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| | SB3619 Engrossed | | LRB097 18931 HLH 64169 b |
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1 | | AN ACT concerning revenue.
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2 | | Be it enacted by the People of the State of Illinois, |
3 | | represented in the General Assembly:
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4 | | Section 5. The Illinois Income Tax Act is amended by |
5 | | changing Section 220 as follows:
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6 | | (35 ILCS 5/220) |
7 | | Sec. 220. Angel investment credit. |
8 | | (a) As used in this Section: |
9 | | "Applicant" means a corporation, partnership, limited |
10 | | liability company, or a natural person that makes an investment |
11 | | in a qualified new business venture. The term "applicant" does |
12 | | not include a corporation, partnership, limited liability |
13 | | company, or a natural person who has a direct or indirect |
14 | | ownership interest of at least 51% in the profits, capital, or |
15 | | value of the investment or a related member. |
16 | | "Claimant" means an applicant certified by the Department |
17 | | who files a claim for a credit under this Section. |
18 | | "Department" means the Department of Commerce and Economic |
19 | | Opportunity. |
20 | | "Qualified new business venture" means a business that is |
21 | | registered with the Department under this Section. |
22 | | "Related member" means a person that, with respect to the
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23 | | investment, is any one of the following: |
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1 | | (1) An individual, if the individual and the members of |
2 | | the individual's family (as defined in Section 318 of the |
3 | | Internal Revenue Code) own directly, indirectly,
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4 | | beneficially, or constructively, in the aggregate, at |
5 | | least 50% of the value of the outstanding profits, capital, |
6 | | stock, or other ownership interest in the applicant. |
7 | | (2) A partnership, estate, or trust and any partner or |
8 | | beneficiary, if the partnership, estate, or trust and its |
9 | | partners or beneficiaries own directly, indirectly, |
10 | | beneficially, or constructively, in the aggregate, at |
11 | | least 50% of the profits, capital, stock, or other |
12 | | ownership interest in the applicant. |
13 | | (3) A corporation, and any party related to the |
14 | | corporation in a manner that would require an attribution |
15 | | of stock from the corporation under the attribution rules
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16 | | of Section 318 of the Internal Revenue Code, if the |
17 | | applicant and any other related member own, in the |
18 | | aggregate, directly, indirectly, beneficially, or |
19 | | constructively, at least 50% of the value of the |
20 | | corporation's outstanding stock. |
21 | | (4) A corporation and any party related to that |
22 | | corporation in a manner that would require an attribution |
23 | | of stock from the corporation to the party or from the
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24 | | party to the corporation under the attribution rules of |
25 | | Section 318 of the Internal Revenue Code, if the |
26 | | corporation and all such related parties own, in the |
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1 | | aggregate, at least 50% of the profits, capital, stock, or |
2 | | other ownership interest in the applicant. |
3 | | (5) A person to or from whom there is attribution of |
4 | | stock ownership in accordance with Section 1563(e) of the |
5 | | Internal Revenue Code, except that for purposes of |
6 | | determining whether a person is a related member under this |
7 | | paragraph, "20%" shall be substituted for "5%" whenever |
8 | | "5%" appears in Section 1563(e) of the Internal Revenue |
9 | | Code. |
10 | | (b) For taxable years beginning after December 31, 2010, |
11 | | and ending on or before December 31, 2016, subject to the |
12 | | limitations provided in this Section, a claimant may claim, as |
13 | | a credit against the tax imposed under subsections (a) and (b) |
14 | | of Section 201 of this Act, an amount equal to 25% of the |
15 | | claimant's investment made directly in a qualified new business |
16 | | venture. In order for an investment in a qualified new business |
17 | | venture to be eligible for tax credits, the business must have |
18 | | applied for and received certification under subsection (e) for |
19 | | the taxable year in which the investment was made prior to the |
20 | | date on which the investment was made. The credit under this |
21 | | Section may not exceed the taxpayer's Illinois income tax |
22 | | liability for the taxable year. If the amount of the credit |
23 | | exceeds the tax liability for the year, the excess may be |
24 | | carried forward and applied to the tax liability of the 5 |
25 | | taxable years following the excess credit year. The credit |
26 | | shall be applied to the earliest year for which there is a tax |
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1 | | liability. If there are credits from more than one tax year |
2 | | that are available to offset a liability, the earlier credit |
3 | | shall be applied first. In the case of a partnership or |
4 | | Subchapter S Corporation, the credit is allowed to the partners |
5 | | or shareholders in accordance with the determination of income |
6 | | and distributive share of income under Sections 702 and 704 and |
7 | | Subchapter S of the Internal Revenue Code. |
8 | | (c) The maximum amount of an applicant's investment that |
9 | | may be used as the basis for a credit under this Section is |
10 | | $2,000,000 for each investment made directly in a qualified new |
11 | | business venture. |
12 | | (d) The Department shall implement a program to certify an |
13 | | applicant for an angel investment credit. Upon satisfactory |
14 | | review, the Department shall issue a tax credit certificate |
15 | | stating the amount of the tax credit to which the applicant is |
16 | | entitled. The Department shall annually certify that the |
17 | | claimant's investment has been made and remains in the |
18 | | qualified new business venture for no less than 3 years. |
19 | | (d-5) If an investment for which a claimant is allowed a |
20 | | credit under subsection (b) is held by the claimant for less |
21 | | than 3 years, or, if within that period of time the qualified |
