Franchise tax is established under the Business Corporation Act (not the revenue laws). The exemption for banks apparently arises as a result of the exemption for banks from filing annual reports, which is referenced in the provision establishing the franchise tax.  All banks domiciled in Illinois (and if they have holding companies, by extension, them as well) obtain significant benefits from this exemption.

 However, the exemption for banks remains an important benefit for bank holding companies (BHCs), because a franchise tax is calculated on the basis of capital. We are not  tax attorneys, but we believe that a BHC’s payment of the franchise tax does not include its subsidiary banks’ capital in its calculation. That was a driving force in JP Morgan Chase’s decision to relocate the charter of its main bank in Ohio, which discovered the Illinois law and made the change in that state for Chase.  And, of course, we have almost 300 Sub S banks in Illinois, which clearly benefit from the exemption. 

 Here is the statutory language:

  805 ILCS 5/15.35. Franchise taxes payable by domestic corporations

 Sec. 15.35.  Franchise taxes payable by domestic corporations. For the privilege of exercising its franchises in this State, each domestic corporation shall pay to the Secretary of State the following franchise taxes, computed on the basis, at the rates and for the periods prescribed in this Act:  . . . .

 (d) An annual franchise tax payable each year with the annual report which the corporation is required by this Act to file.  

   805 ILCS 5/14.05. Annual report of domestic or foreign corporation. Each domestic corporation organized under any general law or special act of this State authorizing the corporation to issue shares, other than homestead associations, building and loan associations, banks and insurance companies (which includes a syndicate or limited syndicate regulated under Article V 1/2 of the Illinois Insurance Code [215 ILCS 5/107.01 et seq.] or member of a group of underwriters regulated under Article V of that Code [215 ILCS 5/86 et seq.]), and each foreign corporation (except members of a group of underwriters regulated under Article V of the Illinois Insurance Code [215 ILCS 5/86 et seq.]), authorized to transact business in this State, shall file, within the time prescribed by this Act, an annual report setting forth