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HB 3128

Relating to the use of water for fire response preparedness.

2025 Regular Session Introduced by Mark Owens

Creates a state tax incentive allowing a 50% deduction of contributions to a small business asset purchase account (up to $50,000 per year) with 50% of withdrawals taxed, plus pena

In committee upon adjournment.
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Bill Summary · HB 3128

HB 3128 — Summary (Introduced 2025)

Relating to the use of water for fire response preparedness — NOTE: bill text provided amends Illinois tax law to create a tax incentive for “small business asset purchase accounts.” There is a mismatch between the bill title and the available legislative text. This summary describes the substantive provisions contained in the introduced text.

Sponsor and Status

  • Sponsor: Rep. Amy Elik
  • Introduced: February 18–20, 2025
  • Current status: In committee upon adjournment (as of 2025-06-28)
  • Committees: Referred to Rules; Revenue & Finance; Tax Policy: Income Tax Subcommittee; also listed actions involving Pensions, Investments & Financial Services and Agriculture/Water in the history.
  • Statutory changes proposed: Amend 35 ILCS 5/203 (Illinois Income Tax Act) and add 35 ILCS 735/3‑3.5 (Uniform Penalty and Interest Act).

Purpose and intent

To create a state tax mechanism that encourages taxpayers to set aside funds in special accounts intended for small business asset purchases by providing a current-year income tax deduction for contributions, while partially recapturing tax on withdrawals and penalizing improper use.

Key provisions

  • Creates a new tax deduction for individuals: 50% of the amount contributed to a “small business asset purchase account” during the tax year, subject to a maximum deduction of $50,000 per taxpayer per year. (Thus to obtain the $50,000 deduction a taxpayer would contribute $100,000 in that year.)
  • Creates an addition modification (an amount added back to base income) equal to 50% of the amount withdrawn from a small business asset purchase account during the taxable year. In other words, half of withdrawals are treated as taxable income when taken.
  • Adds a penalty under the Uniform Penalty and Interest Act for improper use of monies in a small business asset purchase account.
  • The bill text indicates it defines “small business asset purchase account,” but the specific definition language is not included in the excerpt provided.

Who is affected

  • Individual taxpayers who (a) contribute to these accounts and (b) withdraw from them.
  • Small businesses and prospective purchasers of small business assets who may use proceeds from such accounts.
  • State revenue administration (Department of Revenue) — for implementation, compliance, and penalty enforcement.

Potential fiscal and practical impacts

  • Timing of taxation: The structure provides an immediate partial deduction (50% of contributions) and later partial taxation (50% of withdrawals). If all contributions are eventually withdrawn under qualifying uses, the net Illinois tax impact could be revenue‑neutral in aggregate (ignoring investment growth and compliance losses), but actual impact depends on behavior, eligibility, timing of withdrawals, and frequency of improper uses.
  • Incentivizes taxpayers to allocate funds for small business asset purchases; may encourage capital formation for small business acquisitions.
  • Requires administrative rules for account qualification, permitted uses, documentation, and enforcement of penalties for non‑qualified withdrawals.

Procedural notes / next steps

  • The bill was read and referred to multiple committees between February and March 2025 and was last recorded as “in committee upon adjournment” on 2025‑06‑28. If not acted on, it may be reconsidered or reintroduced in a subsequent session.

If you want, I can (1) draft a plain‑language example showing how the deduction/addition works for a hypothetical taxpayer, (2) extract likely revenue scenarios, or (3) attempt to locate the missing definition of “small business asset purchase account” if available in full bill text.

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

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