22 | | new business venture is moved from the State of Illinois, the |
23 | | claimant shall pay to the Department of Revenue, in the manner |
24 | | prescribed by the Department of Revenue, the amount of the |
25 | | credit that the claimant received related to the investment. |
26 | | Repayment of the credit shall not be required under this |
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1 | | paragraph if, prior to the time the claimant disposes of its |
2 | | investment or the business venture is moved from the State of |
3 | | Illinois: |
4 | | (1) the investment by the claimant becomes worthless; |
5 | | (2) 80% or more of the assets of the qualified new |
6 | | business venture are sold to a party that is not related to |
7 | | the qualified new business venture or to the claimant; |
8 | | (3) bankruptcy or insolvency proceedings are commenced |
9 | | for the qualified new business venture; or |
10 | | (4) the qualified new business venture's common stock |
11 | | begins trading on an established securities market. |
12 | | If the Department determines that the qualified new |
13 | | business venture did not meet the requirement that at least 51% |
14 | | of the employees employed by the business are employed in this |
15 | | State in any of the 3 years following the date on which an |
16 | | investment in the qualified new business venture was made, the |
17 | | claimant shall pay to the Department of Revenue, in the manner |
18 | | prescribed by the Department of Revenue, the following |
19 | | percentage of the credits allowed for qualified investments in |
20 | | the qualified new business venture: |
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21 | | Year following the date on which | Percentage of credit required | |
22 | | the investment was made: | to be repaid: | |
23 | | First | 100% | |
24 | | Second | 66% | |
25 | | Third | 33% | |
26 | | Fourth and later | 0% |
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1 | | The Department must notify the Department of Revenue of |
2 | | every credit revoked and subject to full or partial repayment |
3 | | under this subsection. |
4 | | (e) The Department shall implement a program to register |
5 | | qualified new business ventures for purposes of this Section. A |
6 | | business desiring registration shall submit an application to |
7 | | the Department in each taxable year for which the business |
8 | | desires registration. The Department may register the business |
9 | | only if the business satisfies all of the following conditions: |
10 | | (1) it has its headquarters in this State; |
11 | | (2) at least 51% of the employees employed by the |
12 | | business are employed in this State; |
13 | | (3) it has the potential for increasing jobs in this |
14 | | State, increasing capital investment in this State, or |
15 | | both, and either of the following apply: |
16 | | (A) it is principally engaged in innovation in any |
17 | | of the following: manufacturing; biotechnology; |
18 | | nanotechnology; communications; agricultural sciences; |
19 | | clean energy creation or storage technology; |
20 | | processing or assembling products, including medical |
21 | | devices, pharmaceuticals, computer software, computer |
22 | | hardware, semiconductors, other innovative technology |
23 | | products, or other products that are produced using |
24 | | manufacturing methods that are enabled by applying |
25 | | proprietary technology; or providing services that are |
26 | | enabled by applying proprietary technology; or |
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1 | | (B) it is undertaking pre-commercialization |
2 | | activity related to proprietary technology that |
3 | | includes conducting research, developing a new product |
4 | | or business process, or developing a service that is |
5 | | principally reliant on applying proprietary |
6 | | technology; |
7 | | (4) it is not principally engaged in real estate |
8 | | development, insurance, banking, lending, lobbying, |
9 | | political consulting, professional services provided by |
10 | | attorneys, accountants, business consultants, physicians, |
11 | | or health care consultants, wholesale or retail trade, |
12 | | leisure, hospitality, transportation, or construction, |
13 | | except construction of power production plants that derive |
14 | | energy from a renewable energy resource, as defined in |
15 | | Section 1 of the Illinois Power Agency Act; |
16 | | (5) at the time it is first certified: |
17 | | (A) it has fewer than 100 employees; |
18 | | (B) it has been in operation in Illinois for not |
19 | | more than 10 consecutive years prior to the year of |
20 | | certification; and |
21 | | (C) it has received not more than $10,000,000 in |
22 | | aggregate private equity investment in cash; |
23 | | (6) (blank); it has been in operation in Illinois for |
24 | | not more than 10 consecutive years prior to the year of |
25 | | certification; and |
26 | | (7) it has received not more than (i) $10,000,000 in |
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1 | | aggregate private equity investment in cash or (ii) |
2 | | $4,000,000 in investments that qualified for tax credits |
3 | | under this Section. |
4 | | (f) The Department, in consultation with the Department of |
5 | | Revenue, shall adopt rules to administer this Section. The |
6 | | aggregate amount of the tax credits that may be claimed under |
7 | | this Section for investments made in qualified new business |
8 | | ventures shall be limited at $10,000,000 per calendar year. |
9 | | (g) A claimant may not sell or otherwise transfer a credit |
10 | | awarded under this Section to another person. |
11 | | (h) On or before March 1 of each year, the Department shall |
12 | | report to the Governor and to the General Assembly on the tax |
13 | | credit certificates awarded under this Section for the prior |
14 | | calendar year. |
15 | | (1) This report must include, for each tax credit |
16 | | certificate awarded: |
17 | | (A) the name of the claimant and the amount of |
18 | | credit awarded or allocated to that claimant; |
19 | | (B) the name and address of the qualified new |
20 | | business venture that received the investment giving |
21 | | rise to the credit and the county in which the |
22 | | qualified new business venture is located; and |
23 | | (C) the date of approval by the Department of the |
24 | | applications for the tax credit certificate. |
25 | | (2) The report must also include: |
26 | | (A) the total number of applicants and amount for |