Illinois Postpones Crypto Tax as Crypto Industry Challenges Law in Court

Illinois has agreed to delay the rollout of its 0.2% digital asset tax by six months, potentially moving the effective date to July 1 as the crypto industry continues to challenge the measure in court.

The postponement still requires approval from a judge. The Digital Chamber and Illinois Blockchain Association reached the agreement with state officials, the Digital Chamber told CoinDesk.

The tax was approved in June under Illinois’ Digital Asset Tax Act and is scheduled to begin Jan. 1. It applies to crypto-related activities by businesses reporting more than $100,000 in receipts, including transactions and the acceptance of digital assets for custody.

Joint Filing Expected Thursday

The state and industry groups are expected to ask the Sangamon County state circuit court on Thursday to approve the six-month extension.

A successful request would allow the parties to avoid an immediate dispute over preliminary injunctions and instead focus on the central legal issues in the case. Those issues include the “constitutionality and enforceability” of the Digital Asset Tax Act.

Crypto industry organizations had already turned to the courts for temporary relief. On Sept. 9, groups opposing the tax asked the state court to suspend its implementation, saying companies were already absorbing costs associated with preparing for the new requirements.

The Digital Chamber said the agreement gives businesses additional time while the industry’s broader challenge proceeds.

“We’re pleased that the State of Illinois has agreed to delay implementation of its Digital Asset Tax, giving digital asset businesses and users relief from costly compliance obligations while we continue to seek to have this tax permanently repealed through the courts,” Digital Chamber CEO Cody Carbone said.

Industry Raises State and Federal Objections

The groups challenging the tax dispute its validity under Illinois law and argue that it is unconstitutional. They have also claimed that the Internet Tax Freedom Act at the federal level preempts Illinois from imposing the levy.

The proposed joint filing, reviewed by CoinDesk, says the delay is being sought “in the interest of justice while the matter works towards resolution on the merits.”

The agreement would therefore postpone the tax rather than resolve the lawsuit. The court will still need to address the industry’s challenges concerning the measure’s constitutionality and enforceability.