Bill Text: IL HB3363 | 2017-2018 | 100th General Assembly | Introduced

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Bill Title: Amends the Illinois Income Tax Act. Provides that the angel investment credit applies for taxable years ending on or before December 31, 2022 (instead of December 31, 2016). Makes changes concerning the annual report submitted by the Department of Commerce and Economic Opportunity to the Governor and the General Assembly. Effective immediately.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2019-01-08 - Session Sine Die [HB3363 Detail]

Download: Illinois-2017-HB3363-Introduced.html

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100TH GENERAL ASSEMBLY State of Illinois 2017 and 2018 HB3363 Introduced , by Rep. Elgie R. Sims, Jr. SYNOPSIS AS INTRODUCED:
35 ILCS 5/220
Amends the Illinois Income Tax Act. Provides that the angel investment credit applies for taxable years ending on or before December 31, 2022 (instead of December 31, 2016). Makes changes concerning the annual report submitted by the Department of Commerce and Economic Opportunity to the Governor and the General Assembly. Effective immediately.
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FISCAL NOTE ACT MAY APPLY
A BILL FOR
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AN ACT concerning revenue.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Income Tax Act is amended by
changing Section 220 as follows:
(35 ILCS 5/220)
Sec. 220. Angel investment credit.
(a) As used in this Section:
"Applicant" means a corporation, partnership, limited
liability company, or a natural person that makes an investment
in a qualified new business venture. The term "applicant" does
not include a corporation, partnership, limited liability
company, or a natural person who has a direct or indirect
ownership interest of at least 51% in the profits, capital, or
value of the investment or a related member.
"Claimant" means an applicant certified by the Department
who files a claim for a credit under this Section.
"Department" means the Department of Commerce and Economic
Opportunity.
"Qualified new business venture" means a business that is
registered with the Department under this Section.
"Related member" means a person that, with respect to the
investment, is any one of the following:

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(1) An individual, if the individual and the members of
the individual's family (as defined in Section 318 of the
Internal Revenue Code) own directly, indirectly,
beneficially, or constructively, in the aggregate, at
least 50% of the value of the outstanding profits, capital,
stock, or other ownership interest in the applicant.
(2) A partnership, estate, or trust and any partner or
beneficiary, if the partnership, estate, or trust and its
partners or beneficiaries own directly, indirectly,
beneficially, or constructively, in the aggregate, at
least 50% of the profits, capital, stock, or other
ownership interest in the applicant.
(3) A corporation, and any party related to the
corporation in a manner that would require an attribution
of stock from the corporation under the attribution rules
of Section 318 of the Internal Revenue Code, if the
applicant and any other related member own, in the
aggregate, directly, indirectly, beneficially, or
constructively, at least 50% of the value of the
corporation's outstanding stock.
(4) A corporation and any party related to that
corporation in a manner that would require an attribution
of stock from the corporation to the party or from the
party to the corporation under the attribution rules of
Section 318 of the Internal Revenue Code, if the
corporation and all such related parties own, in the

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aggregate, at least 50% of the profits, capital, stock, or
other ownership interest in the applicant.
(5) A person to or from whom there is attribution of
stock ownership in accordance with Section 1563(e) of the
Internal Revenue Code, except that for purposes of
determining whether a person is a related member under this
paragraph, "20%" shall be substituted for "5%" whenever
"5%" appears in Section 1563(e) of the Internal Revenue
Code.
(b) For taxable years beginning after December 31, 2010,
and ending on or before December 31, 2022 December 31, 2016,
subject to the limitations provided in this Section, a claimant
may claim, as a credit against the tax imposed under
subsections (a) and (b) of Section 201 of this Act, an amount
equal to 25% of the claimant's investment made directly in a
qualified new business venture. In order for an investment in a
qualified new business venture to be eligible for tax credits,
the business must have applied for and received certification
under subsection (e) for the taxable year in which the
investment was made prior to the date on which the investment
was made. The credit under this Section may not exceed the
taxpayer's Illinois income tax liability for the taxable year.
If the amount of the credit exceeds the tax liability for the
year, the excess may be carried forward and applied to the tax
liability of the 5 taxable years following the excess credit
year. The credit shall be applied to the earliest year for

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which there is a tax liability. If there are credits from more
than one tax year that are available to offset a liability, the
earlier credit shall be applied first. In the case of a
partnership or Subchapter S Corporation, the credit is allowed
to the partners or shareholders in accordance with the
determination of income and distributive share of income under
Sections 702 and 704 and Subchapter S of the Internal Revenue
Code.
(c) The maximum amount of an applicant's investment that
may be used as the basis for a credit under this Section is
$2,000,000 for each investment made directly in a qualified new
business venture.
(d) The Department shall implement a program to certify an
applicant for an angel investment credit. Upon satisfactory
review, the Department shall issue a tax credit certificate
stating the amount of the tax credit to which the applicant is
entitled. The Department shall annually certify that the
claimant's investment has been made and remains in the
qualified new business venture for no less than 3 years.
If an investment for which a claimant is allowed a credit
under subsection (b) is held by the claimant for less than 3
years, or, if within that period of time the qualified new
business venture is moved from the State of Illinois, the
claimant shall pay to the Department of Revenue, in the manner
prescribed by the Department of Revenue, the amount of the
credit that the claimant received related to the investment.

