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 Department of the Treasury and the Internal Revenue Service recently issued a notice announcing upcoming regulations and providing guidance regarding Trump Accounts, which are a new type of individual retirement account (IRA) for eligible children.
How do you choose the right attorney or law firm for your needs? Attorney Kerry Lavelle has refined his answer to this common question into a clear, two-part test - one that helps individuals and businesses identify legal representation that is both highly competent and truly client-focused.
Daday and Kish discussed the essentials of Illinois condominium and common interest community association law. The presentation highlighted recent legal updates impacting HOA operations and addressed key issues in collections and safeguarding the financial interests of the association.
While Illinois law recognizes that grandparents can play a vital role in a child’s life, it also strongly defers to the rights of parents. A grandparent seeking visitation must overcome a high legal threshold and demonstrate that denial of contact would likely harm the child’s well-being.
The 2025 Lavelle Law Charities Food Drive wrapped up excitingly on October 24, 2025! After weeks of heartfelt community giving, Lavelle Law team members personally delivered an enormous haul to the Schaumburg Township Food Pantry.
Impact of Partial Government Shutdown on IRS – Day 41: Due to the current lapse in appropriations, IRS operations are limited. However, the underlying tax law remains in effect, and all taxpayers must continue to meet their tax obligations as normal.
$65 Million Sale of Business – a Lavelle Law Success Story. We were able to effectively negotiate the terms of a complex sale in a manner that enabled both buyer and seller to achieve their objectives.
Explore the nuts and bolts of condominium law and gain actionable strategies to navigate today’s condominium and HOA challenges in Illinois.
The Illinois General Assembly enacted Public Act 1738, amending several provisions of the Illinois Code of Civil Procedure to raise debtor exemption limits effective 1.1.26. The new law provides expanded protection for residents, marking the most significant increase to the state’s exemption statutes in over a decade.
A crucial estate planning tool that many people in Illinois overlook is putting their home in a trust. Placing your house in a revocable trust offers multiple benefits. It avoids probate, which can save your family time and money after your death.
