ESTATE TAX-MANUFACTURING

104th Regular Session Introduced by Joe Sosnowski

Starting 2027, Illinois estate tax credits ignore the value of a decedent’s Illinois manufacturing business interest (NAICS 31–33) when calculating the state credit.

Overview

HB4816, introduced in the Illinois 104th General Assembly by Rep. Joe Sosnowski, amends the Illinois Estate and Generation-Skipping Transfer Tax Act. The bill, effective upon becoming law, would modify how the Illinois state tax credit is calculated for deaths occurring on or after January 1, 2027. Specifically, it treats a deceased person’s business interest in a manufacturing business located in Illinois as not included in the decedent’s federal taxable estate for purposes of determining the State tax credit.

Purpose and intent

The primary goal is to adjust the calculation of the State tax credit used to reduce Illinois estate taxes for decedents who owned a manufacturing business in Illinois.

By excluding the decedent’s manufacturing business interest from the federal taxable estate when computing the state credit (for deaths on/after Jan. 1, 2027), the bill effectively alters the credit amount available to offset Illinois estate tax.

Key provisions and changes

Defines “manufacturing business” as a business within NAICS codes 31 through 33.

For deaths on or after January 1, 2027:

The State tax credit shall be calculated as though the decedent’s federal taxable estate did not include the decedent’s business interest in a manufacturing business located in Illinois.

Maintains prior structure for the State tax credit, with several historical credit baselines (CFCs based on federal credits under Sections 2011 and 2604 of the Internal Revenue Code, reflecting pre- and post-2009 rule changes).

Establishes specific credit framework:

For deaths from 2003-2005, 2005-2009, and 2010-2012-2013 windows, credits are based on federal credit amounts as in effect at certain historical dates, with defined exclusion or modification provisions.
Adjustments to credits include:
Pre-2012 exclusion amount references (e.g., $2,000,000; $3,500,000; $4,000,000 at later dates).
A notable change (starting 2027) that the Illinois credit excludes the value of manufacturing business interests in the decedent’s federal estate.
A provision allowing a marital deduction election for Illinois estate tax purposes, distinct from federal CT/Estate tax elections, with trustee conduct limits on non-income assets in certain trusts.

Who/what is affected

Estate taxpayers in Illinois who own or owned a manufacturing business (NAICS 31–33) and whose deaths occur on/after January 1, 2027.

Beneficiaries and heirs, particularly qualified heirs under Internal Revenue Code provisions, through changes in how the state credit is calculated.

Trustees managing trusts subject to Illinois estate tax, especially those with qualified terminable interest property elections.

Procedural and timeline aspects

Effective Date: The act takes effect upon becoming law (immediate effect once enacted).

Application: The new calculation rule applies exclusively to decedents dying on or after January 1, 2027; earlier deaths would be governed by existing rules under current law.

The bill interacts with ongoing federal tax framework (IRC Sections 2011, 2604, 2032A, and 2044), but creates a state-level modification for the manufacturing business exclusion in the estate tax credit.

Note: This summary reflects the bill’s text as introduced and does not include potential amendments or fiscal impact analyses that may accompany committee or floor actions.