Illinois Digital Asset Tax Act Takes Shape with Draft Rules

The Illinois Department of Revenue has released a draft of rules for implementing the Digital Asset Tax Act, which will take effect on January 1, 2027. The law requires digital brokers to collect and remit a tax of 0.2% on certain exchange, transfer, and storage operations involving digital assets for clients in Illinois.

The draft clarifies the taxation conditions for transactions involving stablecoins, decentralized finance (DeFi), transfers between personal accounts, and other digital asset transactions. The tax applies if the client is located in Illinois, receives a service related to digital asset activities, and the transaction is conducted by a digital asset broker for a fee.

The draft also defines what constitutes a transfer, including moving an asset between two accounts of the same client if conducted by a broker for a fee and recorded on the blockchain. The tax rate is 0.2% of the value of the digital asset being exchanged, transferred, or stored, determined in dollars at the time the transaction is completed.

The Illinois Department of Revenue is accepting comments on the draft until October 30. At least two separate lawsuits have been filed against the Digital Asset Tax Act, arguing that the tax contradicts the U.S. and Illinois Constitutions, the federal Internet Tax Freedom Act, and due process requirements.