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| Public Act 103-0945
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| SB3155 Enrolled | LRB103 37139 HLH 67258 b |
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AN ACT concerning revenue.
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Be it enacted by the People of the State of Illinois, |
represented in the General Assembly:
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Section 5. The Illinois Income Tax Act is amended by |
changing Section 220 as follows:
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(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 (i) 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 qualified new business |
venture receiving the investment or (ii) 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. |
"Investment" means money (or its equivalent) given to a |
qualified new business venture, at a risk of loss, in |
consideration for an equity interest of the qualified new |
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business venture. The Department may adopt rules to permit |
certain forms of contingent equity investments to be |
considered eligible for a tax credit under this Section. |
"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 |
applicant, is any one of the following: |
(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 |
qualified new business venture that is the recipient of |
the applicant's investment. |
(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 qualified new business venture |
that is the recipient of the applicant's investment. |
(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 |
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applicant and any other related member own, in the |
aggregate, directly, indirectly, beneficially, or |
constructively, at least 50% of the value of the |
outstanding stock of the qualified new business venture |
that is the recipient of the applicant's investment. |
(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 |
aggregate, at least 50% of the profits, capital, stock, or |
other ownership interest in the qualified new business |
venture that is the recipient of the applicant's |
investment. |
(5) A person to or from whom there is attribution of |
ownership of stock in the qualified new business venture |
that is the recipient of the applicant's investment 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, 2026, subject to the |
limitations provided in this Section, a claimant may claim, as |
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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. However, the amount of the credit is 35% of |
the claimant's investment made directly in the qualified new |
business venture if the investment is made in: (1) a qualified |
new business venture that is a minority-owned business, a |
women-owned business, or a business owned a person with a |
disability (as those terms are used and defined in the |
Business Enterprise for Minorities, Women, and Persons with |
Disabilities Act); or (2) a qualified new business venture in |
which the principal place of business is located in a county |
with a population of not more than 250,000. 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 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 |
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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 minimum amount an applicant must invest in any |
single qualified new business venture in order to be eligible |
for a credit under this Section is $10,000. The maximum amount |
of an applicant's total investment made in any single |
qualified new business venture that may be used as the basis |
for a credit under this Section is $2,000,000. |
(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: (i) each |
qualified new business venture that receives an angel |
investment under this Section has maintained a minimum |
employment threshold, as defined by rule, in the State (and |
continues to maintain a minimum employment threshold in the |
State for a period of no less than 3 years from the issue date |
of the last tax credit certificate issued by the Department |
with respect to such business pursuant to this Section); and |
(ii) the claimant's investment has been made and remains, |
except in the event of a qualifying liquidity event, in the |
qualified new business venture for no less than 3 years. |
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If an investment for which a claimant is allowed a credit |
under subsection (b) is held by the claimant for less than 3 |
years, other than as a result of a permitted sale of the |
investment to person who is not a related member, the claimant |
shall pay to the Department of Revenue, in the manner |
prescribed by the Department of Revenue, the aggregate amount |
of the disqualified credits that the claimant received related |
to the subject investment. |
If the Department determines that a qualified new business |
venture failed to maintain a minimum employment threshold in |
the State through the date which is 3 years from the issue date |
of the last tax credit certificate issued by the Department |
with respect to the subject business pursuant to this Section, |
except for any 3-year reporting period that includes March 13, |
2020 to January 1, 2024, the claimant or claimants shall pay to |
the Department of Revenue, in the manner prescribed by the |
Department of Revenue, the aggregate amount of the |
disqualified credits that claimant or claimants received |
related to investments in that business. For tax credits under |
this Section involving a 3-year reporting period that includes |
March 13, 2020 to January 1, 2024, the repayment of any tax |
credits issued shall be determined at the discretion of the |
Department. |
(e) The Department shall implement a program to register |
qualified new business ventures for purposes of this Section. |
A business desiring registration under this Section shall be |
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required to submit a full and complete application to the |
Department. A submitted application shall be effective only |
for the taxable year in which it is submitted, and a business |
desiring registration under this Section shall be required to |
submit a separate application in and for each taxable year for |
which the business desires registration. Further, if at any |
time prior to the acceptance of an application for |
registration under this Section by the Department one or more |
events occurs which makes the information provided in that |
