SPRINGFIELD – The federal One Big Beautiful Bill (OBBB or HR1), which passed in early July, is still being analyzed to determine how the measure’s changes may positively impact manufacturers nationwide.
There is no question that the majority in the US Congress intended to encourage US manufacturing by lowering tax burdens, adding bonus tax breaks for equipment and building investments, as well as other business-encouraging tax benefits.
That’s the good news for manufacturers in Illinois.
However, in the state’s recent Fall 2025 Veto Session, the Democrat-controlled General Assembly passed legislation that would “decouple” the state’s manufacturers from benefiting from most of those same tax breaks when figuring their state tax burdens for 2025.
That’s not so good news for Illinois’ small and midsize manufacturers, such as TMA members.
TMA members hear about potential”decoupling” effects
During a recent TMA Legislative Briefing with the Tax Foundation’s Dr. Will McBride, he explained what he thought might happen to the tax bills of Illinois’ small and mid-sized manufacturers if the state’s General Assembly voted to separate some of the federal tax breaks from state tax returns.
First, Dr. McBride said, Illinois tax returns would be more involved to complete as one set of tax figures would apply to the federal level and another would apply to the state level of income taxes.
“For certainty and simplification, the states should conform to the federal provisions. Illinois should conform to the federal code. We can and should make taxes as easy to comply with as possible,” he told the TMA members.
“If you’ve got items at the federal level that companies are allowed to fully expense, say, equipment investment, but then they come to do their Illinois taxes and they have to comply with the depreciation schedules for those assets, then you’ve got a penalty at the state level on that investment due to the delay of the deduction.
Secondly, suppose Illinois refuses to acknowledge the federal R&D expensing Section 174 and the small business expensing Section 179, along with the OBBB’s new structures provision. In that case, Illinois manufacturers will be required to pay more in taxes than those in comparable states.
“TMA members just need to follow the action in the Illinois legislature and make sure that they do conform ultimately to the federal code,” McBride said. “That would be the most beneficial treatment for investment in the state of Illinois.”
IL General Assembly votes to “decouple” from OBBB
But despite high hopes of the “decoupling” proposal being delayed until the January 2026 session, the controlling party pushed the measure through the Illinois General Assembly within the last 48 hours of the October 2025 session, and the bill proposing Illinois not follow the same tax breaks the federal government is enacting now sits on Governor Pritzker’s desk, awaiting his signature.
It is expected that Pritzker will sign the measure into law, as he voiced approval for the proposal before the veto session convened.
When TMA first learned of the proposal through whispers within Capitol sources, TMA voiced strong disapproval of the idea and asked its members to phone Governor Pritzker, as well as the Democratic leadership in both chambers, to express their views.
“At a time when manufacturers face enormous headwinds, Washington threw us a lifeline with improvements to the tax code that will lower costs and help our members compete on the global marketplace. Now, before we could even benefit, Governor Pritzker wants to strip those benefits away,” said TMA Executive Vice President Dennis LaComb.
“Illinois manufacturers already face among the highest taxes and costs in the nation, hampering our ability to compete and making it harder to create jobs for Illinois workers. Now Springfield wants to put us at even more of a national competitive disadvantage.”
The federal One Big Beautiful Bill Act introduced a new tax provision, Section 168(n), which allows for 100% bonus depreciation on qualified production property, including manufacturing structures, as a form of accelerated depreciation. Congress intended to incentivize domestic manufacturing and production and support the expansion of facilities in America.
Unfortunately, Governor Pritzker encouraged the Illinois legislature to immediately change state law to decouple from federal law on this new bonus depreciation.
TMA responds to IL General Assembly undermining possible manufacturing tax breaks
“It’s not the responsibility of small, family-run manufacturers to pay more to fund the state’s perpetual overspending,” said LaComb. “Will our state lawmakers support ‘Made in Illinois’ or will they continue to overburden our state’s manufacturers to prop up a tax-and-spend agenda?
“TMA will be meeting with legislators and making it clear that following through on Pritzker’s bad idea would severely impact their constituents.”
Reports on the roll calls and impact of this legislation will soon be coming on TMANews.com.