Illinois Legislature finalizes budget and final bills; Transit Reform & Passenger Rail bill still uncertain

The Illinois Legislature adjourned on the evening of Saturday, May 31, finalizing the State budget and passing final policy bills, while leaving issues including the Transit Reform & Passenger Rail bill unresolved – likely requiring a special session later this year. 

Throughout the session, the Chamber team worked to pursue new investment in the Quad Cities, including the creation of the Middle-Income Housing Grant program, creation of an enhanced Brownfield and Grayfield program, funding for the Chicago-to-Quad Cities passenger rail connection and fighting to stop new harmful policies. 

More details on some of our top priorities are below, in accordance with the Chamber's 2025 Illinois Legislative Agenda.

Budget and Tax Summary

Lawmakers enacted a $55.2 billion budget, including new taxes on sports bets, nicotine products and businesses. Spending increased 3.9%, up from FY 2024, creating $500 million more in new revenue than what was proposed by Gov. Pritzker this February. The increase makes up for declining base revenues.  

Taxes

• Increase the tobacco and vape tax to $0.44 to help fund the Medicaid program. 
• Implement a sports wagering tax of $0.25 per wager for the first $20 million wagers and $0.50 for each wager in excess of $20 million [$36 million].
• Implement a tax amnesty program [$195 million].
• Extension of the Hotel Operators’ Occupation Tax to short-term rentals [$15 million].
• Implement the “throwback rule” impacting corporations that operate in multiple states (switches Illinois from the Joyce rule to the Finnigan Rule to enable the State to collect more corporate tax income) [$72 million].
• Increase the telecommunications tax to fund 9-8-8 services, a statewide suicide prevention and mental health crisis line. 
• Implement a tax on businesses outside of Illinois selling $100,000+ worth of physical goods to Illinois residents must collect Illinois sales tax, even without an in-state presence. 
• Expansion of the Illinois Retail Act to include servicemen under occupation and use taxes. 
• Elimination of the 200-transaction threshold for economic nexus. 
• Implementation of a 15% tax rate when insufficient sales records are provided. 
• Enables service providers to file returns for retailers and servicemen maintaining business in Illinois. 
• Delayed final payment from the sales tax on motor fuel to the Road Fund [$171 million].

Transit Reform and Passenger Rail 

Senator Halpin was able to secure $300 million into Senate Amendment 1 to HB3438 for the Chicago-to-Quad Cities Passenger Rail Service. The Bill passed the Senate but stalled in the House. The bill included a number of revenue raisers.

Details include: 

• $1.50 fee on home delivery for online orders with some exceptions for small businesses and orders containing only groceries and medication. 
• Of the funds raised from this statewide tax, 80% would go to northern Illinois transit systems under a renamed Regional Transit Authority. 
• 20% would be put into a fund (Downstate Transit Improvement Fund) for downstate transit agencies.  
• The House progressive caucus was adamant that a tax on digital advertisements be included in the revenue package to support transit reform legislation. The Senate sent the package over to the House for concurrence without that provision and the House failed to pass or concur prior to the adjournment deadline.  
• Gov. Pritzker said there is “significant work” left to address Chicagoland transit funding over the summer and into the fall. Session is likely to reconvene this summer or fall in part to address the transit bill and we will continue to fight for inclusion of the Chicago-to-Quad Cities connection. 

Middle Income Housing and Brownfield/Grayfield Enhancements 

The Chamber has continued to pursue the creation of new funding mechanisms for economic development in Illinois, including the creation of a Middle-Income Housing Grant program and Brownfield/Grayfield Enhancements. Middle-Income Housing saw the most interest with a subject matter hearing held late in session. Unfortunately, the Legislature did not move forward with the proposal this year. The Brownfield bill did not receive a hearing. 

Site Readiness & Economic Development 

The Illinois Legislature passed an economic development package aimed at fostering business growth and attracting investment in the state. This package included incentives for manufacturers, capital investment programs and business recruitment strategies.

Specific areas of focus included: 

• Investing in manufacturing and supply chains, particularly in electric vehicle development. 
• Strengthening incentives for semiconductor and microchip manufacturers to advance quantum computing research. 
• Extending the Research & Development tax credit.  
• Investing in site readiness ($500 million for state-owned sites).

Further details of the package involved recodifying eligibility for the Manufacturing Illinois Chips for Real Opportunity (MICRO) program to include R&D phase companies and reduction of investment requirements for smaller businesses. It also included the creation of a Quantum Enterprise Zone (QEZ) to attract investment for Illinois' proposed quantum campus and the reduction of Blue Collar Jobs Act (BCJA) red tape by allowing credits based on standard wages.  

The State's FY2026 budget, approved by the General Assembly, focused on investments in education, human services, economic development and poverty reduction. The budget increased general obligation and Build Illinois bond authorizations to support new capital appropriations, allocating $500 million for economic development and investment in site readiness grants. 

Business/Employment Regulation 

• Workplace Temperature – the Chamber in coalition with other business groups, successfully killed a proposed bill that would limit the temperatures at which employees could work in both indoor and outdoor settings. 
• Eliminating the Tipped Wage – working in coalition with the Illinois Restaurant Association, the Chamber again successfully helped prevent the passage of harmful legislation that would raise costs on consumers and make doing business more difficult for restaurant and hospitality industry employers. Troubling data from Chicago and Washington D.C., both of which passed similar ordinances at the local level helped to bolster the argument on the significant negative impact to employment and business success when the tipped wage is eliminated. 
• Warehouse Quote Regulation – Gov. Pritzker vetoed legislation early in session aimed at requiring reporting of quotas for warehouse workers. This would have provided significant additional administrative burdens on employers and been potentially unworkable. 
• Frivolous lawsuits – Unfortunately, late in session a priority of the trial lawyers and unions was passed which allows for companies with an Illinois location to be subject to lawsuits for actions outside of the state, increasing risk and liability for companies with a presence in Illinois and negatively impacting economic development prospects in the future.