Lawsuit claims digital asset tax is unconstitutional

By Jim Talamonti | The Center Square
The Center Square

(The Center Square) – According to a lawsuit filed in Sangamon County court, a new, first-in-the-nation digital asset tax in Illinois violates both the U.S. and state constitutions.

The Digital Chamber filed the complaint against Illinois Department of Revenue Director David Harris and Attorney General Kwame Raoul over the tax scheduled to take effect on Jan. 1, 2027.

Bellementis law firm partner Olta Andoni said the 0.2% tax on every digital asset is unconstitutional under the uniformity clause in Illinois.

“The tax classifies by record-keeping technology, so it’s not addressed on any real and substantial difference between the assets. Second of all, there is some due process implication here because the tax is very vague,” Andoni told The Center Square.

The Digital Chamber’s complaint said the tax imposes an unfair burden, even though Andoni said 0.2% may not sound like much.

“When you consider that this is going to be applicable to every single transaction in digital asset, that definitely turns to be quite impactful for a majority of the businesses,” Andoni said, adding that is the first in the nation with such implications.

Under U.S. law, Andoni invoked the dormant commerce clause and 14th Amendment due process.

“The most important count claim that we address is under the Internet Tax Freedom Act that pretty much preempts the tax as a discriminatory tax on electronic commerce,” Andoni said.

The tax is part of the revenue package signed by Gov. J.B. Pritzker last month.

Senate Bill 3019 was originally an agricultural financing measure, but the text was gutted and replaced with the 1,623-page revenue document during the final hours of the legislative session this spring.

Less than a week after Pritzker signed the revenue package, state Rep. John Cabello, R-Machesney Park, filed House Bill 5798 to immediately repeal the digital asset tax.

“I don’t believe any other state has this, and yes, it’s very punitive,” Cabello told The Center Square.

Cabello also said the measure was meant to generate $60 million or more in new revenue for the state.

The Digital Chamber said its members are already incurring costs by trying to comply with the new tax before it takes effect.

Andoni said, as far as she is aware, the Illinois Department of Revenue has issued no implementation guide or guidance.

“The suit was just filed and any comments at this time would be premature,” said IDOR Director David Harris in a statement provided to The Center Square.