Bill Text: IL SB0652 | 2017-2018 | 100th General Assembly | Engrossed


Bill Title: Amends the New Markets Development Program Act. Provides that, to be considered a "qualified equity investment" under the Act, 100% (currently, 85%) of the cash purchase price of the investment must be used by the issuer to make qualified low-income community investments in the State of Illinois. Requires qualified community development entities to submit an annual job creation report. Provides that the application for certification as a qualified community development entity must include the amount of qualified equity investment authority the applicant agrees to designate as a federal qualified equity investment under Section 45D of the Internal Revenue Code. Provides that no qualified active low-income community business that receives a qualified low-income community investment from a qualified community development entity that issues qualified equity investments under the Act may directly or indirectly (i) own or have the right to acquire an ownership interest in a qualified community development entity or member or affiliate of a qualified community development entity or (ii) loan to or invest in a qualified community development entity or member or affiliate of a qualified community development entity. Provides that the annual cap on credits under the Act is $50,000,000 (currently, $20,000,000). Effective immediately.

Spectrum: Moderate Partisan Bill (Democrat 7-2)

Status: (Engrossed) 2017-04-28 - Referred to Rules Committee [SB0652 Detail]

Download: Illinois-2017-SB0652-Engrossed.html



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1 AN ACT concerning revenue.
2 Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4 Section 5. The New Markets Development Program Act is
5amended by changing Sections 5, 20, 25, 40, and 50 and by
6adding Sections 43 and 55 as follows:
7 (20 ILCS 663/5)
8 Sec. 5. Definitions. As used in this Act:
9 "Applicable percentage" means 0% for each of the first 2
10credit allowance dates, 7% for the third credit allowance date,
11and 8% for the next 4 credit allowance dates.
12 "Credit allowance date" means with respect to any qualified
13equity investment:
14 (1) the date on which the investment is initially made;
15 and
16 (2) each of the 6 anniversary dates of that date
17 thereafter.
18 "Department" means the Department of Commerce and Economic
19Opportunity.
20 "Long-term debt security" means any debt instrument issued
21by a qualified community development entity, at par value or a
22premium, with an original maturity date of at least 7 years
23from the date of its issuance, with no acceleration of

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1repayment, amortization, or prepayment features prior to its
2original maturity date. Cumulative cash payments of interest on
3the qualified debt instrument during the period commencing with
4the issuance of the qualified debt instrument and ending with
5the seventh anniversary of its issuance shall not exceed the
6sum of such cash interest payments and the cumulative net
7income of the issuing community development entity for the same
8period. This definition in no way limits the holder's ability
9to accelerate payments on the debt instrument in situations
10where the issuer has defaulted on covenants designed to ensure
11compliance with this Act or Section 45D of the Internal Revenue
12Code of 1986, as amended.
13 "Purchase price" means the amount paid to the issuer of a
14qualified equity investment for that qualified equity
15investment.
16 "Qualified active low-income community business" has the
17meaning given to that term in Section 45D of the Internal
18Revenue Code of 1986, as amended; except that any business that
19derives or projects to derive 15% or more of its annual revenue
20from the rental or sale of real estate is not considered to be
21a qualified active low-income community business. This
22exception does not apply to a business that is controlled by or
23under common control with another business if the second
24business (i) does not derive or project to derive 15% or more
25of its annual revenue from the rental or sale of real estate
26and (ii) is the primary tenant of the real estate leased from

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1the initial business. A business shall be considered a
2qualified active low-income community business for the
3duration of the qualified community development entity's
4investment in or loan to the business if the entity reasonably
5expects, at the time it makes the investment or loan, that the
6business will continue to satisfy the requirements for being a
7qualified active low-income community business throughout the
8entire period of the investment or loan.
9 "Qualified community development entity" has the meaning
10given to that term in Section 45D of the Internal Revenue Code
11of 1986, as amended; provided that such entity has entered
12into, or is controlled by an entity that has entered into, an
13allocation agreement with the Community Development Financial
14Institutions Fund of the U.S. Treasury Department with respect
15to credits authorized by Section 45D of the Internal Revenue
16Code of 1986, as amended, that includes the State of Illinois
17within the service area set forth in that allocation agreement.
18 "Qualified equity investment" means any equity investment
19in, or long-term debt security issued by, a qualified community
20development entity that:
21 (1) is acquired after the effective date of this Act at
22 its original issuance solely in exchange for cash;
23 (2) with respect to qualified equity investments made
24 before January 1, 2017, has at least 85% of its cash
25 purchase price used by the issuer to make qualified
26 low-income community investments in the State of Illinois,

