Public safety; creating the Public Safety Reform Act of 2025; effective date.

2025 Regular Session Introduced by Toni Hasenbeck

Illinois domestic corporations would no longer pay franchise tax starting Jan 1, 2027, with a $100,000 exemption in 2026 and no refunds for years crossing that date.

Second Reading referred to Rules

Summary — HB 2861 (Domestic Franchise Tax — Illinois)

Status: Introduced (2025), House sponsor Rep. Tony M. McCombie. Filed Feb 6, 2025; referred to the House Rules Committee. (Bill text appears in the 2025–26 Illinois General Assembly.)

Purpose
- To phase out franchise-tax liability for Illinois domestic corporations by increasing exemptions in the near term and eliminating the requirement to pay the franchise tax on or after January 1, 2027.

Key provisions and changes
- Amends Section 15.35 of the Illinois Business Corporation Act (805 ILCS 5/15.35).
- Phased exemptions (continuing a sequence already in statute):
- On or after Jan 1, 2026 and before Jan 1, 2027 — the first $100,000 of franchise-tax liability for domestic corporations is exempt.
- Starting Jan 1, 2027 — the statute “shall not require the payment of any franchise tax that would otherwise have been due and payable on or after January 1, 2027.” In practice this waives franchise-tax payments for liabilities that would be due on/after that date.
- The bill includes a clause stating there will be no refunds or prorations of franchise tax for taxable years that cross Jan 1, 2027 (i.e., no retroactive refunds if part of a taxable year extends past that date).
- The amended section is scheduled for statutory repeal on Jan 1, 2028 (appears to be a technical clean‑up after the transition).
- Effective: the bill is written to take effect immediately upon enactment; the statutory deadlines/exemptions take effect on the dates above.

Who is affected
- Primary beneficiaries: Illinois domestic corporations (those formed under Illinois law) that pay the Secretary of State franchise tax (annual franchise tax, initial/additional franchise taxes tied to paid-in capital, etc.).
- State government: Secretary of State and state budget/treasury would be affected by reduced or eliminated franchise-tax receipts beginning Jan 1, 2027.
- No private right of action or other private-party mechanisms are created or affected by this change — this is a tax‑liability change for corporations.

Timing and procedural notes
- The bill provides a one-year large exemption ($100,000) for 2026 and eliminates the obligation to pay franchise tax on or after Jan 1, 2027.
- Because the bill disallows refunds or proration for taxable years spanning Jan 1, 2027, corporations with year-ends that cross that date would not receive retroactive refunds for earlier-paid tax portions.
- Fiscal impact: elimination of franchise tax collections from domestic corporations beginning in 2027 would reduce state revenues; the bill text does not include offsetting revenue measures.

Potential implications to watch
- Revenue loss for state and possible need to adjust budgets or identify alternative revenue sources.
- Competitive/business effects: reduces ongoing costs for domestic corporations, potentially encouraging formation/retention of Illinois charters.
- Administrative/implementation details (how Secretary of State will handle filings spanning the transition, guidance on taxable-year treatment) would need to be resolved by implementing agency rules or further legislation.