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SB 3944

USE/OCC TX-SOLAR PANELS

104th Regular Session Introduced by Don DeWitte

Illinois will exempt purchases for installing residential or commercial solar energy systems from sales/use taxes starting Jan 1, 2027, with required purchase documentation.

Rule 2-10 Committee/3rd Reading Deadline Established As May 15, 2026
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Bill Summary · SB 3944

Summary of SB 3944 (104th Illinois General Assembly)

Jurisdiction: Illinois
Session: 104th
Title: USE/OCC TX-SOLAR PANELS
Introduced: February 6, 2026
Sponsor: Sen. Donald P. DeWitte

Purpose and intent
- The bill adds a new exemption from Illinois sales/use taxes for tangible personal property purchased for the installation of solar energy systems on residential or nonresidential real estate. The exemption applies to property that becomes part of an integrated solar energy system primarily used to provide electricity to the premises.
- Effective date for the exemption: January 1, 2027.

Key provisions and changes
- Expands exemptions under four major tax acts:
- Use Tax Act
- Service Use Tax Act
- Service Occupation Tax Act
- Retailers’ Occupation Tax Act

  • New solar-related exemption (paragraph 47 in the Use Tax Act; similarly reflected in other Acts):

    • Beginning January 1, 2027, tangible personal property purchased for the improvement of real estate by installing a solar energy system, primarily used to provide electricity to the premises, is exempt from taxation under the Acts.
    • Definition of “solar energy system” for exemption purposes:
    • A complete assembly or structure that uses solar energy to generate electricity via photovoltaics.
    • Includes components such as solar panels, inverters, mounting, cabling, and related electrical accessories, plus necessary interconnection equipment.
    • The system is considered to offset the electricity load of the end user with annual production not exceeding 110% of the end-user’s electricity consumption at the meter in the prior 12 months.
    • Documentation and recordkeeping:
    • Purchasers must complete a form prescribed by the Department documenting eligibility at the point of sale and retain it for at least 6 years.
    • The exemption applies to property that becomes a necessary part of the integrated solar energy system, even if some components are not affixed to the real estate.

  • Other contextual provisions (existing exemptions retained/modified):

    • The bill retains a broad array of exemptions that exist in current law (e.g., for educational facilities, non-profit organizations, farm equipment, aircraft-related equipment, data centers under certain conditions, breast pumps and related supplies, and data-center-related property under a Department of Commerce and Economic Opportunity certificate).
    • It also clarifies and aligns several exemptions with current statutory language, some of which reference active exemption numbers or approved programs.

  • Scope and timing:

    • The solar exemption is the primary new element in SB 3944 and is scheduled to take effect on January 1, 2027.
    • The bill makes conforming amendments to the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers’ Occupation Tax Act to reflect the new exemption.

Who is affected
- End users installing solar energy systems on residential or nonresidential real estate in Illinois.
- Retailers, contractors, and suppliers selling eligible solar components and related tangible personal property, who must collect/exempt accordingly and use the prescribed exemption form.
- Department of Revenue and Department of Commerce and Economic Opportunity (as the form and eligibility processes may reference departmental rules and certificates).

Procedural and timeline notes
- Effective date for the solar exemption: January 1, 2027.
- Purchasers must maintain exemption documentation for at least 6 years.
- The bill references specific statutory changes across four major tax Acts to implement the exemption consistently.

Bottom line
- SB 3944 introduces a targeted sales/use tax exemption from multiple Illinois tax acts for tangible personal property used in the installation of solar energy systems on real estate, provided the system primarily supplies electricity to the premises. The exemption becomes effective January 1, 2027, with required purchaser documentation and recordkeeping. The bill preserves a broad set of existing exemptions in related tax acts, ensuring consistency with current law.

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

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