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1 and, with respect to qualified equity investments made on
2 or after January 1, 2017, has 100% of the cash purchase
3 price used by the issuer to make qualified low-income
4 community investments in the State of Illinois; and
5 (3) is designated by the issuer as a qualified equity
6 investment under this Act; with respect to qualified equity
7 investments made on or after January 1, 2017, is designated
8 by the issuer as a qualified equity investment under
9 Section 45D of the Internal Revenue Code of 1986, as
10 amended; and is certified by the Department as not
11 exceeding the limitation contained in Section 20.
12 This term includes any qualified equity investment that
13does not meet the provisions of item (1) of this definition if
14the investment was a qualified equity investment in the hands
15of a prior holder.
16 "Qualified low-income community investment" means any
17capital or equity investment in, or loan to, any qualified
18active low-income community business. With respect to any one
19qualified active low-income community business, the maximum
20amount of qualified low-income community investments made in
21that business, on a collective basis with all of its affiliates
22that may be counted towards the satisfaction of paragraph (2)
23of the definition of qualified equity investment, shall be
24$10,000,000 whether issued to one or several qualified
25community development entities.
26 "Tax credit" means a credit against any income, franchise,

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1or insurance premium taxes, including insurance retaliatory
2taxes, otherwise due under Illinois law.
3 "Taxpayer" means any individual or entity subject to any
4income, franchise, or insurance premium tax under Illinois law.
5(Source: P.A. 95-1024, eff. 12-31-08.)
6 (20 ILCS 663/20)
7 Sec. 20. Annual cap on credits. The Department shall limit
8the monetary amount of qualified equity investments permitted
9under this Act to a level necessary to limit tax credit use at
10no more than $50,000,000 $20,000,000 of tax credits in any
11fiscal year. This limitation on qualified equity investments
12shall be based on the anticipated use of credits without regard
13to the potential for taxpayers to carry forward tax credits to
14later tax years.
15(Source: P.A. 95-1024, eff. 12-31-08; 96-939, eff. 7-1-10.)
16 (20 ILCS 663/25)
17 Sec. 25. Certification of qualified equity investments.
18 (a) A qualified community development entity that seeks to
19have an equity investment or long-term debt security designated
20as a qualified equity investment and eligible for tax credits
21under this Section shall apply to the Department. The qualified
22community development entity must submit an application on a
23form that the Department provides that includes:
24 (1) The name, address, tax identification number of the

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1 entity, and evidence of the entity's certification as a
2 qualified community development entity.
3 (2) A copy of the allocation agreement executed by the
4 entity, or its controlling entity, and the Community
5 Development Financial Institutions Fund.
6 (3) A certificate executed by an executive officer of
7 the entity attesting that the allocation agreement remains
8 in effect and has not been revoked or cancelled by the
9 Community Development Financial Institutions Fund.
10 (4) A description of the proposed amount, structure,
11 and purchaser of the equity investment or long-term debt
12 security.
13 (5) The name and tax identification number of any
14 taxpayer eligible to utilize tax credits earned as a result
15 of the issuance of the qualified equity investment.
16 (6) Information regarding the proposed use of proceeds
17 from the issuance of the qualified equity investment.
18 (7) A nonrefundable application fee of $5,000. This fee
19 shall be paid to the Department and shall be required of
20 each application submitted.
21 (8) With respect to qualified equity investments made
22 on or after January 1, 2017, the amount of qualified equity
23 investment authority the applicant agrees to designate as a
24 federal qualified equity investment under Section 45D of
25 the Internal Revenue Code, including a copy of the screen
26 shot from the Community Development Financial Institutions

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1 Fund's Allocation Tracking System of the applicant's
2 remaining federal qualified equity investment authority.
3 (b) Within 30 days after receipt of a completed application
4containing the information necessary for the Department to
5certify a potential qualified equity investment, including the
6payment of the application fee, the Department shall grant or
7deny the application in full or in part. If the Department
8denies any part of the application, it shall inform the
9qualified community development entity of the grounds for the
10denial. If the qualified community development entity provides
11any additional information required by the Department or
12otherwise completes its application within 15 days of the
13notice of denial, the application shall be considered completed
14as of the original date of submission. If the qualified
15community development entity fails to provide the information
16or complete its application within the 15-day period, the
17application remains denied and must be resubmitted in full with
18a new submission date.
19 (c) If the application is deemed complete, the Department
20shall certify the proposed equity investment or long-term debt
21security as a qualified equity investment that is eligible for
22tax credits under this Section, subject to the limitations
23contained in Section 20. The Department shall provide written
24notice of the certification to the qualified community
25development entity. The notice shall include the names of those
26taxpayers who are eligible to utilize the credits and their

