HB2735 amends the Illinois Income Tax Act to create a new subtraction modification for gratuities (tips) included in a taxpayer’s federal adjusted gross income. The bill adds a new provision to the individual income tax base-income calculation allowing taxpayers to deduct qualifying gratuities from Illinois taxable income beginning with tax years on or after January 1, 2026. The bill defines gratuities by reference to the Minimum Wage Law and makes the deduction exempt from Section 250, which generally governs certain limitations and adjustments.
In practical terms, the measure would reduce Illinois income tax liability for workers who receive reported tips, such as restaurant and hospitality employees, by excluding those amounts from state taxable income. Because the bill only amends the individual income tax provisions, it does not change corporate, partnership, or trust taxation. The bill is effective immediately upon enactment, but the new deduction would apply starting in 2026.
The available record shows no committee transcript and no recorded votes, so there is no documented floor or committee debate to gauge formal legislative sentiment. Based on the bill’s subject matter and caption, the proposal appears to be framed as a tax relief measure for tipped workers, which typically carries consumer- and worker-focused support. However, without voting history or hearing testimony, the overall sentiment cannot be measured beyond the bill’s introduction.
There is no identified recorded contention in the provided materials, but the likely policy questions would concern revenue loss to the state, whether the deduction should apply broadly to all reported tips or only certain occupations, and how to administer the deduction consistently with federal reporting. Another possible point of discussion is whether the measure creates a targeted tax preference for one class of workers relative to other low- and moderate-income taxpayers who do not receive tips.
Impact
HB2735 would amend Section 203 of the Illinois Income Tax Act by adding gratuities to the list of subtraction modifications for individual taxpayers, thereby lowering Illinois base income for qualifying tipped income. The change would affect only individual income tax filers who include gratuities in federal adjusted gross income and would not alter tax treatment for businesses or other entity types. It would also interact with existing Illinois income tax calculations by creating a new state-level deduction tied to federally reported tip income.
Sentiment
No committee transcripts or votes were provided, so there is no direct evidence of debate, amendments, or recorded support/opposition. The bill’s caption and structure suggest a generally favorable policy posture toward tax relief for tipped workers, but the legislative record supplied here does not show whether that support was broad, contested, or partisan. As introduced, the measure appears straightforward and narrowly targeted.
Contention
The provided materials do not identify any explicit points of contention or named opponents. Potential areas of disagreement, based on the bill’s design, would likely include the fiscal impact on state revenues, whether the deduction should be limited to certain occupations or income thresholds, and whether excluding gratuities from Illinois taxable income creates an uneven tax preference compared with wages earned by non-tipped workers. Administrative issues could also arise around defining and verifying gratuities using federal income tax reporting and the Minimum Wage Law definition.