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HB 5215

MARK-TO-MARKET TAX ACT

104th Regular Session Introduced by Dee Avelar and 8 co-sponsors

Illinois bill requires annual taxation of unrealized investment gains for targeted taxpayers, potentially increasing state revenue but raising compliance and liquidity challenges.

Added Co-Sponsor Rep. Dagmara Avelar
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Bill Summary · HB 5215

Legislative bill overview

HB 5215 proposes implementing a mark-to-market tax system in Illinois, which would require taxpayers—likely high-net-worth individuals or specific asset classes—to pay taxes on unrealized gains in their investments annually, rather than only when assets are sold. This represents a significant departure from the traditional realization principle of U.S. tax law, where gains are taxed upon sale or disposition of assets.

Why is this important

Mark-to-market taxation could substantially increase annual tax revenue by capturing gains that currently escape taxation indefinitely if assets are held until death. However, it would also create new compliance burdens and liquidity challenges for taxpayers who must pay taxes on paper gains without selling assets to generate cash. This type of tax is highly contentious and has been debated at the federal level as part of broader wealth tax proposals.

Potential points of contention

  • Liquidity concerns: Taxpayers may struggle to pay taxes on unrealized gains without selling assets, potentially forcing asset liquidation
  • Constitutional questions: Mark-to-market taxation may conflict with federal tax law or constitutional protections against certain tax structures
  • Economic competitiveness: High-income earners and businesses may relocate to lower-tax states, reducing Illinois's tax base
  • Implementation complexity: Determining fair market values for illiquid assets (private businesses, real estate, art) annually is administratively challenging and costly
  • Valuation disputes: Disagreements over asset valuations could spawn litigation between taxpayers and revenue authorities

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

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