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1respective credit amounts. If the names of the taxpayers who
2are eligible to utilize the credits change due to a transfer of
3a qualified equity investment or a change in an allocation
4pursuant to Section 15, the qualified community development
5entity shall notify the Department of such change.
6 (d) With respect to applications received before January 1,
72017, the The Department shall certify qualified equity
8investments in the order applications are received by the
9Department. Applications received on the same day shall be
10deemed to have been received simultaneously. For applications
11received on the same day and deemed complete, the Department
12shall certify, consistent with remaining tax credit capacity,
13qualified equity investments in proportionate percentages
14based upon the ratio of the amount of qualified equity
15investment requested in an application to the total amount of
16qualified equity investments requested in all applications
17received on the same day.
18 (d-5) With respect to applications received on or after
19January 1, 2017, the Department shall certify applications by
20applicants that agree to designate qualified equity
21investments as federal qualified equity investments in
22accordance with item (8) of subsection (a) of this Section in
23proportionate percentages based upon the ratio of the amount of
24qualified equity investments requested in an application to be
25designated as federal qualified equity investments to the total
26amount of qualified equity investments to be designated as

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1federal qualified equity investments requested in all
2applications received on the same day.
3 (d-10) With respect to applications received on or after
4January 1, 2017, after complying with subsection (d-5), the
5Department shall certify the qualified equity investments of
6all other applicants, including the remaining qualified equity
7investment authority requested by applicants not designated as
8federal qualified equity investments in accordance with item
9(8) of subsection (a) of this Section, in proportionate
10percentages based upon the ratio of the amount of qualified
11equity investments requested in the applications to the total
12amount of qualified equity investments requested in all
13applications received on the same day.
14 (e) Once the Department has certified qualified equity
15investments that, on a cumulative basis, are eligible for
16$20,000,000 in tax credits, the Department may not certify any
17more qualified equity investments. If a pending request cannot
18be fully certified, the Department shall certify the portion
19that may be certified unless the qualified community
20development entity elects to withdraw its request rather than
21receive partial credit.
22 (f) Within 30 days after receiving notice of certification,
23the qualified community development entity shall (i) issue the
24qualified equity investment and receive cash in the amount of
25the certified amount and (ii) with respect to qualified equity
26investments made on or after January 1, 2017, if applicable,

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1designate the required amount of qualified equity investment
2authority as a federal qualified equity investment. The
3qualified community development entity must provide the
4Department with evidence of the receipt of the cash investment
5within 10 business days after receipt and, with respect to
6qualified equity investments made on or after January 1, 2017,
7if applicable, provide evidence that the required amount of
8qualified equity investment authority was designated as a
9federal qualified equity investment. If the qualified
10community development entity does not receive the cash
11investment and issue the qualified equity investment within 30
12days following receipt of the certification notice, the
13certification shall lapse and the entity may not issue the
14qualified equity investment without reapplying to the
15Department for certification. A certification that lapses
16reverts back to the Department and may be reissued only in
17accordance with the application process outline in this Section
1825.
19(Source: P.A. 95-1024, eff. 12-31-08; 96-939, eff. 7-1-10.)
20 (20 ILCS 663/40)
21 Sec. 40. Recapture. The Department of Revenue shall
22recapture, from the taxpayer that claimed the credit on a
23return, the tax credit allowed under this Act if:
24 (1) any amount of the federal tax credit available with
25 respect to a qualified equity investment that is eligible

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1 for a tax credit under this Act is recaptured under Section
2 45D of the Internal Revenue Code of 1986, as amended. In
3 that case, the Department of Revenue's recapture shall be
4 proportionate to the federal recapture with respect to that
5 qualified equity investment;
6 (2) the issuer redeems or makes principal repayment
7 with respect to a qualified equity investment prior to the
8 7th anniversary of the issuance of the qualified equity
9 investment. In that case, the Department of Revenue's
10 recapture shall be proportionate to the amount of the
11 redemption or repayment with respect to the qualified
12 equity investment; or
13 (3) the issuer fails to invest at least 85% of the cash
14 purchase price of the qualified equity investment with
15 respect to qualified equity investments made before
16 January 1, 2017 and 100% of the cash purchase price of the
17 qualified equity investment with respect to qualified
18 equity investments made on or after January 1, 2017 in
19 qualified low-income community investments in the State of
20 Illinois within 12 months of the issuance of the qualified
21 equity investment and maintain such level of investment in
22 qualified low-income community investments in Illinois
23 until the last credit allowance date for such qualified
24 equity investment; or .
25 (4) with respect to qualified equity investments made
26 on or after January 1, 2017, the issuer violates Section 43

