The State of Illinois is Repealing its Corporate Franchise Tax – eventually!

Frank J. Portera • March 3, 2020
Each corporation that does business in the State of Illinois, whether it was organized in Illinois or organized in another state around the country, is subject to an annual Corporate Franchise Tax. The Corporate Franchise Tax is essentially a fee that businesses must pay to the Illinois Secretary of State for the privilege of doing business in the State of Illinois and it is calculated based upon either the value of the corporation’s property or based upon the corporation’s total Paid-in Capital. Paid-in Capital is the amount of money that a corporation receives from its shareholders in exchange for the issuance of stock in the company.

Currently, Illinois is one of 8 states that assesses a franchise tax on corporations. Those states include Alabama, Arkansas, North Carolina, Oklahoma, Tennessee, Texas, and West Virginia. Most states are moving towards eliminating their Corporate Franchise Taxes all together with the goal of attracting more business owners to incorporate and do business in their states.

The Illinois Corporate Franchise Tax is currently calculated and due along with the filing of every business’ Corporate Annual Report with the Illinois Secretary of State. However, in June of 2019, Governor J.B. Pritzker signed into law Senate Bill 689 (now Illinois Public Act 101-0009) which provided for the eventual phase-out of Illinois’ Corporate Franchise Tax on both domestic and foreign corporations. 

As of January 1, 2020, the Illinois Corporate Franchise Tax has begun its process of being completely phased out. By 2024, the Illinois Corporate Franchise Tax will be a thing of the past. The actual timing of the phase-out and the tax amount that each corporation will be relieved of is as follows:

“On or after January 1, 2020 and prior to January 1, 2021, the first $30 in liability is exempt from the tax imposed under this Section.”

“On or after January 1, 2021 and prior to January 1, 2022, the first $1,000 in liability is exempt from the tax imposed under this Section.”

“On or after January 1, 2022 and prior to January 1, 2023, the first $10,000 in liability is exempt from the tax imposed under this Section.”

“On or after January 1, 2023 and prior to January 1, 2024, the first $100,000 in liability is exempt from the tax imposed under this Section.”

“The provisions of this Section shall not require the payment of any franchise tax that would otherwise have been due and payable on or after January 1, 2024.” 805 ILCS 5/15.35(e)

The new law not only affects corporations organized in Illinois but also those foreign (out-of-state) corporations that do business in the State of Illinois. 805 ILCS 5/15.65(e) also reads as follows:

“On or after January 1, 2020 and prior to January 1, 2021, the first $30 in liability is exempt from the tax imposed under this Section.”

“On or after January 1, 2021 and prior to January 1, 2022, the first $1,000 in liability is exempt from the tax imposed under this Section.”

“On or after January 1, 2022 and prior to January 1, 2023, the first $10,000 in liability is exempt from the tax imposed by under this Section.”

On or after January 1, 2023 and prior to January 1, 2024, the first $100,000 in liability is exempt from the tax imposed under this Section.”

“The provisions of this Section shall not require the payment of any franchise tax that would otherwise have been due and payable on or after January 1, 2024.” 

If you have an Illinois Corporate Annual Report due in 2020, expect to have your usual franchise tax amount be lowered by the new law. These lower tax assessments will likely benefit larger corporations and those corporations that have high amounts of Paid-In Capital.

If you would like to discuss this topic further or would like to discuss preparing your Illinois Corporate Annual Report, you may contact attorney Frank Portera at (847) 705-7555 or fportera@lavellelaw.com.

