IVCA Provides Updates for State Legislative Issues 09/30/2026 -IVCA CONFRONTS QSBS ROLLBACK
In the 2026 legislative session the state tax relief for investments of Qualified Small Business Stock were eliminated. The term of art is that the state “decoupled” from federal law, meaning that while the relief is available at the federal law, it is no longer available on Illinois tax returns beginning in 2026.
Plante Moran Analysis of Illinois QSBS
The IVCA has assiduously reached out to policy makers in Illinois to advise them that QSBS can be a powerful accelerant for very early-stage projects and research shows it has more potential to create the next “unicorn” than other investment approaches.
IVCA members have participated in numerous meetings in person, online, and by telephone. Policy makers have been appreciative of the economic activity created by the VC community but generally consider a rollback of the decoupling a steep hill to climb. The state is persistently looking for revenue to meet its budget projections and there are voices in the Capitol who believe the QSBS is only the first step in a broader effort to further tax wealth and economic success.
The other message we are conveying to policy makers is that the trend of highlighting private investors for punitive or restrictive policy measures will undoubtedly have a negative overall impact on the investing climate in Illinois. States with lower tax rates, more hospitable investment rules and regulations, states without the kinds of bans, prohibitions, limitations or disclosure requirements which are sought by policy makers in Illinois, all of these factors could contribute to and out migration of capital and a far less enthusiastic valuation of an Illinois investment than what we enjoy currently.
We will keep you posted. The Illinois General Assembly returns for a Veto Session before and after the Thanksgiving holiday, then for a “lame duck” session in early January 2027. From there, the regular session of the 105th Illinois General Assembly will convene in mid-January, and we will watch for what we anticipate being a very active introduction of legislation which is relevant to our interests.