Illinois Should Decouple from Federal CARES Act Tax Breaks


February 2, 2021

Part of the federal economic stimulus created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, involved increasing the tax relief businesses could claim under the existing net operating loss and excess business loss tax breaks. Among other things, the Cares Act made these tax cuts retroactive, meaning businesses can claim losses and reduce their tax liability for years in which the pandemic had no impact on their profitability.

Because the Illinois income tax code is predicated on federal law, whenever Congress increases existing tax relief already received by businesses at the federal level, that tax relief automatically applies under Illinois law, resulting in a concomitant reduction in tax revenue for the state. According to State Representative Mike Zalewski, this change in federal law could result in Illinois losing anywhere from $500 million to $1 billion in tax revenue this year, unless Illinois “decouples” from the federal change, as requested by the Pritzker Administration.  The following Issue Brief provides CTBA’s reasoning for supporting decoupling from Federal CARES Act Tax Breaks.

Topics:Tax and Budget, Revenue Policy

Tags:Taxes, Business Taxes, Income Tax, Revenue, Budget, COVID-19