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SB 3934

INC TX-PHARMACY WITHHOLDING

104th Regular Session Introduced by Julie Morrison

SB 3934 lets certain Illinois-based taxpayers claim the Economic Development for a Growing Economy tax credit against withholding taxes (not just income tax), with irrevocable elec

Rule 2-10 Committee/3rd Reading Deadline Established As May 15, 2026
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Bill Summary · SB 3934

Summary of SB 3934 (104th General Assembly, Illinois)

Date introduced: February 6, 2026
Sponsor: Sen. Julie A. Morrison (co-sponsor)
Bill title: INC TX-PHARMACY WITHHOLDING

Purpose and main intent
- SB 3934 amends the Economic Development for a Growing Economy Tax Credit Act (35 ILCS 10/5-15) to allow certain eligible taxpayers to elect to claim the Act’s tax credit against Illinois withholding tax payments (Section 704A) instead of only against income tax obligations.
- A key new eligibility path targets a subset of entities primarily engaged in pharmacy, health, and wellness, with corporate headquarters and distribution centers located in Illinois.

Key provisions and changes
1. General framework (current law retained with additions)
- The Department of Commerce and Economic Opportunity continues to award a tax credit to foster job creation and retention in Illinois.
- Applicants must enter into an agreement for the credit, with specific tax-year timing and credit caps defined in the Act.
- The credit generally can be applied against Illinois income tax (for taxes under Section 201(a) and (b) of the Illinois Income Tax Act).

  1. New election to apply credit against withholding (Section 5-15(d)/(f))

    • Beginning for taxable years ending after December 31, 2009 (and subject to existing eligibility criteria), the bill adds an option for certain taxpayers to elect to apply the credit against withholding tax obligations (Section 704A) instead of or in addition to the income tax credit, provided they meet the specified criteria.
    • The election to apply the credit against withholding is irrevocable once made and applies for the duration of the related Agreement.

  2. Eligibility for the withholding election (paragraphs under subsection (f))

    • The withholding election is available to a targeted group of taxpayers, including:
      • A privately held corporation primarily engaged in pharmacy, health, and wellness with Illinois distribution centers and a corporate headquarters in Illinois; and
      • Employers meeting criteria related to employment, investment, and activity within Illinois, with varying thresholds and timelines (detailed “subparagraphs” (1) through (1.11)).
    • Several subparagraphs create tailored eligibility paths based on historical tax attributes (e.g., net loss deductions, prior agreements), job creation and retention thresholds, capital investment requirements, and timing of applications.
    • Notable eligibility constructs include:
      • Manufacturing and automotive-related thresholds (various subparagraphs (1)-(1.11)) with differentiated job creation/retention and investment requirements.
      • A specific subparagraph (1.11) targeting a pharmacy/health/wellness-focused taxpayer that maintains at least 2,500 full-time employees at Illinois HQ, commits to substantial investment, and maintains at least 450 retail locations in Illinois, among other criteria. Credits under this subparagraph are applied 100% against withholding for employees at the corporate headquarters and have a term cap (up to 8 years or until $75,000,000 in credits are awarded, whichever comes first).
      • Other subparagraphs include provisions for discount department stores, tubes/tires manufacturers, and steel-related companies, each with unique thresholds and requirements.

  3. Definition of “primarily engaged” (subsection (1) of (1.11))

    • “Primarily engaged” means more than 50% of gross revenue from Illinois pharmacy, health, and wellness activities, averaged over the preceding three fiscal years.

  4. Pass-through entities (Section 5-15(g))

    • Pass-through entities awarded credits can allocate some or all of the credit as a tax payment for shareholders or partners under the Illinois Income Tax Act, with the total credit not exceeding the entity’s or partners’ Illinois tax liability for the taxable year.

  5. Timing, form, and irrevocability

    • The election to apply the credit against withholding must be made in the form and manner required by the Illinois Department of Revenue.
    • The election, once made, is irrevocable.
    • The credit is applied against withholding in the first calendar quarter following the end of the taxable quarter in which the credit is awarded (timing specifics in subsection (2)).

Impact and who is affected
- Targeted businesses in Illinois that are primarily pharmacy, health, and wellness oriented with HQs and distribution centers in Illinois could access a new withholding-based pathway to claim the credit.
- The broader set of eligibility paths within subsection (f) covers a range of industries that previously used income tax credits, potentially enabling larger employers with significant Illinois presence to accelerate or optimize cash flow through withholding credits.
- Pass-throughs and their partners/shareholders could benefit from credit treatment as withholding payments, subject to the cap that the credit cannot exceed tax liability.

Procedural/timeline notes
- The bill references existing credit awards and specific historical Act dates, with the new withholding election applying to agreements executed or applicable under the amended provisions.
- The bill adds irrevocability for the withholding election and specifies the credit’s application timing (first calendar quarter after the end of the relevant taxable quarter).

Overall, SB 3934 broadens the Economic Development for a Growing Economy Tax Credit Act by offering a new mechanism to claim credits against withholding taxes for qualifying taxpayers, with a special emphasis on pharmacy/health/wellness-focused companies and a variety of eligibility ladders tied to job creation, investment, and Illinois economic activity.

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

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