Illinois budget adds digital taxes, wagering changes and SALT planning work

Illinois lawmakers gave final passage to a $55.9 billion FY27 budget on June 1, and the bill quickly turned into a planning problem for KPMG’s SALT, advisory and compliance teams. The package layered new digital taxes on top of a broader budget deal that also touched wagering, hotel marketplaces, net operating losses and pass-through entity tax calculations. For multistate companies, the immediate issue was not the headline size of the budget. It was the way the law split into different effective dates, different thresholds and different reporting triggers that could change modeling long before year-end.

The most aggressive new revenue piece was a 10% tax on gross receipts from targeted advertising services provided in Illinois, but only for providers that exceeded $1 million in gross receipts from those services in the prior 12 months. The bill defined targeted advertising broadly enough to reach display ads, internet programmatic video, multichannel video programming distributor advertising, social media advertising, native advertising and incentivized or rewarded advertising. That definition alone created new work for tax teams trying to decide what belonged in the base, how receipts should be sourced and which business lines could be pulled into Illinois nexus analysis.

The budget also created a monthly social media platform fee for platforms with more than 100,000 Illinois users. Platforms must report average monthly Illinois users to the secretary of state within 14 days after the start of each month, a detail that will force data, legal and tax teams to align on one user count methodology. PwC said the bill also imposed a 0.2% privilege tax on the value of digital asset business activity received by Illinois customers, collected by digital asset brokers that maintain a place of business in Illinois or meet a $100,000 Illinois gross receipts threshold. That combination means companies handling targeted ads, platform monetization or crypto activity could face new tax, fee, sourcing, registration and systems requirements at once.

The broader budget context mattered too. Illinois kept the Illinois Independent Tax Tribunal in place, included a 10-day back-to-school sales tax holiday in August 2026 and paused the planned 1.3-cent-per-gallon motor fuel tax increase for six months. State leaders framed the plan as balanced and said it did not raise the state income tax or sales tax, even as the Illinois Policy Institute estimated the package would bring in more than $800 million in new taxes, including about $200 million each from the social media fee and the targeted advertising tax. Democrats defended the changes as a response to federal cuts and uncertainty, while Republicans said the plan would hurt the state’s finances.

For KPMG, the lesson was immediate: this was not a single Illinois update to be parked until filing season. Some provisions were set to begin July 1, 2026, while others were scheduled for January 1, 2027, and the bill was still awaiting the governor’s signature. That left advisers with a short runway to revisit elections, provision work, cash tax planning and any entity structure that had been built around the older Illinois base. Illinois had considered a digital advertising tax in the prior year and dropped it after industry pushback, which made this year’s return of the idea a clear signal that the state was willing to keep pressing into digital business models.