Illinois Contractor Prompt Payment Act for Foreign Owners
Learn how the Illinois Contractor Prompt Payment Act sets payment deadlines, interest, retainage caps for foreign-owned and cross-border construction work.
Last reviewed October 27, 2026 · 3 min read · General information, not legal advice
General information only, not legal advice. CPA Tax Payroll and Accounting Corp is a CPA firm, not a law firm. Laws change: confirm with the official source or a licensed attorney before you act. Read the full notice.
815 ILCS 603, the Illinois Contractor Prompt Payment Act, writes payment terms into private construction contracts: when an owner pays a contractor, when a contractor pays subcontractors, how much retainage (money held back until the job ends) may be held, and what late payment costs. The Act names no enforcing agency; the parties use the contract and the courts. This page is for owners and contractors with ties to Canada or India, such as an investor in Mumbai or Toronto who owns an Illinois apartment building.
Slide show: The Illinois prompt payment rules in seven slides
What it is
Payment terms built into private construction contracts in Illinois (815 ILCS 603).
Who it covers
Owners, contractors and subcontractors. Public-funds jobs, single-family homes and buildings of 12 or fewer family units are excluded.
Owner payment
Within 15 calendar days of approving a payment application, the owner pays.
The deadline
No written withholding statement by day 25 after receipt means deemed approval.
The number
Retainage is capped at 10% of each payment, then 5% from the halfway point.
The penalty
Late payment bears 10% interest per year, and an unpaid party may suspend work following 7 calendar days of written notice. No fine.
The tip
Put the reason for any withholding in writing before day 25.
Who does the Illinois Contractor Prompt Payment Act cover?
Question
Answer
Which contracts?
Contracts and subcontracts covering the repair, improvement, alteration, construction or design of Illinois real property.
What is excluded?
Contracts requiring public funds; single-family homes; and a multi-family residence with no more than 12 units in a single building.
Who is a contractor or subcontractor?
The meanings under the Mechanics Lien Act.
Size threshold?
None.
What it means for a foreign-owned or cross-border business
Situation
What the law says
What to check
Investor in Canada or India owns an Illinois office, shop or large apartment building
A private construction contract for Illinois real property is covered; a building of 12 or fewer family units is not.
Count the units in each building.
Owner reviews payment applications from abroad
Silence for 25 days after receipt means deemed approval unless a written withholding statement goes out first. A lender or architect instruction is not approval.
Make sure applications reach someone who can answer within 25 days.
Contractor owned from abroad pays subcontractors
Payment is due within 15 calendar days after receipt, for accepted work. Late sums bear 10% interest.
Diary day 15 from each receipt.
Project with public money
Contracts requiring public funds are outside the Act.
Ask an attorney about mixed projects.
Books and tax
The Act has no tax provision; interest and retainage are contract balances.
When retainage is taxed is an income tax question for your CPA.