Illinois Enacts SALT Cap Workaround for Pass-Through Businesses

Illinois pass-through businesses will be able to avoid the federal $10,000 cap on deductions for state and local taxes—or SALT cap—under legislation signed Friday by Gov. J.B. Pritzker.

Pritzker signed S.B. 2531, which allows partnerships and S corporations to pay their income tax at the entity-level rate of 4.95% and then claim a credit on their state return. The bill essentially permits such businesses to circumvent the $10,000 SALT cap added to the 2017 tax law because the cap doesn’t apply to business taxes.

• Illinois taxpayers are required to make the election annually. The election is irrevocable, ...