* COGFA’s September revenue report…

After a mediocre start in the first couple months of the fiscal year, September revenues deposited into the General Funds came in much higher, providing a solid first quarter of collections for FY 2026. For the month, revenues rose $413 million or 8.6% thanks to strong growth in Personal Income Tax receipts, Sales Tax revenues, and Federal Sources. Through the 1 st Quarter of FY 2026, revenues are now up $450 million or 3.7%. September’s totals were aided by an additional receipting day this month as compared to a year ago.

After a subpar performance to start the year, Personal Income Tax gross receipts grew $307 million as compared to last September, for growth of 10.3%. On a net basis, when subtracting out distributions to the Refund Fund and the Local Government Distributive Fund, these receipts were up $260 million. This month’s gains were despite the fact that the “true-ups” from the annual reallocations of business-related income are and will be notably less than last year (discussed in greater detail on page 8 of the monthly). While the details behind this month’s growth will not be released for a few days, the timing of withholding tax payments and the “extra” receipting day is believed to be the main cause of the strong showing this month.

Sales Tax receipts continued its recent upward trend by rising $54 million or 5.6% in September. Even when accounting for non- General Funds distributions to the Road Fund and certain transportation funds, net receipts were still up a positive $21 million or 2.3% for the month.

Also contributing to the strong month of receipts was a bounce-back month in revenues received from Federal Sources. These deposits grew $239 million or 199.2% in September. As noted in last month’s briefing, Federal Sources are highly volatile and subject to irregular receipting patterns. September’s gains easily erased the $114 million deficit that was present after the first two months of the fiscal year.

The growth in these prominent revenue sources overshadowed the disappointing month for Corporate Income Tax receipts. For the month, gross revenues were $196 million lower than last September, resulting in a decline of -18.1%. On a net basis, revenues were down $157 million. This is despite the fact that true-up reallocation adjustments (including the first of five adjustments that occurred in September) will be a net positive for Corporate Income Tax receipts this fiscal year (see page . A possible explanation for the disappointing revenue totals for this source so far is discussed on page 5.

In the category of “All Other State Sources”, revenues were a combined $19 million higher, though the performance of individual sources was mixed. Revenues from the Estate Tax grew the most with a gain of $22 million. Other Sources were up $9 million while Interest on State Funds & Investments improved by $3 million. Losses in individual revenue sources this month were relatively minor. Insurance Taxes were down $7 million. Corporate Franchise Taxes were $5 million lower. Liquor Taxes fell $2 million, while Public Utility Taxes were $1 million behind last September’s pace.

It was also a positive month for Transfers In. Overall, these transfers were $31 million higher in September. Lottery Transfers improved from its earlier declines with growth of $16 million. Gaming Transfers were up $11 million and the Sports Wagering Transfer added an additional $7 million. Other Transfers slipped $3 million this month, while Cannabis Transfers were flat.

* More on the corporate income tax…

While the majority of revenue sources have performed reasonably well to start the fiscal year, the same cannot be said for the Corporate Income Tax. Following September’s declines, receipts from 5 this source are now down $270 million through the first quarter—a drop of 18.9%. On a net basis, the decline stands at $215 million.

As discussed in the July Monthly Briefing, this revenue stream was originally projected to grow by 10.8% over FY 2025 actuals, largely due to several revenue-enhancing provisions enacted at the end of the spring session via P.A. 104-0006. These provisions include a tax amnesty program scheduled for October and November, a shift from the “Joyce” to the “Finnigan” method for apportioning certain business income, and changes to the treatment of foreign-source dividends under the Global Intangible Low-Taxed Income (GILTI) & 80/20 Safe Harbor provisions. At the time of the FY 2026 budget introduction, the Governor’s Office projected a positive net impact of $438 million from these corporate tax changes.

However, the federal One Big Beautiful Bill Act, enacted in July—after the State budget had been finalized—may offset much of the anticipated corporate tax revenue growth from these state-level reforms. Key components of the Act, including the permanent reinstatement of 100% bonus depreciation for qualifying property and expanded deductibility of business interest expenses, will reduce federal taxable income. Because Illinois conforms to many aspects of the federal tax code, these changes are likely to lower State Corporate Tax Revenues relative to earlier expectations. While proponents argue that the federal provisions could spur economic growth and eventually boost tax revenues in the future, the near-term impact in FY 2026 may be a net reduction in State Corporate Income Tax collections.

As a result, the Corporate Income Tax will remain a particularly difficult revenue source to forecast for the remainder of the fiscal year. It remains unclear how businesses will react to the various changes and whether the positive revenue effects of the state-level changes will outweigh the declining revenue impact of the federal changes. The sharp 18.1% decline in September may reflect a correction in estimated tax payments made earlier in the year, possibly in response to the recent tax changes, but it could also serve as an early warning of continued weakness in this revenue source for FY 2026.

* But…

While the potential reduction of Corporate Income Tax receipts this fiscal year is a concern for State coffers, revenue totals are expected to get a boost from other areas (beyond original budgetary expectations) and could mitigate or even outweigh these losses. For example, the Income Tax Refund Fund Transfer was conservatively forecast in May to provide $450 million in revenues for FY 2026. Based on June’s end-of-year balance, this transfer is now anticipated to total nearly $800 million (including the $150 million transferred in August) or approximately $350 million more than the assumed budgetary value. Additional General Funds growth may also come from newly enacted measures, such as the per-wager tax on online sports betting, which will flow into the General Revenue Fund via the Sports Wagering Transfer.

In short, while the decrease in Corporate Income Tax receipts is concerning, other revenue sources may offset these declines.

Discuss.