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(e) The Department shall implement a program to register
qualified new business ventures for purposes of this Section. A
business desiring registration shall submit an application to
the Department in each taxable year for which the business
desires registration. The Department may register the business
only if the business satisfies all of the following conditions:
(1) it has its headquarters in this State;
(2) at least 51% of the employees employed by the
business are employed in this State;
(3) it has the potential for increasing jobs in this
State, increasing capital investment in this State, or
both, and either of the following apply:
(A) it is principally engaged in innovation in any
of the following: manufacturing; biotechnology;
nanotechnology; communications; agricultural sciences;
clean energy creation or storage technology;
processing or assembling products, including medical
devices, pharmaceuticals, computer software, computer
hardware, semiconductors, other innovative technology
products, or other products that are produced using
manufacturing methods that are enabled by applying
proprietary technology; or providing services that are
enabled by applying proprietary technology; or
(B) it is undertaking pre-commercialization
activity related to proprietary technology that
includes conducting research, developing a new product

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or business process, or developing a service that is
principally reliant on applying proprietary
technology;
(4) it is not principally engaged in real estate
development, insurance, banking, lending, lobbying,
political consulting, professional services provided by
attorneys, accountants, business consultants, physicians,
or health care consultants, wholesale or retail trade,
leisure, hospitality, transportation, or construction,
except construction of power production plants that derive
energy from a renewable energy resource, as defined in
Section 1 of the Illinois Power Agency Act;
(5) at the time it is first certified:
(A) it has fewer than 100 employees;
(B) it has been in operation in Illinois for not
more than 10 consecutive years prior to the year of
certification; and
(C) it has received not more than $10,000,000 in
aggregate private equity investment in cash;
(6) (blank); and
(7) it has received not more than $4,000,000 in
investments that qualified for tax credits under this
Section.
(f) The Department, in consultation with the Department of
Revenue, shall adopt rules to administer this Section. The
aggregate amount of the tax credits that may be claimed under

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this Section for investments made in qualified new business
ventures shall be limited at $10,000,000 per calendar year.
(g) A claimant may not sell or otherwise transfer a credit
awarded under this Section to another person.
(h) On or before March 1 of each year, the Department shall
report to the Governor and to the General Assembly on the tax
credit certificates awarded under this Section for the prior
calendar year.
(1) This report must include, for each tax credit
certificate awarded:
(A) the name of the claimant, and the amount of
credit awarded or allocated to that claimant, and the
name of the recipient qualified new business venture
that received the investment;
(B) the name and address, including the county, the
North American Industry Classification System (NAICS)
code, and the number of employees of the qualified new
business venture that received an investment giving
rise to the credit the name and address of the
qualified new business venture that received the
investment giving rise to the credit and the county in
which the qualified new business venture is located;
and
(C) the date of approval by the Department of each
claimant's the applications for the tax credit
certificate.

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(2) The report must also include:
(A) the total number of applicants and the total
number of claimants, including the amount of each tax
credit certificate and amount for tax credit
certificates awarded to a claimant under this Section
in the prior calendar year;
(B) the total number of applications from
businesses seeking registration, the total number of
new qualified business ventures registered by the
Department, and the aggregate amount of investment
upon which tax credit certificates were issued in the
prior calendar year the total number of applications
and amount for which tax credit certificates were
issued in the prior calendar year; and
(C) the total amount of tax credit certificates
sought by applicants, the amount of each tax credit
certificate issued to a claimant, the aggregate amount
of all tax credit certificates issued in the prior
calendar year and the aggregate amount of tax credit
certificates issued as authorized under this Section
for all calendar years. the total tax credit
certificates and amount authorized under this Section
for all calendar years.
(2) On and after the effective date of this amendatory
Act of the 100th General Assembly, the Department shall
require a business seeking registration as a qualified new

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business venture to include in its application the North
American Industry Classification System (NAICS) code
associated with the business and the number of employees at
the time of application. Each business registered by the
Department as a qualified new business venture that
receives an investment giving rise to the issuance of a tax
credit certificate shall, for each of the 3 subsequent
years, report to the Department the following:
(A) the number of employees at the end of each
year;
(B) the amount of additional new capital
investment raised within each year; and
(C) any liquidity event transpiring within the
3-year period; for purposes of this paragraph (C), a
liquidity event shall mean an event that allows some or
all investors in a company to cash out some or all of
their ownership shares or that is considered an exit
strategy for an illiquid investment.
(Source: P.A. 96-939, eff. 1-1-11; 97-507, eff. 8-23-11;
97-1097, eff. 8-24-12.)
Section 99. Effective date. This Act takes effect upon
becoming law.