SB2038 104TH GENERAL ASSEMBLY

LRB104 11647 HLH 21736 b

104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
SB2038

Introduced 2/6/2025, by Sen. Celina Villanueva

SYNOPSIS AS INTRODUCED:

35 ILCS 405/2	from Ch. 120, par. 405A-2
35 ILCS 405/3	from Ch. 120, par. 405A-3
35 ILCS 405/4	from Ch. 120, par. 405A-4

Amends the Illinois Estate and Generation-Skipping Transfer Tax Act. Provides that, for persons dying on or after January 1, 2026, the amount of the Illinois estate tax shall be the amount of the Illinois taxable estate, multiplied by the Illinois estate tax rate. Sets forth the estate tax rate. Provides that the "Illinois taxable estate" means the decedent's federal gross estate, subject to certain modifications, including a deduction in the amount of $4,000,000. Makes conforming changes with respect to the generation-skipping transfer tax. Effective immediately.

A BILL FOR

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Estate and Generation-Skipping Transfer Tax Act is amended by changing Sections 2, 3, and 4 as follows:

(35 ILCS 405/2) (from Ch. 120, par. 405A-2)

Sec. 2. Definitions.

"Exemption amount" means, for persons dying on or after January 1, 2026 and for taxable transfers occurring on or after January 1, 2026, $4,000,000.

"Federal estate tax" means the tax due to the United States with respect to a taxable transfer under Chapter 11 of the Internal Revenue Code.

"Federal generation-skipping transfer tax" means the tax due to the United States with respect to a taxable transfer under Chapter 13 of the Internal Revenue Code.

"Federal return" means the federal estate tax return with respect to the federal estate tax and means the federal generation-skipping transfer tax return with respect to the federal generation-skipping transfer tax.

"Federal transfer tax" means the federal estate tax or the federal generation-skipping transfer tax.

"Illinois estate and generation-skipping transfer tax rate" means:

(1) in the case of the Illinois estate tax:

(A) if the decedent's Illinois taxable estate is $6,000,000 or less, 5%;

(B) if the decedent's Illinois taxable estate exceeds $6,000,000 but does not exceed $16,000,000, 10%;

(C) if the decedent's Illinois taxable estate exceeds $16,000,000 but does not exceed $21,000,000, 16%; and

(D) if the decedent's Illinois taxable estate exceeds $21,000,000, 22%.

(2) in the case of the Illinois generation-skipping transfer tax:

(A) if the amount by which the taxable transfer exceeds the exemption amount is $6,000,000 or less, 5%;

(B) if the amount by which the taxable transfer exceeds the exemption amount exceeds $6,000,000 but does not exceed $16,000,000, 10%;

(C) if the amount by which the taxable transfer exceeds the exemption amount exceeds $16,000,000 but does not exceed $21,000,000, 16%; and

(D) if the amount by which the taxable transfer exceeds the exemption amount exceeds $21,000,000, 22%.

"Illinois estate tax" means the tax due to this State with respect to a taxable transfer.

"Illinois generation-skipping transfer tax" means the tax due to this State with respect to a taxable transfer that gives rise to a federal generation-skipping transfer tax.

"Illinois taxable estate" means the decedent's federal gross estate, as provided under Section 2031 of the Internal Revenue Code, without regard to whether the estate is subject to the federal estate tax, modified as follows:

(1) the decedent's federal gross estate shall be increased by:

(A) the value of any property in which the decedent had a qualifying income interest for life and for which an election was made under subsection (b-1) of this Section for Illinois estate tax purposes but was not made for federal estate tax purposes; and

(B) the aggregate amount of taxable gifts, as defined in section 2503 of the Internal Revenue Code, made by the decedent within 3 years of the date of death; and

(2) the decedent's federal gross estate shall be decreased by:

(A) the exemption amount;

(B) the deductions found in sections 2053, 2054, 2055, 2056, and 2056A of the Internal Revenue Code; and

(C) the marital deduction for qualified terminable interest property available for elections made pursuant to subsection (b-1) of this Section.

For the purposes of subparagraph (B) of paragraph (1) of this definition, the amount of the addition equals the value of the gift under section 2512 of the Internal Revenue Code and excludes any value of the gift included in the federal taxable estate or the value of any gift with a non-Illinois situs. The tax situs of a gift of real or tangible personal property shall be the location of the real or tangible personal property at the time the gift was given. The tax situs of intangible personal property shall be the state in which the decedent resided at the time the gift was given.

"Illinois transfer tax" means the Illinois estate tax or the Illinois generation-skipping transfer tax.

"Internal Revenue Code" means, unless otherwise provided, the Internal Revenue Code of 1986, as amended from time to time.

"Non-resident trust" means a trust that is not a resident of this State for purposes of the Illinois Income Tax Act, as amended from time to time.

"Person" means and includes any individual, trust, estate, partnership, association, company or corporation.

"Qualified heir" means a qualified heir as defined in Section 2032A(e)(1) of the Internal Revenue Code.

"Resident trust" means a trust that is a resident of this State for purposes of the Illinois Income Tax Act, as amended from time to time.

"State" means any state, territory or possession of the United States and the District of Columbia.

"State tax credit" means:

(a) For persons dying on or after January 1, 2003 and through December 31, 2005, an amount equal to the full credit calculable under Section 2011 or Section 2604 of the Internal Revenue Code as the credit would have been computed and allowed under the Internal Revenue Code as in effect on December 31, 2001, without the reduction in the State Death Tax Credit as provided in Section 2011(b)(2) or the termination of the State Death Tax Credit as provided in Section 2011(f) as enacted by the Economic Growth and Tax Relief Reconciliation Act of 2001, but recognizing the increased applicable exclusion amount through December 31, 2005.

