Bill Text: IL HB5378 | 2019-2020 | 101st General Assembly | Introduced

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Bill Title: Creates the Rural Job Creation Tax Credit Act. Provides that a taxpayer may claim a nonrefundable income tax credit for rural job creation equal to a percentage of the taxpayer's purchase of an equity interest in a rural investment company or purchase of a debt instrument issued by the rural investment company. Effective immediately.

Spectrum: Partisan Bill (Republican 4-0)

Status: (Introduced - Dead) 2020-02-18 - Referred to Rules Committee [HB5378 Detail]

Download: Illinois-2019-HB5378-Introduced.html

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101ST GENERAL ASSEMBLY State of Illinois 2019 and 2020 HB5378 Introduced , by Rep. Dave Severin - Terri Bryant - Patrick Windhorst - Avery Bourne SYNOPSIS AS INTRODUCED:
New Act
35 ILCS 5/229 new
Creates the Rural Job Creation Tax Credit Act. Provides that a taxpayer may claim a nonrefundable income tax credit for rural job creation equal to a percentage of the taxpayer's purchase of an equity interest in a rural investment company or purchase of a debt instrument issued by the rural investment company. 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 1. Short title. This Act may be cited as the Rural
Job Creation Tax Credit Act.
Section 5. Nonrefundable rural job creation tax credit.
(a) For taxable years beginning on or after January 1,
2020, a taxpayer may claim a nonrefundable tax credit against
the tax imposed by subsections (a) and (b) of Section 201 of
the Illinois Income Tax Act for rural job creation as provided
in this Section.
(b) The tax credit under this Section is the amount listed
as the tax credit amount on a tax credit certificate issued by
the Department to the taxpayer for the taxable year.
(c) A taxpayer may carry forward a tax credit under this
Section for the next 7 taxable years if the amount of the tax
credit exceeds the taxpayer's tax liability under the Illinois
Income Tax Act for the taxable year in which the taxpayer
claims the tax credit.
Section 10. Definitions. As used in this Act:
Affiliate" means a person that directly, or indirectly
through one or more intermediaries, controls, is controlled by,

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or is under common control with another person. For the
purposes of this part, a person controls another person if the
person holds, directly or indirectly, the majority voting or
ownership interest in the controlled person or has control over
the day-to-day operations of the controlled person by contract
or by law.
"Claimant" means a resident or nonresident person that has
taxable income under the Illinois Income Tax Act.
"Closing date" means the date on which a rural investment
company has collected all of the investments.
"Credit-eligible contribution" means an investment of cash
by a claimant in a rural investment company that is or will be
eligible for a tax credit as evidenced by notification issued
by the Department under this Act. The investment shall purchase
an equity interest in the rural investment company or purchase,
at par value or premium, a debt instrument issued by the rural
investment company that has a maturity date at least five years
after the closing date.
"Department" means the Department of Commerce and Economic
Opportunity.
"Eligible small business" means a business that at the time
of an initial growth investment in the business by a rural
investment company:
(1) has fewer than 150 employees;
(2) has less than $10,000,000 in net income for the
preceding taxable year;

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(3) maintains the business's principal business
operations in the State; and
(4) is engaged in an industry related to:
(A) aerospace;
(B) defense;
(C) energy and natural resources;
(D) financial services;
(E) life sciences;
(F) outdoor products;
(G) software development;
(H) information technology;
(I) manufacturing; or
(J) agribusiness.
"Excess return" means the difference between: (i) the
present value of all growth investments made by a rural
investment company on the day the rural investment company
applies to exit the program under Section 63N-4-309, including
the present value of all distributions and gains from the
growth investments; and (ii) the sum of the amount of the
original growth investment and an amount equal to any projected
increase in the equity holder's federal or State tax liability,
including penalties and interest, related to the equity
holder's ownership, management, or operation of the rural
investment company. If this calculation is less than zero, then
the excess return is equal to zero.
"Federally licensed rural business investment company"

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means a person licensed as a rural business investment company
under 7 U.S.C. 2009cc.
"Federally licensed small business investment company"
means a person licensed as a small business investment company
under 15 U.S.C. 681.
"Investment authority" means the minimum amount of
investment a rural investment company must make in eligible
small businesses in order for credit-eligible contributions to
the rural investment company to qualify for a rural job
creation tax credit.
"Rural county" means a county designated as a rural county
by the Department.
"Rural investment company" means a company approved by the
Department.
"State reimbursement amount" means the difference between:
(i) 50% of the rural investment company's credit-eligible
capital contributions; and (ii) the product of: (A) the total
sum of new annual jobs reported to the State in the rural
investment company's exit report; and (B) $20,000. If the
amount calculated is less than zero, the State reimbursement
amount is equal to zero.
Section 15. Application, approval, and allocations.
(a) A person seeking approval as a rural investment company
shall submit an application to the Department.
(b) The Department shall begin accepting applications on