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1 of this Act.
2 For purposes of this Section, an investment shall be
3considered held by an issuer even if the investment has been
4sold or repaid; provided that the issuer reinvests an amount
5equal to the capital returned to or recovered by the issuer
6from the original investment, exclusive of any profits
7realized, in another qualified low-income community investment
8in this State within 12 months after the receipt of that
9capital. An issuer is not required to reinvest capital returned
10from qualified low-income community investments after the 6th
11anniversary of the issuance of the qualified equity investment,
12the proceeds of which were used to make the qualified
13low-income community investment, and the qualified low-income
14community investment shall be considered held by the issuer
15through the 7th anniversary of the qualified equity
16investment's issuance.
17 The Department of Revenue shall provide notice to the
18qualified community development entity of any proposed
19recapture of tax credits pursuant to this Section. The entity
20shall have 90 days to cure any deficiency indicated in the
21Department of Revenue's original recapture notice and avoid
22such recapture. If the entity fails or is unable to cure such
23deficiency with the 90-day period, the Department of Revenue
24shall provide the entity and the taxpayer from whom the credit
25is to be recaptured with a final order of recapture. Any tax
26credit for which a final recapture order has been issued shall

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1be recaptured by the Department of Revenue from the taxpayer
2who claimed the tax credit on a tax return.
3(Source: P.A. 95-1024, eff. 12-31-08.)
4 (20 ILCS 663/43 new)
5 Sec. 43. Prohibited activities and interests. For
6qualified equity investments made on or after January 1, 2017,
7no qualified active low-income community business that
8receives a qualified low-income community investment from a
9qualified community development entity that issues qualified
10equity investments under this Act, or any affiliates of such a
11qualified active low-income community business, may directly
12or indirectly (i) own or have the right to acquire an ownership
13interest in a qualified community development entity or member
14or affiliate of a qualified community development entity,
15including, but not limited to, a holder of a qualified equity
16investment issued by the qualified community development
17entity or (ii) loan to or invest in a qualified community
18development entity or member or affiliate of a qualified
19community development entity, including, but not limited to, a
20holder of a qualified equity investment issued by a qualified
21community development entity, where the proceeds of such loan
22or investment are directly or indirectly used to fund or
23refinance the purchase of a qualified equity investment under
24this Act. For purposes of this Section, "affiliate" means an
25entity that directly, or indirectly through one or more

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1intermediaries, controls, is controlled by, or is under common
2control with another entity. For purposes of this Section, an
3entity is "controlled by" another entity if the controlling
4person holds, directly or indirectly, the majority voting or
5ownership interest in the controlled person or has control over
6the day-to-day operations of the controlled person by contract
7or law, provided that a qualified community development entity
8shall not be considered an affiliate of a qualified active
9low-income community business solely as a result of its
10qualified low-income community investment in such business.
11 (20 ILCS 663/50)
12 Sec. 50. Sunset. For fiscal years following fiscal year
132021 2017, qualified equity investments shall not be made under
14this Act unless reauthorization is made pursuant to this
15Section. For all fiscal years following fiscal year 2021 2017,
16unless the General Assembly adopts a joint resolution granting
17authority to the Department to approve qualified equity
18investments for the Illinois new markets development program
19and clearly describing the amount of tax credits available for
20the next fiscal year, or otherwise complies with the provisions
21of this Section, no qualified equity investments may be
22permitted to be made under this Act. The amount of available
23tax credits contained in such a resolution shall not exceed the
24limitation provided under Section 20. Nothing in this Section
25precludes a taxpayer who makes a qualified equity investment

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1prior to the expiration of authority to make qualified equity
2investments from claiming tax credits relating to that
3qualified equity investment for each applicable credit
4allowance date.
5(Source: P.A. 97-636, eff. 6-1-12.)
6 (20 ILCS 663/55 new)
7 Sec. 55. Annual job creation report. Each qualified
8community development entity shall submit an annual job
9creation report to the Department within 45 days after the
10beginning of the calendar year during the compliance period. No
11annual report shall be due prior to the first anniversary of
12the initial credit allowance date. The report shall include,
13but is not limited to, the following:
14 (1) the number of employment positions created and
15 retained as a result of qualified low-income community
16 investments; and
17 (2) the average annual salary of positions described in
18 item (1).
19 The qualified community development entity is not required
20to provide the annual report set forth in this Section for
21qualified low-income community investments that have been
22redeemed or repaid.
23 Section 99. Effective date. This Act takes effect upon
24becoming law.
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