application materially false or incomplete (in whole or in |
part), the business shall promptly notify the Department of |
the same. Any failure of a business to promptly provide the |
foregoing information to the Department may, at the discretion |
of the Department, result in a revocation of a previously |
approved application for that business, or disqualification of |
the business from future registration under this Section, or |
both. The Department may register the business only if all of |
the following conditions are satisfied: |
(1) it has its principal place of business in this |
State; |
(2) at least 51% of the employees employed by the |
business are employed in this State; |
(3) the business has the potential for increasing jobs |
in this State, increasing capital investment in this |
State, or both, as determined by the Department, and |
either of the following apply: |
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(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 |
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; |
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(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 investments; |
(5.1) it agrees to maintain a minimum employment |
threshold in the State of Illinois prior to the date which |
is 3 years from the issue date of the last tax credit |
certificate issued by the Department with respect to that |
business pursuant to this Section; |
(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. For |
taxable years beginning before January 1, 2024, the aggregate |
amount of the tax credits that may be claimed under this |
Section for investments made in qualified new business |
ventures shall be limited to $10,000,000 per calendar year, of |
which $500,000 shall be reserved for investments made in |
qualified new business ventures which are minority-owned |
businesses, women-owned businesses, or businesses owned by a |
person with a disability (as those terms are used and defined |
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in the Business Enterprise for Minorities, Women, and Persons |
with Disabilities Act), and an additional $500,000 shall be |
reserved for investments made in qualified new business |
ventures with their principal place of business in counties |
with a population of not more than 250,000. For taxable years |
beginning on or after January 1, 2024, the aggregate amount of |
the tax credits that may be claimed under this Section for |
investments made in qualified new business ventures shall be |
limited to $15,000,000 per calendar year, of which $2,500,000 |
shall be reserved for investments made in qualified new |
business ventures that are minority-owned businesses (as the |
term is defined in the Business Enterprise for Minorities, |
Women, and Persons with Disabilities Act), $1,250,000 shall be |
reserved for investments made in qualified new business |
ventures that are women-owned businesses or businesses owned |
by a person with a disability (as those terms are defined in |
the Business Enterprise for Minorities, Women, and Persons |
with Disabilities Act), and $1,250,000 shall be reserved for |
investments made in qualified new business ventures with their |
principal place of business in a county with a population of |
not more than 250,000. The annual allowable amounts set forth |
in this Section shall be allocated by the Department, on a per |
calendar quarter basis and prior to the commencement of each |
calendar year, in such proportion as determined by the |
Department, provided that: (i) the amount initially allocated |
by the Department for any one calendar quarter shall not |
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exceed 35% of the total allowable amount; (ii) any portion of |
the allocated allowable amount remaining unused as of the end |
of any of the first 3 calendar quarters of a given calendar |
year shall be rolled into, and added to, the total allocated |
amount for the next available calendar quarter; and (iii) the |
reservation of tax credits for investments in minority-owned |
businesses, women-owned businesses, businesses owned by a |
person with a disability, and in businesses in counties with a |
population of not more than 250,000 is limited to the first 3 |
calendar quarters of a given calendar year, after which they |
may be claimed by investors in any qualified new business |
venture. |
(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; |
(B) the name and address (including the county) of |
the qualified new business venture that received the |
investment giving rise to the credit, the North |
American Industry Classification System (NAICS) code |
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applicable to that qualified new business venture, and |
the number of employees of the qualified new business |
venture; and |
(C) the date of approval by the Department of each |
claimant's tax credit certificate. |
(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 awarded to a claimant under this |
Section in the prior calendar year; |
(B) the total number of applications from |
businesses seeking registration under this Section, |
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; 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. |
(i) For each business seeking registration under this |
Section after December 31, 2016, the Department shall require |
the business to include in its application the North American |
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Industry Classification System (NAICS) code applicable to the |
business and the number of employees of the business 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 pursuant to this Section shall, for each of the 3 |
years following the issue date of the last tax credit |
certificate issued by the Department with respect to such |
business pursuant to this Section, report to the Department |
the following: |
(1) the number of employees and the location at which |
those employees are employed, both as of the end of each |
year; |
(2) the amount of additional new capital investment |
raised as of the end of each year, if any; and |
(3) the terms of any liquidity event occurring during |
such year; for the purposes of this Section, a "liquidity |
event" means any event that would be considered an exit |
for an illiquid investment, including any event that |
allows the equity holders of the business (or any material |
portion thereof) to cash out some or all of their |
respective equity interests. |
(Source: P.A. 102-16, eff. 6-17-21; 103-9, eff. 1-1-24.)
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