SB3778 104TH GENERAL ASSEMBLY

LRB104 18100 LNS 31539 b

104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
SB3778

Introduced 2/5/2026, by Sen. Mike Simmons

SYNOPSIS AS INTRODUCED:

See Index

Creates the Extremely High Wealth Mark-to-Market Tax Act. Provides that a resident taxpayer with net assets worth $1,000,000,000 or more on December 31 of a tax year shall recognize gains or losses as if each asset owned by that taxpayer on December 31 of the tax year had been sold for its fair market value on December 31 of the tax year but with adjustment made for taxes paid on gains in previous years. Provides that money collected under the Act, other than for administration and enforcement, shall be deposited into the Community College Tuition Fund. Amends the Public Community College Act. Beginning with the 2028-2029 academic year, prohibits a community college district from charging a student tuition and fees, unless the student is not a resident of this State. Requires the Illinois Community College Board to establish a grant program to fully reimburse community college districts for the loss of tuition and fee revenue. Repeals certain provisions related to community college tuition and fees. Amends the State Finance Act to create the Community College Tuition Fund as a special fund in the State treasury. Makes conforming changes.

STATE MANDATES ACT MAY REQUIRE REIMBURSEMENT MAY APPLY

A BILL FOR

AN ACT concerning public community colleges.

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

Section 1. Short title. This Act may be cited as the Extremely High Wealth Mark-to-Market Tax Act.

Section 5. Definitions. As used in this Act:

"Asset", to the extent allowable under the Illinois Constitution, the United States Constitution, and any other governing federal law, means:

(1) all real or personal property, whether tangible or intangible and wherever situated, that is:

(A) owned by the taxpayer;

(B) owned by the taxpayer's spouse, minor children, or any trust or estate of which the taxpayer is a beneficiary; or

(C) contributed by the taxpayer, or the taxpayer's spouse, minor children, or any trust or estate of which the taxpayer is a beneficiary, to any private foundation, donor advised fund, and any other entity described in Section 501(c) or Section 527 of the Internal Revenue Code of which the taxpayer, or the taxpayer's spouse, minor children, or any trust or estate of which the taxpayer is a beneficiary, is a substantial contributor (as such term is defined in Section 4958(c)(3)(B)(i) of the Internal Revenue Code); and

(2) without duplication, all gifts and donations made within the past 5 years by the taxpayer, or the taxpayer's spouse, minor children, or any trust or estate of which the taxpayer is a beneficiary, as if such gifts and donations were still owned by the taxpayer.

"Basis" means the fair market value of an asset on December 31 of the taxable year immediately preceding the taxable year in which the gain or loss is calculated under this Act. If the asset is acquired by the taxpayer during the taxable year, then the basis shall be the taxpayer's basis in the asset for the purpose of calculating capital gains under the federal Internal Revenue Code.

"Net assets" means the fair market value of the taxpayer's assets less the fair market value of the taxpayer's liabilities and, in appropriate cases as determined by the Department of Revenue, liabilities of such other persons described in the definition of "asset" under this Section.

"Net income" has the meaning given to that term in Section 202 of the Illinois Income Tax Act.

"Phase-in cap amount" means an amount equal to one-fourth of the worth of a taxpayer's net assets in excess of $1,000,000,000 on December 31 of the taxable year for which gains or losses are calculated under this Act.

"Resident taxpayer" means an individual, other than a nonresident of the State or a part-year resident of the State, who is subject to the tax imposed under subsections (a) and (b) of Section 201 of the Illinois Income Tax Act for the taxable year.

"Taxable year" or "tax year" has the meaning ascribed to the term "taxable year" in Section 1501 of the Illinois Income Tax Act.

Section 10. Tax imposed; tax years ending on or after December 31, 2027 and ending prior to December 31, 2028.

