Illinois Proposes Rules for Taxing Digital Asset Transactions

The Illinois Department of Revenue has proposed rules for taxing digital asset transactions under the Digital Asset Tax Act. The act, enacted in June despite opposition from major crypto industry associations, imposes a 0.2% tax on the gross value of covered crypto transactions starting January 1, 2027.

The draft framework clarifies that stablecoins will be taxed as digital assets subject to the levy, while non-fungible tokens are explicitly excluded. However, decentralized finance (DeFi) treatment hinges on the nature of fees charged: routine network fees and swap fees funded solely through payments to liquidity providers are excluded, but protocol fees retained for operating or maintaining a decentralized platform can bring activity inside the tax.

The department also clarified that bridging digital assets from one network to another constitutes a taxable exchange if facilitated by a digital asset broker and involves a fee. Out-of-state providers are not exempt, and any business with annual receipts of $100,000 or more from digital asset services sold to Illinois customers must register, collect, and remit the tax.

The public comment window runs through 5 p.m. on October 30, with submissions accepted on the department's official website. The rules had not yet been filed with the Secretary of State or submitted to the Joint Committee on Administrative Rules when they were published.