Illinois Puts Crypto Transfers in the Tax Crosshairs

The governor of Illinois signed a law that will impose a 0.2% tax on customers’ use of digital asset services, including exchange, transfer or custody activities, according to the Crypto Council for Innovation (CCI).

The organization outlined the law in a Tuesday (June 16) letter in which it asked Gov. JB Pritzker to issue a line-item veto for the Digital Asset Privilege Tax Act. It said in the letter that no other state in the country has adopted a transaction-based tax like the one in Illinois, and that Illinois does not impose such a tax on stocks, bonds or derivatives.

In the LinkedIn post in which it shared the letter, the CCI said Pritzker had just signed “the most punitive digital asset tax in the country into law.”

“This will create an unprecedented tax regime that disproportionately burdens Illinois residents for simply using digital assets and will drive innovation and builders out of the state,” the CCI said in the post.

CoinDesk reported Wednesday (June 17) that the new tax law was passed as a provision to the state’s broader budget bill and that the provision was added at the last minute. The tax takes effect on Jan. 1, according to the report.

While the crypto industry is pushing back against the tax, any changes may be impossible in the short term because the Illinois legislature is out of session for the rest of the year, and it is not clear if Pritzker would enact a line-item veto on the tax during a veto session that is scheduled for the fall, the report said.

The law applies the new tax to firms that are based in Illinois or provide services to the state’s residents and have total gross receipts of at least $100,000, per the report.

The Illinois Blockchain Association and The Digital Chamber wrote a letter dated June 3, about two weeks before the bill was signed into law, opposing the 0.2% tax on crypto transactions.

In the LinkedIn post in which it shared the letter, the Illinois Blockchain Association said the Digital Asset Privilege Tax is “a punitive, discriminatory measure rushed through in the dark of night that will drive businesses and jobs to competing states.”