Injunction delays digital assets tax
(The Center Square) – Holders of cryptocurrency and other digital assets have a reprieve before a new Illinois tax is scheduled to take effect.
Last week, a Sangamon County judge signed an agreed preliminary injunction between the state and The Digital Chamber, postponing the 0.2% tax on digital assets held or transacted by Illinois residents from Jan. 1 to July 1.
“This allows all the parties to litigate the matter and have a court reach a resolution, hopefully in advance of that, so that digital asset service providers and people using digital assets in the state of Illinois don’t have to worry about compliance with the tax while it’s still being challenged in court,” Jonathan Schmalfeld, Director of Policy at The Digital Chamber, told The Center Square.
The Digital Chamber filed a complaint on July 21, claiming the tax violates both the Illinois and U.S. constitutions.
Schmalfeld said the parties can move forward with briefings from early November to January or February.
“The goal would be to have this case resolved on the legal merits by early spring of next year, and then it would move on to any kind of appellate process or otherwise,” Schmalfeld said.
The Illinois Department of Revenue did not immediately respond to The Center Square’s request for comment on the agreed injunction.
The tax is part of the revenue package signed by Gov. J.B. Pritzker last June after it cleared the General Assembly during the final hours of the spring legislative session.
State Rep. John Cabello, R-Machesney Park, said, before implementing a tax, lawmakers should face the people who will pay for it.
“Hold a hearing. Let them testify. Explain what you’re doing before it’s a done deal instead of passing it in the middle of a night without a hearing,” Cabello said.
As of Monday, Cabello’s House Bill 5798 to repeal the digital assets tax had 22 Republican cosponsors.
Cabello said the tax was meant to generate $60 million or more in new revenue for the state.
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