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November 1, 2019. Applications shall be in the form and manner
required by the Department, by rule, and shall include the
following:
(1) the total investment authority sought by the
applicant, which may not exceed $42,000,000;
(2) a copy of the applicant's or an affiliate of the
applicant's license as a federally licensed rural business
investment company or as a federally licensed small
business investment company;
(3) evidence that, before the date the application is
submitted, the applicant or affiliates of the applicant
have invested at least $50,000,000 in nonpublic companies
located in counties in the United States with fewer than
50,000 inhabitants;
(4) a signed affidavit from each claimant that commits
to make a credit-eligible capital contribution to the
applicant, stating the amount of that commitment; and
(5) the sum of all credit-eligible capital
contribution commitments under paragraph (4), which must
equal 58% of the total investment authority sought by the
applicant.
(c) The Department shall:
(1) review and evaluate the applications submitted
under this Section within 30 days of receipt in the order
in which the applications are received; and
(2) consider applications received on the same day to

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have been received simultaneously.
(d) If, after review and evaluation of an application, the
Department determines that the application does not meet the
requirements of subsection (b), the Department shall: (i) deny
the application; or (ii) notify the applicant that the
application was inadequate and allow the applicant to provide
additional information to the Department to complete, clarify,
or cure defects identified by the Department in the application
and inform the applicant that the additional information must
be received by the Department within 5 days of the notice in
order to be considered.
If an applicant submits additional information to the
Department, the Department shall consider the application to
have been received on the date it was originally received by
the Department and review and evaluate the additional
information within 10 days of receiving the additional
information. If, after review and evaluation of an application
submitted under this Section and any additional information
submitted, the Department determines that the application
meets the requirements of subsection (b), the Department shall:
(i) determine the amount of investment authority to award the
applicant, (ii) provide to the applicant a written notice of
approval as a rural investment company specifying the amount of
the applicant's investment authority, and (iii) notify each
claimant whose affidavit was included in the application that
the claimant qualifies for a tax credit.

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(e) The Department may not approve more than $42,000,000 in
total investment authority and not more than $24,360,000 in
total credit-eligible contributions under this Section.
Subject to the provisions of this subsection, if an application
is approved, the Department shall approve the amount of
investment authority requested on the application. The
Department may continue to accept applications under this
Section until the amount of approved investment authority
reaches $42,000,000. If the Department approves multiple
applications received simultaneously and the total amount of
investment authority requested on those applications exceeds
the amount of investment authority remaining, the Department
shall proportionally reduce the investment authority and
credit-eligible capital contributions for each of these
applications as necessary to avoid exceeding the amount of
investment authority and credit-eligible capital contributions
remaining.
(f) Within 65 days after the day on which a rural
investment company receives approval of an application under
this Section, the rural investment company shall:
(1) collect the total amount of committed
credit-eligible capital contributions from each claimant
whose affidavit was included in the application;
(2) collect one or more cash equity investments
contributed by affiliates of the rural investment company,
including employees, officers, and directors of such

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affiliates, that equal at least 10% of the rural investment
company's investment authority;
(3) collect one or more cash investments that, when
added to the amounts collected under paragraphs (1) and
(2), equal the rural investment company's investment
authority; and
(4) send sufficient documentation to the Department to
prove that the amounts described in this subsection have
been collected.
(g) If the rural investment company fails to fully comply
with subsection (f), the rural investment company's approval
shall lapse and the corresponding investment authority and
credit-eligible capital contributions shall not count toward
the limits on the program size. If the Department awards lapsed
investment authority to a rural investment company, the
Department shall first award lapsed investment authority pro
rata to each rural investment company that was awarded less
than the requested investment authority, which a rural
investment company may allocate to the rural investment
company's investors at the company's discretion. The
Department may award any remaining investment authority to new
applicants.
Section 20. Tax credit.
(a) On the closing date, a claimant whose affidavit was
included in an approved application submitted under Section 15

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shall earn a credit against the taxes imposed by subsections
(a) and (b) of Section 201 equal to the amount of the
claimant's credit-eligible capital contribution to the rural
investment company.
(b) In each of the taxable years that includes the fourth
through seventh anniversaries of the closing date, the
Department shall issue a tax credit certificate to each
approved claimant, specifying a tax credit amount for the
taxable year equal to 25% of the claimant's total
credit-eligible capital contribution.
(c) A claimant may not claim a tax credit under this
Section unless the claimant has a tax credit certificate issued
by the Department. A claimant claiming a credit under this
Section shall retain a tax credit certificate the claimant
receives from the Department for the same time period a person
is required to keep books and records under the Illinois Income
Tax Act. The Department shall adopt rules for the
administration of this program.
Section 25. Revocation of tax credit certificates.
(a) Except as provided in subsection (b), the Department
shall revoke a tax credit certificate issued under Section 20
if the rural investment company in which the credit-eligible
capital contribution was made does any of the following before
the rural investment company exits the program in accordance
with Section 30:

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(1) fails to invest 100% of the rural investment
company's investment authority in growth investments in
this state within three years of the closing date;
(2) fails to maintain growth investments in this State
equal to 100% of the rural investment company's investment
authority until the seventh anniversary of the closing date
in accordance with this section;
(3) makes a distribution or payment that results in the
rural investment company having less than 100% of the rural
investment company's investment authority invested in
growth investments in this state or available for
investment in growth investments and held in cash and other
marketable securities;
(4) fails to maintain growth investments equal to 70%
of the rural investment company's investment authority in
eligible small businesses that maintain their principal
business operations in a rural county;
(5) invests more than $5,000,000 from the investment
authority in the same eligible small business, including
amounts invested in affiliates of the eligible small
business, exclusive of growth investments made with repaid
or redeemed growth investments or interest or profits
realized on the repaid or redeemed growth investments; or
(6) makes a growth investment in an eligible small
business that directly, or indirectly through an
affiliate: (i) owns or has the right to acquire an

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ownership interest in the rural investment company, an
affiliate of the rural investment company, or an investor
in the rural investment company; or (ii) makes a loan to or
an investment in the rural investment company, an affiliate
of the rural investment company, or an investor in the
rural investment company.
(b) For the purposes of subsection (a), an investment is
maintained even if the investment is sold or repaid if the
rural investment company reinvests an amount equal to the
capital returned or recovered by the fund from the original
investment, exclusive of any profits realized, in other growth
investments in this State within 12 months of the receipt of
such capital. Amounts received periodically by a rural
investment company are treated as continually invested in
growth investments if the amounts are reinvested in one or more
growth investments by the end of the following calendar year. A
rural investment company is not required to reinvest capital
returned from growth investments after the sixth anniversary of
the closing date and such growth investments are considered as
being held continuously by the rural investment company through
the seventh anniversary of the closing date. Paragraph (6) of
subsection (a) does not apply to investments in publicly-traded
securities by an eligible small business or an owner or
affiliate of an eligible small business. A rural investment
company is not considered an affiliate of a business concern
solely as a result of the rural investment company's growth

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investment. A growth investment in an eligible small business
that is not located in a rural county may count toward the
requirements of paragraph (4) of subsection (a) if the
Department determines that the eligible small business is
located in an economically disadvantaged rural area, as defined
by rules adopted by the Department.
(c) Before revoking one or more tax credit certificates
under this section, the Department shall notify the rural
investment company of the reasons for the pending revocation.
If the rural investment company corrects any violation outlined
in the notice to the satisfaction of the Department within 90
days after the day on which the notice was sent, the Department
may not revoke the tax credit certificate. If tax credit
certificates are revoked under this Section, the rural
investment company shall make a cash distribution to the
Department in an amount equal to the sum of all tax credits
awarded to persons that have made credit-eligible
contributions to the rural investment company, if the rural
investment company is able to provide documentation to the
Department that proves that a tax credit has not been claimed,
the amount owed shall be reduced by the amount of the unclaimed
tax credit. The rural investment company's investment
authority and credit-eligible capital contributions will not
count toward the limits on the program size.
Section 30. Exit. On or after the seventh anniversary of

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the closing date, a rural investment company may apply to the
Department to exit the program and no longer be subject to this
Act. An application submitted this Section shall be in a form
and in accordance with procedures prescribed by the Department
and shall include a calculation of the State reimbursement
amount. In evaluating the exit application, if no tax credit
certificates have been revoked and the rural investment company
has not received a notice of revocation that has remained
uncorrected, the rural investment company is eligible for exit.
The Department shall respond to the application within 30 days
of receipt and include confirmation of the State reimbursement
amount. The Department shall not unreasonably deny an
application submitted under this Section. If the Department
denies the application, the Department shall provide the
reasons for the determination to the rural investment company.
Within 60 days after the day on which the confirmation of the
State reimbursement amount is received by the rural investment
company, the rural investment company shall make a cash
distribution to the State in an amount equal to the lesser of:
(i) the State reimbursement amount; or (ii) the excess return.
The Department shall notify the rural investment company once
payments have been received. Any amounts collected under this
Section shall be deposited into the General Revenue Fund.
Section 900. The Illinois Income Tax Act is amended by
adding Section 229 as follows:

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(35 ILCS 5/229 new)
Sec. 229. Rural Job Creation Tax Credit Act. A taxpayer is
entitled to a credit against the taxes imposed by subsections
(a) and (b) of Section 201 as provided in the Rural Job
Creation Tax Credit Act.
Section 999. Effective date. This Act takes effect upon
becoming law.