beginning on or after January 1, 2026).
  • Carryforward provisions: All three credits include a maximum 15-year carryforward for any unused credit.
  • Order of application: When applying multiple credits to offset a tax liability, the earliest-year credits are applied first.
  • Administrative exemptions: Each new credit explicitly exempt from certain provisions (Sections 7250 or 8250, as noted).

5) Practical considerations

  • The Legacy Credit rewards Illinois-headquartered status, potentially encouraging companies to establish or maintain headquarters within Illinois.
  • The Employee Credit creates a per-employee incentive, potentially affecting hiring decisions for residents with six months of tenure.
  • The Collective Bargaining Credit targets workplaces with NLRB-defined employee protections and six months of service.
  • Overall fiscal impact would depend on tax liability levels of eligible taxpayers and how widely credits are claimed, given the 15-year carryforward option.

Note: This summary reflects the introduced version of SB 3786 as of the 104th General Assembly. If amended, provisions and applicability could change.

Compiled from official sources — confirm details with the bill’s official record.

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