The Barrington Hills Observer

The tax also risks being challenged in court.

By Adam Gorcyca | Illinois Policy Institute

Illinois’ new tax on digital asset transactions risks hurting trading volume and market liquidity, making the state unfriendly for the industry and prompting legal battles.

The fiscal 2027 state budget, which Gov. J.B. Pritzker signed in June, puts a 0.2% tax on the value of transactions in assets such as NFTs, bitcoin and other cryptocurrencies, starting Jan. 1. Such transactions include exchanges, transfers or custodial services.

It’s the first such tax in the country. Affected businesses include crypto exchanges, trades, wallet and custody providers holding customer assets and firms transmitting digital assets between accounts. The law applies to any digital asset broker with a place of business in Illinois and to any brokers that gross $100,000 or more in annual digital asset receipts with Illinois residents.

Compliance will require brokers to collect and retain customers’ personal online transaction history, account information, mailing address, IP address and other data to indicate Illinois is the customer’s place of primary use.

Because the tax targets transactions rather than profits, brokers must collect it even when a trade loses money or when assets are transferred between accounts. For gains, the new tax will be an addition to Illinois’ current 4.95% individual income tax, which applies to capital gains.

Lawmakers expect the tax to generate $60 million a year.

Read more here.