Key facts
- The Digital Chamber (TDC) has sued the state of Illinois.
- The lawsuit seeks to block the Digital Asset Tax Act.
- TDC claims the tax violates the U.S. and Illinois constitutions.
- The group also argues the tax is preempted by federal law, specifically the Internet Tax Freedom Act.
- The Digital Asset Tax Act applies to entities based in or operating in Illinois that provide digital asset services, with gross receipts exceeding $100,000.
- The tax is scheduled to go into effect in January.
The Digital Chamber (TDC), a cryptocurrency lobbying organization, has filed a lawsuit in federal court to block Illinois' newly enacted Digital Asset Tax Act. The group alleges that the tax provision, which was recently added to the state budget, violates both the U.S. Constitution and the Illinois state constitution, and is also preempted by federal law.
The lawsuit contends that the Digital Asset Tax Act infringes upon the uniformity and due process clauses of the Illinois constitution, as well as the Commerce Clause of the U.S. Constitution. Furthermore, TDC argues that the law violates the Internet Tax Freedom Act by specifically targeting digital asset transactions.
The Digital Asset Tax Act, passed with little notice, imposes a 0.2% tax on entities based in or operating in Illinois that provide digital asset services and have gross receipts exceeding $100,000. The tax is slated to take effect in January.
TDC's filing asserts that the Internet Tax Freedom Act establishes a principle that "electronic commerce would not be subjected to discriminatory state and local taxation." The group criticizes the Illinois law for distinguishing solely based on the technology used to record ownership, rather than on gains, losses, or the nature of the transaction itself.
The lawsuit, brought on behalf of TDC's members, seeks a judicial ruling that the crypto tax is unconstitutional and asks for an injunction to prevent its enforcement, along with any associated legal fees and costs.