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HB 2697

INC TX-ESTIMATED TAX

104th Regular Session Introduced by Curtis Tarver

Illinois redefines required annual payment for estimated taxes as the lesser of 90% of current year tax, 100% of prior year tax (if applicable), or 90% of the current-year tax unde

Rule 19(a) / Re-referred to Rules Committee
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Bill Summary · HB 2697

Summary — HB 2697 (Illinois) — Changes to Estimated Income Tax Payment Rules

Status: Enacted. Signed by the Governor 2025-06-20; legislative history lists effective date 9/1/2025. (Bill text also contains “Effective immediately.” See legislative actions for enacted effective date.)

Sponsor: Rep. Curtis J. Tarver, II
Statute amended: Illinois Income Tax Act, 35 ILCS 5/804 (failure to pay estimated tax / required installments)
Companion: SB 2219

Purpose

To revise how the “required annual payment” for Illinois estimated income tax is calculated, thereby changing the basis for required quarterly installments and the determination of underpayment and related penalties.

Key provisions

  • Redefines the term “required annual payment” (the base used to compute required quarterly installments) as the lesser of three amounts:
    1. 90% of the tax shown on the return for the taxable year (or, if no return is filed, 90% of the tax for that year);
    2. 100% of the tax shown on the taxpayer’s return for the preceding taxable year — but only if the taxpayer filed a return for that preceding year showing a tax liability and the preceding year was a 12‑month year;
    3. 90% of the tax for the taxable year computed under the Illinois Income Tax Act as it exists on the first day of the taxable year.
  • Maintains the existing framework that each required installment is generally 25% of the required annual payment and retains the annualized-income installment alternative where appropriate.
  • Amends language in Section 804 (underpayment/penalty mechanics) to conform to the new definition.

Who is affected

  • Individuals, corporations, trusts and other taxpayers required to make estimated income tax payments to Illinois.
  • Tax preparers and payroll/finance departments that calculate and remit quarterly estimated tax.
  • Illinois Department of Revenue administration (for guidance, collection and penalty assessments).

Practical effect / potential impacts

  • Provides taxpayers a potentially lower safe-harbor basis for estimated payments by making the required annual payment the lesser of the specified options. Taxpayers with changing incomes or those subject to retroactive law changes may benefit.
  • May reduce the incidence or amount of underpayment penalties for taxpayers who rely on prior-year tax or on a 90% rule tied to current-law computations.
  • Could modestly affect state cash‑flow timing (quarterly receipts) but not necessarily total annual revenue.
  • Requires taxpayers and tax professionals to update estimated‑tax calculations and compliance procedures to apply the new three‑part test.

Timing and implementation

  • Legislative actions record the bill as signed by the Governor on June 20, 2025. The recorded effective date is September 1, 2025 (review the enrolled act for final effective date and any transitional rules).
  • Taxpayers should review estimated‑payment computations for taxable years that begin on or after the effective date and consult the Illinois Department of Revenue for guidance and any updated forms/instructions.

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

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