Illinois tax officials have released draft guidance explaining how the state’s 0.2% digital asset transaction tax would apply across several parts of the crypto market. The proposal spells out the treatment of stablecoins, DeFi activity, bridging transactions and transfers involving centralized exchanges.

The draft indicates that stablecoins would be taxed as digital assets covered by the law, while nonfungible tokens would fall outside the tax. The Illinois Department of Revenue is taking public comments on the proposal through Oct. 30 ahead of the tax’s planned Jan. 1, 2027 start date.

What the draft says

The newly published draft rules focus on implementation of Illinois’ digital asset transaction tax rather than changing the underlying law. They describe which assets and transaction types would be included and which would not.

Under the proposal, stablecoins would be treated as taxable digital assets. NFTs, by contrast, would be excluded from the scope of the tax.

How DeFi activity would be treated

The draft says decentralized finance transactions would generally not be taxed unless a user pays fees that count as “valuable consideration.” The guidance points to protocol fees used for operating or maintaining a platform as an example of the kind of payment that could bring a transaction within scope.

At the same time, the proposal draws limits around that definition. Network fees and swap fees paid only to liquidity providers would not, under the draft, trigger the tax.

Bridging and exchange-to-wallet transfers

Illinois officials also address blockchain bridging in the draft. A bridge transaction could be treated as a taxable exchange when it is carried out through a digital asset broker for consideration.

The draft adds that transfers from centralized exchanges to self-custody wallets may also be taxable if the exchange charges a fee for the transaction. That means the presence of a broker or exchange and the charging of consideration are key factors in the proposed treatment.

Timeline and next step

Illinois approved the Digital Asset Tax Act in June, setting the framework for the 0.2% tax. The tax is scheduled to take effect on Jan. 1, 2027.

For now, the rules remain in draft form. The Illinois Department of Revenue is accepting comments until Oct. 30, which is the next confirmed step before the guidance is finalized or revised.

Source: cointelegraph.com