State Income Tax Increase In the eleventh hour of the 96th General Assembly, both chambers passed Senate Bill 2505 by slim margins required to enact the legislation.  Key points of the legislation are: Illinois Personal Income Tax rate is increased from 3% to 5% between January 1, 2011 and December 31, 2014. The rate will revert to 3.75% (originally proposed at 4%) from January 1, 2015 to December 31, 2024. The rate will then reduce to 3.25% (originally proposed at 3.5%) starting on January 1, 2025. Corporate Income Tax rate rate is increased from the current 7.3% rate to 9.5% starting January 1, 2011 through December 31, 2014.  It then drops to 7.75% between January 1, 2015 and December 31, 2024. It then reverts to 7.3% starting on January 1, 2025. (NOTE: this includes the personal property replacement tax of 2.5%.) Net Operating Loss absorption was suspended (except for S-corporations) for tax years ending after December 31, 2010 and prior to December 31, 2014. The current carry over provisions (twelve years for losses incurred on or after December 31, 2003) will be extended for the number of years of the suspension. Property tax rebate program that was included in the original bill was eliminated in the final bill and the elimination produced the reduction in the out year tax rates. The current 5% of property tax paid credit under the personal income tax was retained. State spending limitation and tax reduction - If the state spending from "state general funds" for any fiscal year for 2012 through 2015 exceeds established spending limitations set forth in the Income Tax Act, the income tax rates will be returned to 3% for personal and 7.3% for corporations. Local Government Distributive Fund (LGDF) - Currently 10% of the collections under the Illinois Income Tax Act are deposited in the LGDF for distribution to counties and municipalities based on their proportionate share of the state's population. They will not share in collections from the additional taxes that are imposed under this act. Illinois Estate and Generation-Skipping Transfer Tax Act has been reinstated for deaths occurring after December 31, 2010.  It had previously been allowed to lapse December 31, 2009. The tax is equal to the full amount of the state tax credit that would have been allowed under the Internal Revenue Code in effect on December 31, 2001 but limiting the exclusion amount to $2 million.