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HB 2603

INCOME TAX-GRATUITIES

104th Regular Session Introduced by Adam Niemerg

HB2603 allows an Illinois individual to subtract the full amount of gratuities from base income, making the deduction permanent and effective immediately.

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Bill Summary · HB 2603

Summary — HB 2603 (Income Tax — Gratuities) — Illinois (2025)

Note: The materials provided also included text from an unrelated Arizona hunting/fishing bill using the same bill number. This summary focuses on the Illinois measure introduced by Rep. Adam M. Niemerg (HB2603) titled “Income Tax — Gratuities.”

Main purpose

HB2603 creates a new Illinois state income tax deduction that allows taxpayers to deduct the full amount of gratuities (tips) they received during the taxable year from their Illinois base income.

Key provisions

  • Amends Section 203 of the Illinois Income Tax Act (35 ILCS 5/203).
  • Creates a subtraction/deduction from base income equal to the amount the taxpayer received in gratuities during the taxable year.
  • The deduction is expressly made exempt from the Act’s automatic sunset provision (i.e., it is intended to be permanent).
  • Effective immediately (per the bill text).

Who is affected

  • Primary beneficiaries: individuals who receive gratuities — e.g., tipped workers in restaurants, bars, hospitality, personal services, and other service-industry employees who report tips as income.
  • Employers: indirect administrative effects only (reporting/payroll practices may not change under federal requirements, but employers may have additional state reporting or verification implications depending on implementation).
  • State government: the deduction will reduce Illinois taxable base and therefore is likely to reduce individual income tax revenues to some degree (no revenue estimate included in the bill text).

Implementation and timing

  • The bill states it is “effective immediately.” Depending on standard state practice, that usually means the change applies to taxable years as specified in implementing guidance; the bill text did not specify a retroactive or prospective taxable-year cutoff beyond “effective immediately.”
  • The bill removes the deduction from any automatic sunset, making it a permanent change unless repealed by later legislation.

Notable considerations

  • The bill does not: include an explicit cap, phase-in, eligibility rules beyond “amount received in gratuities,” or special documentation requirements; implementation detail (how taxpayers substantiate gratuities to the Illinois Department of Revenue) would be determined administratively.
  • Interactions with federal tax law: gratuities remain taxable for federal purposes; this is a state-only subtraction from Illinois base income.
  • Fiscal impact: the bill will reduce state individual income tax receipts; the magnitude depends on aggregate reported gratuities. No fiscal note or dollar estimate is included in the provided text.

Legislative status (from provided actions)

  • Introduced in early February 2025 (Rep. Adam M. Niemerg).
  • Recorded actions in the provided record show passage and final actions in March–April 2025, including a signature date listed as April 14, 2025. (Confirm current status with official state legislative records for final effective date and guidance.)

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

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