(a) Notwithstanding any other provision of law to the contrary, for tax years ending on or after December 31, 2027 and ending prior to December 31, 2028, a resident taxpayer with net assets worth $1,000,000,000 or more on December 31, 2027 shall recognize gains or losses as if each asset owned by that taxpayer had been sold for its fair market value on December 31, 2027. An amount equal to the lesser of (i) the difference between the total fair market value, on December 31, 2027, of all assets held by the taxpayer on that date and the combined basis of all assets held by the taxpayer on that date or (ii) the phase-in cap amount shall be included in the taxpayer's net income for that tax year for the purpose of calculating the tax due under the Illinois Income Tax Act. Proper adjustment shall be made in the amount of any gain or loss subsequently realized for gains or losses taken into account under this subsection. At the taxpayer's option, the tax payable as a result of this Section shall either be payable in one installment or else shall be payable annually in 10 equal installments beginning in the year of the effective date of this Act and with all such installment payments commencing after the initial installment payment also being subject to an annual nondeductible deferral charge of 7.5% annually.

(b) For resident taxpayers who would recognize net gains as a result of this Section except for the operation of this sentence, if the taxpayer can show that any portion of those gains was accumulated prior to the taxpayer becoming a resident taxpayer of Illinois, and if the taxpayer can also show that a portion of those gains was previously taxed by any state or jurisdiction in which the taxpayer was a resident prior to becoming a resident of Illinois, then credit shall be provided in the amount of the tax on those gains that was paid to any such prior state or jurisdiction. Any credits so provided by this subsection, however, shall not exceed the lesser of the total tax owed under this Section on such gains and the tax imposed on such gains by such other prior states or jurisdictions in which the taxpayer was a resident prior to becoming a resident individual of Illinois.

Section 15. Tax imposed; tax years ending on or after December 31, 2028.

(a) For taxable years ending on or after December 31, 2028, a resident taxpayer with net assets worth $1,000,000,000 or more on December 31 of the tax year shall recognize gains or losses as if each asset owned by that taxpayer on December 31 of the tax year had been sold for its fair market value on December 31 of the tax year but with adjustment made for taxes paid on gains in previous years. Any resulting net gains from these deemed sales, up to the phase-in cap amount, shall be included in the taxpayer's income for such taxable year. Proper adjustment shall be made in the amount of any gain or loss subsequently realized for gain or loss taken into account under the preceding sentence. To the extent that the losses of a taxpayer exceed the taxpayer's gains, such net losses shall not be recognized in such taxable year and shall instead carry forward indefinitely.

(b) For resident taxpayers who would recognize net gains as a result of this Section except for the operation of this sentence, if the taxpayer can show that any portion of those gains was accumulated prior to the taxpayer becoming a resident taxpayer of Illinois, and if the taxpayer can also show that a portion of those gains was previously taxed by any state or jurisdiction in which the taxpayer was a resident prior to becoming a resident of Illinois, then credit shall be provided in the amount of the tax on those gains that was paid to any such prior state or jurisdiction. Any credits so provided by this subsection, however, shall not exceed the lesser of the total tax owed under this Section on such gains and the tax imposed on such gains by such other prior states or jurisdictions in which the taxpayer was a resident prior to becoming a resident individual of Illinois.

Section 20. Fair market value.

(a) The fair market value of each asset owned by the taxpayer shall be the price at which the asset would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The value of a particular asset shall not be the price that a forced sale of the property would produce. Further, the fair market value of an asset shall not be its sale price in a market other than a market in which the item is most commonly sold to the public, taking into account the location of the item wherever appropriate. In the case of an asset that is generally obtained by the public in the retail market, the fair market value of such an asset shall be the price at which the item or a comparable item would be sold at retail.

(b) For purposes of this Section, any feature of an asset, such as a poison pill, that was added with the intent, and has the effect, of reducing the value of the asset shall be disregarded, and no valuation or other discount shall be taken into account if it would have the effect of reducing the value of a pro rata economic interest in an asset below the pro rata portion of the value of the entire asset.

Section 25. Administration.

