coindesk.com
A crypto lobbying organization has sued the state of Illinois over a last-minute tax provision inserted into the state budget last month.
TDC (otherwise known as The Digital Chamber) alleged that Illinois' Digital Asset Tax Act violated both the U.S. and state constitutions and is preempted by a federal tax law. The lawsuit, filed Tuesday, asks a federal judge to block the Illinois state government from enforcing the tax.
The tax violates the Illinois state constitution's uniformity and due process clauses, the Commerce Clause of the U.S. Constitution and the Internet Tax Freedom Act by specifying digital asset transactions, the suit said.
The Digital Asset Tax Act was passed and approved on short notice last month, right before the Illinois state government wrapped up its session for the year. The 0.2% tax applies to any entities that are based in Illinois or provide services with gross receipts of over $100,000. The tax takes effect in January.
TDC's lawsuit said the Internet Tax Freedom Act alone created a rule that "electronic commerce would not be subjected to discriminatory state and local taxation."
"The Act does not distinguish between gains and losses, between profitable and unprofitable transactions, between realized and unrealized appreciation, or between transfers that change ownership and transfers that do not. It distinguishes only between traditional financial infrastructure and blockchain infrastructure," the filing said.
Federal law makes a distinction between what an asset represents "from the infrastructure used to record them," the filing said, adding that no other body of law makes a distinction tied to what technology records ownership.
The lawsuit, brought on behalf of TDC's members, asks a state judge to rule that the crypto tax violates state and federal constitutions, block the state of Illinois from enacting the law and award any fees and costs to TDC.