More News & Resources

Lavelle Law News and Events

The Junk Fee Ban Act and pricing transparency legislation.
By Sarah J. Reusché and Jacob Rotolo April 23, 2025
If enacted, the Junk Fee Ban Act would protect consumers from hidden fees and promote fair business practices in Illinois. While there has yet to be legislation in the proposed Junk Fee Ban Act that excludes dealerships, it will be important to look for future updates on this bill, as Illinois is quickly becoming a hub for vehicle innovation and automotive plant expansion.
Ancillary probate is required when a person dies owning real estate outside of their home state.
By Heather A. McCollum April 21, 2025
When someone passes away owning property in another state, their estate may need to go through ancillary probate—a secondary court process in that state.
$9.9 Million Dollar Purchase of Packaged Multi-Unit Properties
By Commercial Real Estate April 18, 2025
Lavelle Law represented a joint venture in its $9.9 million acquisition of four multi-unit buildings.
Type F Reorg offers a means of achieving structural change while preserving tax continuity
By Steven A. Migala and Nathan P. Toy April 14, 2025
A Type F reorganization (“F Reorg”), governed by Section 368(a)(1)(F) of the Internal Revenue Code, provides a strategically significant mechanism for corporate restructuring. Defined as a “mere change in identity, form, or place of organization of one corporation,” an F Reorg permits a corporation to alter its legal existence while being treated for federal tax purposes as the same entity. This recharacterization allows for the uninterrupted preservation of tax attributes while maintaining shareholder continuity.
Estate Planning for Your Pet: Securing Your Pet’s Future with a Pet Trust
By Jackie R. Luthringshausen April 10, 2025
When it comes to estate planning, most people think about providing for their loved ones—but what about the furry, feathered, or scaled members of your family? In the United States, 68% of households own at least one pet, according to the American Pet Products Association’s 2023-2024 National Pet Owners Survey. For many, pets are more than just companions—they’re family. Ensuring their care after your death or incapacity is a vital part of comprehensive estate planning. In Illinois, a Pet Trust offers a powerful solution to guarantee your pet’s well-being long after you’re gone.
IRS Press Release Addresses Payment Plan Options
By Timothy M. Hughes April 10, 2025
IRS Press Release Addresses Payment Plan Options - A recent press release by the IRS addressed the options that are available to taxpayers who may owe more on April 15th than they can pay. The IRS advised taxpayers that they do not need to wait until April 15 to file their 2024 federal return, and if they owe and are unable to pay the balance in full, there are payment plans available to help them pay their tax obligation.
Learn about essential legal protections to strengthen your business and safeguard your interests.
By Lavelle Law April 9, 2025
Join us on May 21 in Schaumburg for an engaging Breakfast Briefs seminar, delving into vital strategies to fortify your business. This session will explore the critical role of crafting ironclad non-compete agreements, shielding your trade secrets, and mastering the nuances of temporary restraining orders (TROs) and injunctive relief. Our presenters, attorneys Matthew Sheahin and Jennifer Tee, bring a wealth of experience in this legal domain. Seize this chance to bolster your company’s legal protections and lay a solid groundwork for enduring success!
FinCEN Eliminates BOI Reporting Obligations!
By Frank P. Portera March 25, 2025
On March 21, 2025, the Financial Crimes Enforcement Network (FinCEN) issued its interim final rule stating that those entities previously classified as "domestic reporting companies" are now exempt from all BOI reporting requirements. On the other hand, all foreign entities registered to do business in the USA must file their own initial BOI reports within 30 days of the initial final rule's publication, if they have not done so already.
Join us April 3, 2025 for Business After Hours 5-7 PM
By Lavelle Law March 19, 2025
Spring is here, and with baseball season kicking off, we’re stepping up to the plate with our annual Lavelle Law Business After Hours event. We’re excited to partner with our friends in the Schaumburg business community for an evening of networking, good vibes, and a few surprises—all hosted in the friendly confines of our Schaumburg office. Bonus points: Feel free to rock your favorite baseball team’s gear and show off your fandom while you’re at it!
Delaware Court  Provides the Standard of Supreme Review for the Redomestication of Corporations
By Steven A. Migala and Anthony Letto March 12, 2025
Delaware corporations seeking to redomesticate to another state should be advised that on February 4, 2025, the Delaware Supreme Court issued its highly anticipated decision in Palkon v. Maffei, C.A. No. 2023-0449-JTL, addressing a challenge to TripAdvisor's redomestication from a Delaware corporation to a Nevada corporation. The case raised important questions regarding the standard of review applicable to such reincorporations, particularly when fiduciaries may derive a benefit from shifting to a legal regime perceived as more friendly.
More Posts