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SB 3780

INC TX-LGDF

104th Regular Session Introduced by Chris Balkema and 1 co-sponsor

SB3780 shifts LGDF funding to a fixed 10% of monthly net Illinois income tax revenue starting August 2026, increasing stability for local government funding.

Added as Co-Sponsor Sen. Chris Balkema
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WeVote Research Nonpartisan
Bill Summary · SB 3780

Bill Overview

  • Bill: SB3780
  • Session/Jurisdiction: Illinois, 104th General Assembly
  • Introduced: February 5, 2026
  • Sponsor: Sen. Donald P. DeWitte (with cosponsors Don DeWitte and Chris Balkema)
  • Topic: Revenue; Illinois Income Tax Act amendments
  • Effective date: Upon becoming law

Main Purpose and Intent

SB3780 proposes a structural adjustment to how a portion of net state income tax revenue is distributed to the Local Government Distributive Fund (LGDF). Specifically, it shifts and eventually saturates the LGDF transfer to 10% of the net income tax revenue realized in the preceding month, replacing the current formula-based transfer percentages that allocate funds among individuals/estates, corporations, and electing pass-through entities (and, in earlier years, related pass-through components). The change is phased in, with a clear trajectory culminating in a 10% monthly transfer to LGDF beginning in August 2026.

Key Provisions and Changes

  • Section 901 amendments to LGDF transfers:
    • Beginning August 1, 2022 through July 31, 2023: LGDF transfer structure based on several percentage components (individuals/estates; corporations; electing pass-through entities).
    • Beginning August 1, 2023 through July 31, 2026: LGDF transfers continue with segmented percentages for individuals/estates, corporations, and electing pass-through entities.
    • Beginning August 1, 2026 and ongoing: LGDF transfer set at 10% of the net revenue realized from the income tax imposed by Section 201 (subsections (a) and (b)) during the preceding month.
  • Net revenue definition for LGDF:
    • Net revenue for a month equals revenue deposited into General Revenue, Education Assistance Fund, Income Tax Surcharge LGDF, Fund for the Advancement of Education, and Commitment to Human Services Fund, minus refunds paid for overpayments of tax liability in that month.
  • Direct deposit note:
    • Starting July 6, 2017, the LGDF transfers from General Revenue Fund to LGDF are to be directly deposited as revenue is realized.
  • Broader Fund mechanics (context):
    • The bill references existing fund transfers and multiple statutory allocations (Income Tax Refund Fund, Education Assistance Fund, Commitment to Human Services Fund, Fund for the Advancement of Education, etc.).
    • It preserves general framework for how refunds and surcharges interact with the LGDF and other funds, but shifts the sharing percentage toward LGDF.

Who/What Would Be Affected

  • Local governments and Illinois municipalities relying on LGDF distributions would see a higher and more predictable share of monthly net income tax revenue once the 10% threshold is implemented in 2026.
  • State revenue administration would adopt a simplified, uniform LGDF transfer calculation (10% of monthly net income tax revenue), potentially impacting the timing and size of funds allocated to local governments.
  • Taxpayers and filers indirectly affected via changes in how state withholding, refunds, and related distributions are allocated across state funds.

Procedural and Timeline Aspects

  • Implemented in stages:
    • 2017 onward: existing LGDF transfer mechanics in place.
    • 2022–2023: transitional period with revised percentage formulas.
    • 2023–2026: continued transitional formula adjustments.
    • August 1, 2026 onward: fixed LGDF transfer at 10% of monthly net income tax revenue.
  • Effective date: Upon becoming law (no specific date provided beyond enactment).

Practical Implications

  • Potentially larger and more stable LGDF funding for local governments starting in 2026, depending on state revenue fluctuations.
  • The bill codifies a clear maximum cap (10%) for LGDF transfers, curbing future changes to distribution percentages away from local government funding.

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

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