(a) The Department of Revenue shall amend or create tax forms as necessary for the reporting of gains by assets. Assets shall be listed with (i) a description of the asset, (ii) the asset category, (iii) the year the asset was acquired, (iv) the adjusted Illinois basis of the asset as of December 31 of the tax year, (v) the fair market value of the asset as of December 31 of the tax year, and (vi) the amount of gain that would be taxable under this Act, unless the Department determines that one or more categories is not appropriate for a particular type of asset.

(b) Asset categories separately listed shall include, but shall not be limited to, the following:

(1) stock held in any publicly traded corporation;

(2) stock held in any private C corporation;

(3) stock held in any S corporation;

(4) interests in any private equity or hedge fund organized as a partnership;

(5) interests in any other partnerships;

(6) interests in any other noncorporate businesses;

(7) bonds and interest-bearing savings accounts, cash, and deposits;

(8) interests in mutual funds or index funds;

(9) put and call options;

(10) futures contracts;

(11) financial assets held offshore reported on IRS tax form 8938;

(12) real property;

(13) art and collectibles;

(14) pension funds;

(15) other assets;

(16) debts and liabilities; and

(17) assets not owned by the taxpayer but which count toward the $1,000,000,000 threshold pursuant to this Act.

(c) The Department shall specifically request the filing of such forms by any resident individual expected to have net assets in excess of $1,000,000,000. Such taxpayers shall include, but not be limited to, taxpayers with an adjusted gross income summed over the previous 10 years in excess of $600,000,000.

Section 30. Mark-to-market in other states. If a resident taxpayer becomes an Illinois resident subsequent to paying tax to another state as a result of recognizing gain or loss pursuant to any mark-to-market or deemed-realization regime of that other state, proper adjustment shall be made in the amount of any gain or loss subsequently realized for gain or loss taken into account under such mark-to-market or deemed-realization regime of that other state for purposes of computing gain or loss under Section 10 or 15.

Section 35. Collection. The Department of Revenue shall collect the taxes imposed under this Act. Money collected under this Act, after deducting amounts necessary for administration and enforcement by the Department, shall be deposited into the Community College Tuition Fund.

Section 90. Rules. The Department of Revenue shall adopt any rules necessary or appropriate to carry out the purposes of this Act, including rules to prevent the use of year-end transfers, related parties, or other arrangements to avoid this Act's provisions.

Section 900. The State Finance Act is amended by adding Section 5.1038 as follows:

(30 ILCS 105/5.1038 new)

Sec. 5.1038. The Community College Tuition Fund.

Section 905. The Public Community College Act is amended by changing Sections 2-16.02 and 7-1.1 and by adding Section 6-1.2 as follows:

(110 ILCS 805/2-16.02) (from Ch. 122, par. 102-16.02)

Sec. 2-16.02. Grants. Any community college district that maintains a community college recognized by the State Board shall receive, when eligible, grants enumerated in this Section. Funded semester credit hours or other measures or both as specified by the State Board shall be used to distribute grants to community colleges. Funded semester credit hours shall be defined, for purposes of this Section, as the greater of (1) the number of semester credit hours, or equivalent, in all funded instructional categories of students who have been certified as being in attendance at midterm during the respective terms of the base fiscal year or (2) the average of semester credit hours, or equivalent, in all funded instructional categories of students who have been certified as being in attendance at midterm during the respective terms of the base fiscal year and the 2 prior fiscal years. For purposes of this Section, "base fiscal year" means the fiscal year 2 years prior to the fiscal year for which the grants are appropriated. Such students shall have been residents of Illinois and shall have been enrolled in courses that are part of instructional program categories approved by the State Board and that are applicable toward an associate degree or certificate. Courses that are eligible for reimbursement are those courses for which the district pays 50% or more of the program costs from unrestricted revenue sources, with the exception of dual credit courses and courses offered by contract with the Department of Corrections in correctional institutions. For the purposes of this Section, "unrestricted revenue sources" means those revenues in which the provider of the revenue imposes no financial limitations upon the district as it relates to the expenditure of the funds. Except for Fiscal Year 2012, base operating grants shall be paid based on rates per funded semester credit hour or equivalent calculated by the State Board for funded instructional categories using cost of instruction, enrollment, inflation, and other relevant factors. For Fiscal Year 2012, the allocations for base operating grants to community college districts shall be the same as they were in Fiscal Year 2011, reduced or increased proportionately according to the appropriation for base operating grants for Fiscal Year 2012.

