Illinois HB 2755: Key Income-Tax Changes in the FY 2026 Revenue Omnibus Act

Written By: Mark Gallegos, CPA, MST, Partner & Rachel VonDrasek, CPA, MST

On June 16, 2025, Governor Pritzker signed House Bill 2755, the FY 2026 Revenue Omnibus Act into law. It’s the only bill in this year’s budget package making permanent, substantive changes to Illinois’ tax code. Most provisions take effect for tax years ending on or after December 31, 2025. Below is a distilled overview of the income-tax provisions with the biggest planning and compliance impacts.

GILTI Now 50 % Taxable

• What Changed: Illinois will allow only a 50 % subtraction for IRC § 951A GILTI from taxable income (versus the 100 % dividend-received deduction for CFCs ≥ 80 % owned, or 65 % DRD if < 80 % owned).
• Who’s Affected: Corporations with foreign subsidiaries.
• Takeaway: Model for materially higher Illinois taxable income and evaluate whether to accelerate foreign-tax credits or adjust entity structure.

Finnigan Apportionment for Combined Groups

• What Changed: Beginning with 2025 filings, Illinois adopts the Finnigan method. Every member’s sales, regardless of Illinois nexus, count in the sales-factor numerator for a unitary reporting group.
• Who’s Affected: Any combined/unitary group with affiliates outside Illinois.
• Takeaway: Anticipate a larger sales-factor ratio and potentially higher tax. Update apportionment models now to capture the full group footprint.

New Gain/Loss Sourcing Rules for Pass-Through Interest

• What Changed: For tax years ending on or after June 16, 2025, gains/losses from selling an S-corp or partnership interest (excluding Illinois investment partnerships) are sourced to Illinois based on the entity’s average Illinois apportionment factor over the current and prior two years.
• Who’s Affected: Sellers of pass-through interests in entities with Illinois operations, including retiring partners.
• Takeaway: Nonresidents may face new Illinois-source income exposure. Coordinate with home-state counsel to secure appropriate credits.

Quick Foreign-Operations Note

Taxpayers with foreign subsidiaries should also consider how GILTI and the tightened add-back rules interact with federal § 163(j) allocations and foreign-based apportionment dynamics. Reach out for a deeper dive on cross-border implications.

Closing

As these changes take effect, it’s more important than ever to revisit your Illinois-tax models, refresh your compliance checklists and fine-tune your planning plays. Whether you’re navigating the new GILTI subtraction rules, adapting to Finnigan apportionment, or reworking your interest and royalty expense strategies, early action will position your organization to minimize surprises and seize new opportunities.

Our team at Porte Brown stands ready to help you quantify the impact, integrate these provisions into your forecasts and identify elections or structuring changes that preserve value. Please reach out today so we can walk through your specific situation and ensure your Illinois-tax strategy is both compliant and optimally aligned with your business goals.

Stay tuned for our upcoming articles where we’ll take a closer look at Illinois’ new tax amnesty program and the latest developments in tax credits under HB 2755. Make sure to subscribe to our newsletter or bookmark our NewsBlog to ensure you don't miss future updates.