HB2871 Summary

• Excludes non-Illinois source income: For taxable years beginning January 1, 2022 and later, taxpayers must exclude income or loss from trades or businesses conducted within and outside Illinois that is not derived from or connected with Illinois sources when calculating base income.

• Applies to pass-through entities: The exclusion applies to income from pass-through entities (partnerships, S-corporations, trusts) conducting business both inside and outside Illinois.

• Eliminates foreign tax credit: Repeals the credit for foreign taxes paid for taxable years beginning on or after January 1, 2022, limiting credits to only state income taxes paid.

• Implements sourcing rules from Article 3: Uses existing apportionment and allocation provisions in Article 3 of the Illinois Income Tax Act to determine what income is connected with Illinois sources.

• Effective immediately: The legislation takes effect upon becoming law.