(b) For persons dying after December 31, 2005 and on or before December 31, 2009, and for persons dying after December 31, 2010, an amount equal to the full credit calculable under Section 2011 or 2604 of the Internal Revenue Code as the credit would have been computed and allowed under the Internal Revenue Code as in effect on December 31, 2001, without the reduction in the State Death Tax Credit as provided in Section 2011(b)(2) or the termination of the State Death Tax Credit as provided in Section 2011(f) as enacted by the Economic Growth and Tax Relief Reconciliation Act of 2001, but recognizing the exclusion amount of only (i) $2,000,000 for persons dying prior to January 1, 2012, (ii) $3,500,000 for persons dying on or after January 1, 2012 and prior to January 1, 2013, and (iii) $4,000,000 for persons dying on or after January 1, 2013, and with reduction to the adjusted taxable estate for any qualified terminable interest property election as defined in subsection (b-1) of this Section.

(b-1) The person required to file the Illinois return may elect on a timely filed Illinois return a marital deduction for qualified terminable interest property under Section 2056(b)(7) of the Internal Revenue Code for purposes of the Illinois estate tax that is separate and independent of any qualified terminable interest property election for federal estate tax purposes. For purposes of the Illinois estate tax, the inclusion of property in the gross estate of a surviving spouse is the same as under Section 2044 of the Internal Revenue Code.

In the case of any trust for which a State or federal qualified terminable interest property election is made, the trustee may not retain non-income producing assets for more than a reasonable amount of time without the consent of the surviving spouse.

"Taxable transfer" means an event that gives rise to a state tax credit, including any credit as a result of the imposition of an additional tax under Section 2032A(c) of the Internal Revenue Code.

"Transferee" means a transferee within the meaning of Section 2603(a)(1) and Section 6901(h) of the Internal Revenue Code.

"Transferred property" means:

(1) With respect to a taxable transfer occurring at the death of an individual, the deceased individual's gross estate as defined in Section 2031 of the Internal Revenue Code.

(2) With respect to a taxable transfer occurring as a result of a taxable termination as defined in Section 2612(a) of the Internal Revenue Code, the taxable amount determined under Section 2622(a) of the Internal Revenue Code.

(3) With respect to a taxable transfer occurring as a result of a taxable distribution as defined in Section 2612(b) of the Internal Revenue Code, the taxable amount determined under Section 2621(a) of the Internal Revenue Code.

(4) With respect to an event which causes the imposition of an additional estate tax under Section 2032A(c) of the Internal Revenue Code, the qualified real property that was disposed of or which ceased to be used for the qualified use, within the meaning of Section 2032A(c)(1) of the Internal Revenue Code.

"Trust" includes a trust as defined in Section 2652(b)(1) of the Internal Revenue Code.

(Source: P.A. 96-789, eff. 9-8-09; 96-1496, eff. 1-13-11; 97-636, eff. 6-1-12.)

(35 ILCS 405/3) (from Ch. 120, par. 405A-3)

Sec. 3. Illinois estate tax.

(a) Imposition of Tax. An Illinois estate tax is imposed on every taxable transfer involving transferred property having a tax situs within the State of Illinois.

(b) Amount of tax. On estates of persons dying before January 1, 2003, the amount of the Illinois estate tax shall be the state tax credit, as defined in Section 2 of this Act, with respect to the taxable transfer reduced by the lesser of:

(1) the amount of the state tax credit paid to any other state or states; and

(2) the amount determined by multiplying the maximum state tax credit allowable with respect to the taxable transfer by the percentage which the gross value of the transferred property not having a tax situs in Illinois bears to the gross value of the total transferred property.

(c) On estates of persons dying on or after January 1, 2003 and before January 1, 2026, the amount of the Illinois estate tax shall be the state tax credit, as defined in Section 2 of this Act, reduced by the amount determined by multiplying the state tax credit with respect to the taxable transfer by the percentage which the gross value of the transferred property not having a tax situs in Illinois bears to the gross value of the total transferred property.

(d) For estates of persons dying on or after January 1, 2026, the amount of the Illinois estate tax shall be the amount of the Illinois taxable estate, multiplied by the Illinois estate tax rate. No tax shall be due under this Act if the decedent's Illinois taxable estate is not greater than zero.

(Source: P.A. 93-30, eff. 6-20-03; 94-419, eff. 8-2-05.)

(35 ILCS 405/4) (from Ch. 120, par. 405A-4)

Sec. 4. Illinois generation-skipping transfer tax.

(a) Imposition of tax. An Illinois generation-skipping transfer tax is imposed on every taxable transfer resulting in federal generation-skipping transfer tax involving transferred property having a tax situs within the State of Illinois.

(b) Amount of tax. For taxable transfers occurring before January 1, 2026, the The amount of the Illinois generation-skipping transfer tax shall be the maximum state tax credit allowable with respect to the taxable transfer, reduced by the lesser of:

(1) the amount of the state tax credit paid to any other state or states; and

(2) the amount determined by multiplying the maximum state tax credit allowable with respect to the taxable transfer by the percentage which the gross value of the transferred property not having a tax situs in Illinois bears to the gross value of the total transferred property.

(c) For taxable transfers occurring on or after January 1, 2026, the amount by which the taxable transfer exceeds the exemption amount, multiplied by the Illinois estate tax rate.

(Source: P.A. 86-737.)

Section 99. Effective date. This Act takes effect upon becoming law.