Equalization grants shall be calculated by the State Board by determining a local revenue factor for each district by: (A) adding (1) each district's Corporate Personal Property Replacement Fund allocations from the base fiscal year or the average of the base fiscal year and prior year, whichever is less, divided by the applicable statewide average tax rate to (2) the district's most recently audited year's equalized assessed valuation or the average of the most recently audited year and prior year, whichever is less, (B) then dividing by the district's audited full-time equivalent resident students for the base fiscal year or the average for the base fiscal year and the 2 prior fiscal years, whichever is greater, and (C) then multiplying by the applicable statewide average tax rate. The State Board shall calculate a statewide weighted average threshold by applying the same methodology to the totals of all districts' Corporate Personal Property Tax Replacement Fund allocations, equalized assessed valuations, and audited full-time equivalent district resident students and multiplying by the applicable statewide average tax rate. The difference between the statewide weighted average threshold and the local revenue factor, multiplied by the number of full-time equivalent resident students, shall determine the amount of equalization funding that each district is eligible to receive. A percentage factor, as determined by the State Board, may be applied to the statewide threshold as a method for allocating equalization funding. A minimum equalization grant of an amount per district as determined by the State Board shall be established for any community college district which qualifies for an equalization grant based upon the preceding criteria, but becomes ineligible for equalization funding, or would have received a grant of less than the minimum equalization grant, due to threshold prorations applied to reduce equalization funding. As of July 1, 2013, a community college district eligible to receive an equalization grant based upon the preceding criteria must maintain a minimum required combined in-district tuition and universal fee rate per semester credit hour equal to 70% of the State-average combined rate, as determined by the State Board, or the total revenue received by the community college district from combined in-district tuition and universal fees must be at least 30% of the total revenue received by the community college district, as determined by the State Board, for equalization funding. As of July 1, 2004, a community college district must maintain a minimum required operating tax rate equal to at least 95% of its maximum authorized tax rate to qualify for equalization funding. This 95% minimum tax rate requirement shall be based upon the maximum operating tax rate as limited by the Property Tax Extension Limitation Law.

The State Board shall distribute such other grants as may be authorized or appropriated by the General Assembly. The State Board may adopt any rules necessary for the purposes of implementing and distributing funds pursuant to an authorized or appropriated grant.

Each community college district entitled to State grants under this Section must submit a report of its enrollment to the State Board not later than 30 days following the end of each semester or term in a format prescribed by the State Board. These semester credit hours, or equivalent, shall be certified by each district on forms provided by the State Board. Each district's certified semester credit hours, or equivalent, are subject to audit pursuant to Section 3-22.1.

The State Board shall certify, prepare, and submit monthly vouchers to the State Comptroller setting forth an amount equal to one-twelfth of the grants approved by the State Board for base operating grants and equalization grants. The State Board shall prepare and submit to the State Comptroller vouchers for payments of other grants as appropriated by the General Assembly. If the amount appropriated for grants is different from the amount provided for such grants under this Act, the grants shall be proportionately reduced or increased accordingly.

For the purposes of this Section, "resident student" means a student in a community college district who maintains residency in that district or meets other residency definitions established by the State Board, and who was enrolled either in one of the approved instructional program categories in that district, or in another community college district to which the resident's district is paying tuition under Section 6-2 or with which the resident's district has entered into a cooperative agreement in lieu of such tuition. Students shall be classified as residents of the community college district without meeting the 30-day residency requirement of the district if they are currently residing in the district and are youth (i) who are currently under the legal guardianship of the Illinois Department of Children and Family Services or have recently been emancipated from the Department and (ii) who had previously met the 30-day residency requirement of the district but who had a placement change into a new community college district. The student, a caseworker or other personnel of the Department, or the student's attorney or guardian ad litem appointed under the Juvenile Court Act of 1987 shall provide the district with proof of current in-district residency.

