On December 12 2025, Governor Pritzker signed Senate Bill 1911 (SB 1911), introducing several notable business income tax changes. The legislation expands Illinois’s taxation of foreign-source income by conforming to the federal transition from Global Intangible Low-Taxed Income (GILTI) to the new Net Controlled Foreign Corporation Tested Income (NCTI) regime. In addition, the law decouples Illinois from federal bonus depreciation and makes the state’s pass-through entity tax (PTET) permanent.

Background 

Illinois generally adopts changes in federal tax codes to maintain conformity, but given recent federal tax legislation changes, Illinois is faced with potential declines in revenue and an estimated budget gap for the upcoming year. SB 1911 was enacted in response to this anticipated shortfall and is expected to help mitigate the effects. Rather than increasing statutory tax rates, the legislation broadens the state tax base and limits conformity for certain federal deductions. 

Conformity to NCTI and Expanded Foreign-Source Income Inclusion 

The most consequential change for multinational taxpayers located in Illinois is the state’s decision to conform to the federal NCTI regime. Both frameworks, GILTI and NCTI, focus on the U.S taxation of profits earned by controlled foreign corporations (CFCs).  

The federal shift from GILTI to NCTI occurred with the passing of H.R. 1 in 2025. The GILTI framework, enacted in 2017, required U.S. shareholders of a CFC to include certain types of income earned by the CFC in their taxable income, even if that income was not repatriated to the U.S. NCTI still focuses on the same main objectives, but it no longer includes certain deductions, effectively broadening the scope of includable income types subject to potential taxation. 

Previously, Illinois did not tax GILTI following its creation in 2017. Earlier in 2025, the state amended its tax code to include 50% of GILTI in the Illinois tax base. 

Now, with the signing of SB 1911, Illinois conforms to NCTI, which broadens the scope of foreign earnings subject to inclusion. Conformity ensures continued taxation of foreign earnings as federal calculation methodologies evolve. 

Decoupling from Federal Bonus Depreciation 

H.R. 1 restored the bonus depreciation allowance to the previous 100% threshold for qualified property acquired and placed in service after January 19, 2025. As expected, SB 1911 decouples Illinois from this federal bonus depreciation treatment under IRC Sec. 168, effectively disallowing accelerated depreciation for qualified property. Taxpayers will be required to add back federal bonus depreciation to their state income and calculate state depreciation based on the modified accelerated cost recovery system (MACRS).  

Although manufacturers and capital-intensive taxpayers have expressed concerns regarding competitive impacts, Illinois has historically required addbacks for bonus depreciation benefits claimed at the federal level. As a result, the Department of Revenue views this change as a continuation of existing policy rather than a substantive shift. 

Permanent Extension of the PTET 

The legislation removes the sunset provision for Illinois’s pass-through entity tax (PTET) program that was set to expire at the end of the year, making the election permanent. 

The PTET allows partnerships and S corporations to pay state income tax at the entity level. The most significant advantage is the ability to circumvent the federal cap on individual SALT deductions. By moving the state tax payments to the entity level, it becomes a fully deductible business expense, reducing the federal taxable income that passes through to owners. 

Practical Considerations and Takeaways 

SB 1911 reflects a broader trend of states seeking to protect their tax bases amid evolving federal tax rules. Illinois’s conformity to NCTI and continued decoupling from certain federal provisions underscore the importance of proactive state tax planning for businesses. Taxpayers should consider the following items: 

• Foreign Income Modeling: For any multinational corporations doing business in Illinois, update state tax projections to reflect NCTI inclusion 

• Depreciation Planning: Review fixed-asset acquisitions and depreciation strategies in light of Illinois’s addback requirements 

• PTET Strategy Evaluation: Assess the benefits of opting into IL PTET and owner-level impacts for their business and personal level taxes 

Reach out to a trusted accountant or tax preparer today!