For the purposes of this Section, a "full-time equivalent" student is equal to 30 semester credit hours.

The Illinois Community College Board Contracts and Grants Fund is hereby created in the State Treasury. Items of income to this fund shall include any grants, awards, endowments, or like proceeds, and where appropriate, other funds made available through contracts with governmental, public, and private agencies or persons. The General Assembly shall from time to time make appropriations payable from such fund for the support, improvement, and expenses of the State Board and Illinois community college districts.

(Source: P.A. 103-8, eff. 6-7-23.)

(110 ILCS 805/6-1.2 new)

Sec. 6-1.2. Free community college; State reimbursement.

(a) Beginning with the 2028-2029 academic year, a community college district is prohibited from charging a student tuition and fees, unless the student is not a resident of this State.

(b) The State Board shall establish a grant program to fully reimburse community college districts for the loss of tuition and fee revenue under subsection (a). Grants shall be awarded annually beginning with the 2028-2029 academic year.

(c) The Community College Tuition Fund is created as a special fund in the State treasury. Money in the Fund shall be used, subject to appropriation, by the State Board to award grants under this Section.

(110 ILCS 805/7-1.1) (from Ch. 122, par. 107-1.1)

Sec. 7-1.1. Additional powers.

(a) In addition to other powers and authority now possessed by it, the board shall have power (1) to lease from any public building commission created pursuant to the provisions of the "Public Building Commission Act", approved July 5, 1955, as now or hereafter amended, any real or personal property for the purpose of securing office or other space for its administrative functions or for community college purposes for a period of time not exceeding 40 years; and (2) to pay for the use of this leased property in accordance with the terms of the lease and with the provisions of the "Public Building Commission Act", approved July 5, 1955, as now or hereafter amended.

Such lease may be entered into without making a previous appropriation for the expense thereby incurred; provided, however, that if the board undertakes to pay all or any part of the costs of operating and maintaining the property of a public building commission as authorized in this Section, such expenses of operation and maintenance shall be included in the annual budget of such board annually during the term of such undertaking.

In addition, the board may undertake, either in the lease with a public building commission or by separate agreement or contract with a public building commission, to pay all or any part of the costs of maintaining and operating the property of a public building commission for any period of time not exceeding 40 years.

(b) In addition, the board shall have power to borrow money (including, without limitation, in the form of a line of credit which may vary from time to time as to outstanding principal amount) from any source, public or private, for the purpose of refunding or continuing to refund bonds, notes or other indebtedness when they become due and payable, and to enter into agreements in connection with such borrowing, including agreements providing for the issuance of indebtedness to evidence the obligation to repay such borrowing and agreements providing for the pledge of and the granting of a lien on tuition and fees established and collected by the board pursuant to Section 6-4; provided that the proceeds of any such indebtedness shall be used only to refund or continue to refund bonds, notes or other indebtedness initially issued between February 1, 1994 and March 1, 1994 in an amount not exceeding $34,000,000, and that any such indebtedness be repaid within 20 years.

(Source: P.A. 89-281, eff. 8-10-95.)

(110 ILCS 805/3-45 rep.)

(110 ILCS 805/6-1.5 rep.)

(110 ILCS 805/6-2 rep.)

(110 ILCS 805/6-4 rep.)

(110 ILCS 805/6-4a rep.)

(110 ILCS 805/6-4.1 rep.)

(110 ILCS 805/6-4.2 rep.)

Section 910. The Public Community College Act is amended by repealing Sections 3-45, 6-1.5, 6-2, 6-4, 6-4a, 6-4.1, and 6-4.2.